ISO residuals in Canada: processors, reports, and what is different

Most of what is written about ISO residuals is written for the United States, and most of it applies in Canada. The chain from the merchant's markup to the agent's share is the same. What differs is the inputs: which processors, how debit is priced, what interchange looks like, and the fact that a Canadian ISO often has US merchants too. This guide covers the differences that actually change the numbers on a residual report.

The processors

The Canadian market runs through a shorter list of acquirers than the US. The names an ISO or agent is most likely to receive a residual report from:

• Moneris, the largest domestic acquirer, historically owned by two of the big banks.
• Global Payments Canada.
• Fiserv, through First Data Canada and the Clover platform. Its report layout is covered in How to read a First Data residual report.
• Elavon Canada.
• Chase Payment Solutions, formerly Chase Paymentech.
• Bank-branded programs such as TD Merchant Solutions and Desjardins, and newer entrants such as Nuvei, Helcim and Clearly Payments, some of which run partner or agent programs.

Each sends its own file in its own layout, with its own definition of profit. An office that works with three of them gets three shapes of report every month, which is the same problem as anywhere, with fewer people to ask about it.

Interac changes the shape of the numbers

In Canada, debit is not Visa Debit or Mastercard Debit at the point of sale. It is Interac, a domestic network, and Interac transactions are typically priced to the merchant as a flat amount per transaction rather than a percentage of the sale. The processor's cost is also per transaction.

For residuals this means two things:

• Debit profit scales with transaction count, not volume. A merchant doing many small debit transactions can be worth more than one doing fewer large ones. A residual report that only shows volume understates the value of a coffee shop and overstates a furniture store.
• Card mix decides margin. In many Canadian retail books, debit is a large share of transactions. Two merchants with the same volume can produce very different residuals depending on how much of it is Interac.

When reading a Canadian residual report, look for the debit transaction count column, not just volume, and treat it as a profit driver in its own right.

Interchange is lower, and it is regulated

Credit card interchange in Canada is set under voluntary agreements between Visa, Mastercard and the federal government, alongside the Code of Conduct for the Credit and Debit Card Industry. The result is average interchange rates that are lower than in the US, with a further reduction for qualifying small businesses that took effect in late 2024.

For an ISO, lower interchange does not directly change the residual, because interchange passes through to the issuers. What it changes is the merchant's total cost, and therefore how much room there is for markup, and how a merchant reacts to a rate review. Canadian merchants have been told, repeatedly and officially, what interchange should cost them. A residual built on a wide markup is more exposed to a competitor's statement analysis than it would be in a less regulated market.

The Code of Conduct also governs how merchants are told about fee changes and how easily they can leave. Both affect attrition, which is the subject of Merchant attrition warning signs.

Two currencies in one book

Many Canadian ISOs and agents carry US merchants, through a US processor or a Canadian processor's US program, and get paid for them in US dollars. The month-end problem this creates is easy to state and easy to get wrong:

• Reports arrive in two currencies. Adding them without converting overstates or understates the book by roughly a third, depending on which way you add.
• The rate changes every month. A residual that was flat in USD moved in CAD. Agents paid in CAD on USD merchants will ask why their statement changed when nothing about the merchant did.
• Agreements have to say which currency the split is calculated in, and at what rate. The cleanest rule is to convert each month at one published rate, record the rate on the statement, and apply the split after conversion.

An office that reports in one currency and converts each foreign-currency source at a stated monthly rate can explain every statement. An office that adds the two cheques together cannot.

Agents, contractors and tax

Canadian ISO agents are commonly independent contractors, often incorporated, who invoice the ISO for their residuals. That makes the monthly statement the basis of an invoice rather than a payroll line, and it means GST or HST handling sits between the statement and the payment. This is a question for your accountant, and the practical point for residuals is only this: the statement has to be final and dated when the invoice is raised, which is one more reason to lock a month once it is published.

What does not change

• The chain. Merchant markup, minus processor costs, times the processor split, minus office deductions, times the agent split, minus overrides, leaves the house. Worked through in How to calculate ISO residuals.
• The split structures. Flat splits, tiers, bonuses, overrides and shared merchants all appear in Canadian agreements in the same forms as elsewhere. See ISO commission split structures explained.
• The traps. Closed accounts in the file, rows that are not merchants, the wrong month's tab. They are the same files.

Frequently asked questions

How do ISO residuals work in Canada? The same way as in the US. The processor reports each merchant's profit, applies the ISO's split, and the ISO pays its agents from that. The differences are the processor set, Interac debit priced per transaction, lower regulated interchange, and the frequency of books that earn in both Canadian and US dollars.

Which processors pay residuals to ISOs and agents in Canada? Moneris, Global Payments Canada, Fiserv through First Data Canada and Clover, Elavon Canada and Chase Payment Solutions are the most common sources, alongside bank-branded programs and newer entrants with partner programs. Each reports in its own layout.

Do Interac transactions earn residuals? Yes. Interac debit is typically priced per transaction, so the profit on it scales with transaction count rather than volume. In retail-heavy books it can be a large share of the residual, and it is easy to undervalue from a report that only shows volume.

How should a Canadian ISO handle US-dollar residuals? Report in one currency, convert each foreign-currency source at a stated monthly rate, apply agent splits after conversion, and print the rate on the statement. Write the currency rule into the agent agreement.

Is there residual software built for Canadian ISOs? SplitRun is built in Canada and reads the report layouts Canadian processors send, including Fiserv's Canadian workbooks and Clover files, prices in both Canadian and US dollars, and converts foreign-currency sources at a per-month rate so each statement shows one currency. See Currency in the help center.

Does the Code of Conduct affect residuals? Indirectly. It governs how merchants are notified of fee changes and how they can exit, which affects attrition, and the interchange agreements that sit alongside it keep merchant costs lower, which limits markup. It does not change how residuals are calculated or shared.