Historically, the US payments market has been characterized by the Independent Sales Organization (ISO) model, which took care of different processes in the payment value chain such as processing, liabilities, risk management, underwriting and all services which in Europe are done primarily by acquiring banks. At the same time, in Europe the traditional payment service provider (PSP) model functioned as a gateway and was focused on bringing together many domestic payment options in a single gateway, with one service platform and one reconciliation. Those two models co-existed, since until now Europe has mainly been an alternative payment market and the US more of a card payment one. In the new ecommerce landscape, however, the evolution of these two business models, ISO and PSP, becomes clearer and clearer. Topics Covered: - European Payment Market vs. American Payment Market – discussion from the business models perspective - ISOs vs. PSPs - The influence of online shopping behavior - The evolution of the two business models

1. The evolution of ISO and PSP
business models
Gijs op de Weegh, COO Payvision and
Joe Emig, VP Business Development – International Acquiring
A presentation for CNP EXPO 2014 – GRAD SCHOOL
May 2014, Orlando | Florida

2. Content
1. European Payment Market vs American Payment Market
2. The existent models of PSP and ISO
3. The influence of online shopping behaviour
4. The shift in the payment market
5. PSPs & PSD
6. Conclusion

3. 1. European vs U.S. Payment
Markets
Europe – an alternative payment market
US – a credit card payment market

4. 2. The Existent Business Models –
ISO
The leading model in the US payments market is the
Independent Sales Organization (ISO):
o A sub-division between the ISO and the acquiring institution for different
processes in the payment value chain such as marketing, sales, processing,
loss liability, risk management, and underwriting
- In Europe most of these services are handled primarily by the acquiring banks.
- In the US ISO model, ISOs earn a greater share of revenue in exchange for
performing more of the value chain processes.
- ISOs develop their own value chain with an infrastructure that includes “front end”
elements including marketing campaigns, sales channel partners (agents, referring
parties), onboarding tools, and customer service.

5. 2. The Existent Business Models –
PSP
• Europe - the traditional payment service provider (PSP)
model functioned as a gateway
• focused on bringing together many domestic payment options in a single
gateway, with one service platform and one reconciliation.

6. Online Shopping Behavior
Influence
• The increasing tendency of
consumers to shop globally
• The possibility of searching
online for a wider range of
products and services, special
deals
• Comparing the price, quality
or availability of different
products in different countries
Cross-border ecommerce
Creates opportunity for PSPs, ISOs,
acquiring banks and merchants around
the world to look beyond their borders
and expand their business
internationally.

7. PSPs Challenge
Domestic payment option lost its importance as
a sole solution and became integrated as part of
a bigger, combined and globally-oriented
payment processing solution.

8. PSPs & PSD
• The payment services providers, compliant with the Payment
Services Directive (PSD), have found more opportunities in the
card processing sector which will actually allow them to take over
the work previously considered the banks’ domain:
underwriting, processing and even membership in card schemes like VISA
and MasterCard,
allowing them to behave like acquirers, to issue or acquire a card
transaction performed within the scheme.

9. ISOs Challenge
Domestic US ISOs have an opportunity to expand
their service offering to include international
payments and alternative payments.
- The role of the ISO will remain the same: service the merchants directly by adding
value at each stage of the payments process.
- The function of the ISO must evolve: make new markets and a global opportunity
available to merchants that have been limited to US selling options.

10. ISOs: Expanding Reach
How and Where?
Add key pieces to the value chain: Offer services in key markets:
- Multi-Currency Processing (MCP) - European Union countries
- Multiple currency gateway support - Asia-Pacific region
- Consolidated reporting and funding - BRIC emerging markets
- Alternative payment types - Know your merchant’s key
target markets and needs
Engaging with specialized global providers allows
ISOs to bring a full-service international program
to its merchants.

11. Specialization of ISOs
Traditional challenges of the ISO model are:
- Increased competition
- Compressed pricing/margins
How does the modern ISO stand out?
Specialization – providing distinctive
products and service offerings –
increases customer loyalty and
improves profit margins.

12. Conclusion
• The European PSP model is now shifting towards the ISO model
and vice versa, the American ISO is becoming more of a PSP
model by offering different kinds of alternative payments methods.
European
PSP
MODEL
American
ISO
MODEL

13. Thank you!
E-mail: gijs@payvision.com; j.emig@payvision.com