Mindbody Inc., a San Luis Obispo, Calif., company that makes business management software for health-and-fitness companies, has become an independent sales organization to improve its profit margin and deepen its relationships with merchants.

"Merchant account processing is a natural outgrowth of our products," said Rick Stollmeyer, Mindbody's founder and chief executive.

Previously a referral source for ISOs, Mindbody completed its ISO registration in July. Fifth Third Bancorp is Mindbody's sponsoring bank.

Health-oriented merchants such as personal trainers, massage therapists and spa operators use Mindbody's online software to manage scheduling, billing and operational tasks.

Mindbody is now offering merchants interchange-plus transaction pricing, in which they will pay the interchange rate plus a transaction fee. Stollmeyer would not disclose the specific rates it is charging.

"The desire to be an ISO has two motivations," he said. "First is to have a greater degree of control over the relationship. By the time we're discussing merchant account processing, we already have a relationship with the merchant."

The second benefit is the additional revenue from holding the merchant accounts and from the monthly Mindbody subscription fees, which range from $29 to $155, he said.

Mindbody is not looking to charge merchants excessive processing rates. Instead, it will rely on a large volume of transactions.

"We're looking to make a small amount of money from a large amount of people," Stollmeyer said.

In July, Mindbody handled $68 million in merchants' payments, Stollmeyer said. About 10% of Mindbody's clients are outside the United States.

Stollmeyer also expects that offering merchant accounts will help lower Mindbody's merchant attrition. Currently, about 0.8% of Mindbody merchants each month stop using its software, a rate he attributes mostly to companies going out of business.

About 5,500, or 70%, of Mindbody's overall users have a merchant account with it, said Aia Stinnett, Mindbody's director of merchant accounts.

Besides credit and debit card processing, Mindbody also handles recurring bills through the automated clearing house system, Stinnett said.

Mindbody's strategy is one many ISOs are using, said Jamie Savant, a partner at the Strawhecker Group, an Omaha merchant acquiring consultancy.

More ISOs are focusing on software vendors as a way to reach merchants. Where ISOs already have the payment expertise, companies such as Mindbody have to build that expertise, Savant said.

"One really has to have expertise in the merchant acquiring space," Savant said. "Once you find that, then it can become an all-in-one service."