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ISO Residual Income Calculator

Project monthly, annual, and 5-year residual income from your merchant processing portfolio.

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What Is ISO Residual Income?

Residual income is the recurring revenue an ISO or broker earns from the ongoing processing volume of merchants they have placed. Every time a merchant runs a credit card transaction, the payment processor earns interchange and markup. A portion of that markup -- expressed in basis points (bps) -- flows back to the ISO as a residual. Unlike one-time MCA commissions, residuals compound as you add merchants. An ISO with 200 active merchants processing $30K/month each at 15 bps earns $9,000/month in passive income before attrition. This is why seasoned ISOs treat their residual portfolio as their primary retirement asset. The 5-year projection shows you exactly how much wealth each merchant you board adds over time.

How to Use This Calculator

Enter your active merchant count

Count only merchants currently processing. Dormant accounts that have not processed in 60+ days should be excluded since they contribute zero residual.

Set the average monthly volume

Check your processor portal for actual volume data. Restaurant and retail merchants typically process $15K-$40K/month. B2B merchants and e-commerce can range from $50K to $500K+.

Enter your residual in basis points

Your residual depends on your processor agreement. A typical range is 5-25 bps. Higher residuals come from cost-plus pricing models where you control the merchant markup. Check your ISO agreement for the exact split.

Key Concepts

Basis Points (bps)

One basis point equals 0.01%. So 15 bps on $25,000 monthly volume equals $3.75 per merchant per month. The total residual is merchants x volume x (bps / 10,000).

Attrition Rate

The percentage of merchants who stop processing each month. Industry average is 2-4% monthly. High attrition erodes residuals, which is why merchant retention programs are critical.

Portfolio Valuation Multiple

Residual portfolios are bought and sold at multiples of monthly residual -- typically 24x to 48x depending on attrition rate, merchant quality, and processor agreement transferability.

Expert Insights

Residuals Are the Real Business: Top-producing ISOs earn 60-70% of their total income from residuals, not upfront commissions. The strategic move is to accept lower upfront commission in exchange for higher residual splits from funders. A broker earning $5K/month in residuals after two years has built an asset worth $120K-$240K if sold at 24-48x monthly. That asset did not exist when they were chasing only upfront points.

Protecting Against Attrition: The number one residual killer is merchant attrition. Combat it by boarding quality merchants (not one-time desperation deals), maintaining quarterly merchant check-ins, and offering rate reviews before competitors poach your accounts. Every merchant you lose requires boarding a replacement just to stay flat.

Frequently Asked Questions

At 15 bps and $25K average monthly volume, each merchant generates about $3.75/month. You would need approximately 2,667 merchants to reach $10K/month. At 25 bps with $50K average volume, the number drops to about 800 merchants. This is why merchant quality (higher volume) matters as much as quantity.

Yes, if your ISO agreement allows it. Most processor agreements have assignability clauses. Portfolios with low attrition (under 2% monthly), clean merchant files, and a transferable processor agreement sell for 30-48x monthly residual. High-attrition portfolios sell for 18-24x.

MCA commissions are one-time payments at funding (8-15% of deal amount). Processing residuals are ongoing monthly payments based on transaction volume (5-25 bps). Many ISOs earn both by placing merchants for MCA deals and also processing their credit card transactions.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.