As a US ISO, how can I solicit Canadian merchants?
Canadian merchants have to place their merchant accounts with Canadian banks, unless they operate through a US subsidiary or affiliate. There are only about a dozen Canadian banks that are seriously involved in acquiring and even fewer that have third party sales organizations, like ISOs and ISAs. The norm in Canada is for banks to have in-house merchant services salespeople rather than outside sales organizations. Despite that norm, some Canadian acquiring banks and processors have created third party sales programs, which are the way by which it is possible to solicit Canadian merchants to offer them merchant accounts.
Do I need to incorporate a Canadian company?
Yes. Generally speaking, Canadian ISOs need to operate through a Canadian company. This is so because Canadian acquiring banks prefer to underwrite a Canadian company as an ISO rather than an entity that is foreign to Canada. Incorporating a new company in Canada takes a matter of days and will cost only a bit more than the average US incorporation. There are 10 provinces in Canada (which are like US states) and three territories, which are like provinces, but with a different constitutional status. Each Canadian province and Canadian Federal law has a companies statute, which gives a foreign business a variety of jurisdictions to choose from. For example, some provinces require Canadian resident directors or shareholders, while others do not. In addition, some Canadian companies will work better from a US tax perspective. With our experience in advising hundreds of payments businesses in the US and Canada, and the assistance of local counsel in a number of Canadian provinces, we are able to help US ISOs select the best jurisdiction in which to incorporate in Canada and deliver the incorporation to them in a timely manner.
Do I need a Canadian bank account?
Yes. The Canadian acquirer will want to settle your residuals in Canadian Dollars (each worth about USD$0.80) into a Canadian Dollar bank account in Canada. Wiring money from Canada to the US is a simple process that can be done by instructing the Canadian bank, that would also handle the currency conversion into USD.
Do I have to sign a new ISO agreement?
Yes. Most US processors will require a US ISO to enter into a separate and distinct ISO agreement for Canada. These agreements are negotiated in a manner not unlike those in the US. Because third party sales are a novelty for Canadian banks, US ISOs must expect a little more resistance than they are accustomed to in the US when negotiating their ISO deal.
How long does this process take?
The following are estimates of the time these steps should take:
(a) new Canadian company: 1 week or less;
(b) negotiation of Canadian ISO agreement. Depending on the speed of the Canadian processor’s legal department, a week or two; and
(c) opening a Canadian bank account: 2 days.
How much will it all cost?
We would be pleased to provide a firm and reasonable estimate of our legal fees for an incorporation and advising on the ISO agreement to any interested party.
Disclaimer
Nothing in this memo shall be interpreted as legal advice. This memo is for information purposes only. The information in the memo may not be applicable to you. The information in this memo is subject to change without notice.
About Adam Atlas Attorney at Law
The firm represents over 300 ISOs, agents processors and banks in the US and Canada. Adam Atlas is licensed in the State of New York and the Province of Quebec in Canada and is therefore able to assist parties on both sides of the border. Atlas writes a monthly column in The Green Sheet, speaks at and attends major US payments shows. Atlas helped found the Canadian Acquirers Association and publishes a Canadian payments trade journal called The Frontier Times. Please visit www.adamatlas.com.
For more information, please contact us.
Adam Atlas Attorney at Law
150-5585 Monkland Avenue
Montreal, Quebec, Canada H4A 1E1
Voice: 514-842-0886
