ISO, Sales Partner, Referral Partner, and PayFac: What’s the Difference in Payments?

In the ever-expanding payments ecosystem, understanding where you fit—whether as an ISO, a sales partner, a referral partner, or a PayFac—is key to monetizing relationships, offering value to merchants, and avoiding unnecessary compliance headaches.

Let’s demystify these terms based on recent insights from Stripe, Checkout.com, and Stax Payments, and show how each model fits into the broader payments infrastructure.

💼 What is an ISO (Independent Sales Organization)?

As defined by Stripe, an ISO is a third party registered with card networks (Visa/Mastercard) and sponsored by an acquiring bank or payment processor. ISOs are authorized to sell merchant accounts and payment services—often under their own brand—and can sometimes manage customer support and risk monitoring.

Core Features:

• Regulatory Status: Must register with card networks, often through a sponsoring bank.

• Merchant Services: Can onboard and service merchants, reselling processors like Fiserv, Elavon, or Global Payments.

• Flexibility: May work with multiple processors, gateways, and risk profiles (low to high).

• Revenue Model: Residual income based on transaction volume; possible overrides from sub-agents.

📌 From Checkout.com: “Think of ISOs as an extension of the payment processor—they bring reach and industry relationships to the table, particularly with SMBs.”

Best for:
Entrepreneurs building a merchant portfolio or businesses seeking control over pricing, branding, and long-term payments revenue.

💼 What is a Referral Partner?

A referral partner is someone who sends leads to a registered ISO or processor, typically in exchange for a referral fee or small share of processing revenue. They are not responsible for underwriting, boarding, or servicing merchants.

Core Features:

• No Registration Required: Operates without being listed or sponsored by card networks.

• Passive Role: Simply refers businesses and steps aside.

• Revenue Model: One-time payouts or minimal ongoing commission.

• Ideal For: SaaS platforms, POS resellers, consultants, CPAs, or business influencers.

📌 From Stax Payments: “Referral partners are a great entry point into payments for those without the resources or desire to run a full ISO operation.”

Best for:
Companies or individuals who want to monetize their network without dealing with compliance or customer servicing.

🤝 What is a Sales Partner (or Agent)?

A sales partner—sometimes called a sub-agent—is someone who actively sells merchant accounts but does so under the umbrella of a registered ISO. They typically don’t need to register themselves but are instrumental in growing merchant portfolios.

Core Features:

• Under ISO Supervision: Operates within an ISO’s structure and underwriting.

• Hands-On Sales: Prospects, closes, and may help onboard or support merchants.

• Revenue Model: Monthly residuals from transaction fees.

• Growth Path: Often the stepping stone to becoming an ISO or forming a sales team.

Best for:
Independent business developers or entrepreneurs looking for recurring revenue in exchange for active engagement.

💳 What is a PayFac (Payment Facilitator)?

A PayFac aggregates multiple merchants under a master MID (merchant ID), providing near-instant onboarding and acting as both the processor and underwriter. Examples include Stripe, Square, and Toast.

Unlike ISOs, which help merchants obtain their own accounts, PayFacs provide a sub-merchant model that centralizes liability, underwriting, and compliance.

Core Features:

• Full Tech Stack: APIs for onboarding, risk, and settlement.

• Speed: Instant merchant approvals and simplified underwriting.

• Risk Management: Assumes financial liability for its sub-merchants.

• Compliance Load: High—requires bank sponsorship, KYC, fraud tools, etc.

📌 From Stripe’s guide: “PayFacs streamline onboarding and offer a seamless experience, but must absorb operational and compliance complexity.”

Best for:
SaaS companies or platforms with scale who want to embed payments and control the full user experience.

Final Thoughts

Whether you're just exploring the payments industry or scaling a merchant portfolio, the right model depends on your resources, goals, and risk appetite. ISOs offer more control and upside but come with more responsibility. PayFacs enable full-stack experiences but require serious investment. Referral partners and sales agents offer leaner paths with quicker wins.

At Neutral Payments, we provide unbiased, clear education for ISOs, agents, and merchants navigating these decisions. No fluff. No spin. Just the facts.