Understanding Merchant of Record (MoR): What it is and How it Works
Tags: webdev, automation, startup, wordpress
Published: 2023-04-27 10:35:45

_A Merchant of Record **takes away all the frustrations** with global payments while restoring the **freedom** to focus completely on what matters most: **your business**._

With over 11,000 sales tax jurisdictions in the US alone, the operational work associated with selling products online is a heavy burden, easily capable of affecting your business performance and balance. 

So instead of settling for fragmented growth made up of so many financial elements, why not consider alternatives to creating and handling your own payment stack?  One powerful solution to consider is a Merchant of Record model. Here’s a rundown of everything we’ll be discussing in this article:

- What is a Merchant of Record (MoR)?  
- How Does the Merchant of Record Model Work?
- The Benefits of Using an MoR
- The Price of Choosing the Wrong Merchant of Record
- Who Can and Should be Using Merchant Of Record, and Who Shouldn’t?
- How to Choose the Right Merchant of Record for Your Business?
- Is PayPro Global a Merchant of Record
- Merchant of Record FAQs

## What is a Merchant of Record (MoR)? 
The Merchant of Record is **a third-party legal entity taking full responsibility** for the entire processing of online transactions made between the end customer and the software companies selling the goods and services. This also includes declined transactions, refunds, fraud attempts, as well as any other complications associated with selling your products into international markets.  

Simply put, Merchants of Record are more than financial service providers. The **MoR offers a complete service** to eCommerce brands that sell software, covering complex areas like invoicing, billing, payment processing, global tax handling, ensuring proper PCI data compliance, and payment-related support for your customer base. Partnerships with a solution of this kind allow SaaS, software, and digital goods developers to **transfer the operational burden of growing internationally and focus on building amazing products**.

![What is a Merchant Of Record](https://blog.payproglobal.com/hs-fs/hubfs/buyer-mor-seller-png-2.png?width=730&height=261&name=buyer-mor-seller-png-2.png)

### How Does the Merchant of Record Model Work? 
Before we get into the step-by-step details, it is very important to clarify one point that causes some confusion among business owners. When selling your products globally with the Merchant of Record as your reseller, please keep in mind that your customers will still visit your business website to acquire your products. Behind the scenes, though, two transactions are taking place during the actual sale:

1. Between the MoR and your end customer - this is the reason why the name of the Merchant of Record you are collaborating with will appear on the customer’s credit card statement together with the transaction recorded.

2. Between the MoR and you.

**Now that we’ve sorted out this issue, let’s take a closer look at exactly how this payment solution operates:**

- The customer **selects the goods or services** they wish to purchase and proceeds to the checkout page on the company's website.

- The customer **enters their payment information**, and the MOR **processes the payment** on behalf of the company.

- The MOR is integrated with different payment gateways to ensure **the eCommerce transaction goes through smoothly**.

- The MOR **authorizes the payment** and **settles the funds** into the company's account.

- The MOR ensures that **the transaction complies with local and international laws and regulations**, including data protection, anti-money laundering, and fraud prevention.

- If a customer initiates a dispute or requests a refund, the MOR **handles the process** on behalf of the company.

- The MOR **provides real-time reporting and analytics** to the company, which will help them to understand their customer's buying behavior and make informed business decisions.

- The MOR **acts as the company's official merchant account holder**, handling all financial transactions and providing the company with protection from potential liability issues or financial compliance issues that may arise from global transactions.

![how merchant of records work](https://blog.payproglobal.com/hs-fs/hubfs/mor-jpg.jpeg?width=730&height=863&name=mor-jpg.jpeg)

## The Benefits of Using an MoR
Aside from the opportunity of tapping into a convenient, hands-free transaction processing infrastructure, a comprehensive payment solution like the Merchant of Record brings forward a slew of other essential benefits.

#### 1. Handling Sales Tax Compliance and Liabilities
The SaaS and software industry is growing at a speed no physical product can reach. Not only is SaaS essential to business growth, but it has the potential to go global from the moment it’s officially released. Although this sounds amazing, the reality of local taxes and other legal issues will soon make you wonder if you have all your bases covered. 

While, in theory, you could sell your products anywhere in the world, to do so successfully would mean handling a colossal number of tax regulations, all subject to changes at any point in time. Staying on top of tax compliance for a growing SaaS company can get messy. It can cost you valuable time, burying you in documents and deadlines and preventing you from focusing on your business. Not to mention that tax liability related fines could cripple your business, putting a hold on your investments. 

Fortunately, a Merchant of Record can easily come to your rescue and calculate, file, and remit taxes, and most importantly, always follow the rules and regulations specific to the markets where customers are located. 

By swiftly shifting all the tax liability to the MoR and allowing it to handle legal obligations, SaaS and software vendors are protected against hefty fines, simplifying what is an otherwise complex, tedious, and, above all else, costly process.

#### 2. Achieving Payment Compliance
Just like international taxes, compliance rules are country-specific and also constantly changing. While from a security point of view, this is an effective approach, from an operational perspective, it’s a living hell. And this is mostly because compliance takes on so many different forms, confusing to everyone without experience in these matters. 

To start with, you have PCI compliance to figure out and different changes in regulations from Visa, Mastercard, AMEX, and many other regional mandates to follow. Then, you have data privacy regulations like GDPR that need to be handled adequately. For the sake of your business, you need to successfully manage chargebacks and refunds. And finally, you need to have strong fraud detection and prevention systems to manage transactions securely.

Selling globally means having to adhere to numerous regulations, requiring you to have an in-house legal team to ensure you are compliant from all the aforementioned perspectives. 

Clearly, the Merchant of Record is your ticket to global success because this business model has all the required tools needed to handle compliance regulations, many of which you might not even be aware of, whereas the MoR payment system allows SaaS and software developers to process payments anywhere in the world.  Better yet, you can be assured this is done by ensuring PCI-DSS compliance and adhering to other security regulations, implementing adjustments regarding what products, business models, and working formats are required by law. 

Additionally, this solution handles the time-consuming tasks of chargeback dispute management, protecting the reputation of your business and keeping your customers satisfied. Equally important is the effective use of fraud prevention algorithms used by a reputable MoR, which will significantly reduce the number of scams typical in the eCommerce industry.

#### 3. Enjoying a Cost-Effective And Convenient Solution 
Selling worldwide is a common goal for businesses move when developing SaaS products, but mind you, it's not the simplest one. Not by a long shot. Taking financial responsibility for your international payments requires investing time, effort, and money into successfully handling any requirements or issues that might arise. 

Just to give an idea of what you might be exposing yourself and your staff to, consider that selling globally means establishing local business entities in the market you want to enter. This can be a highly resource-consuming and complicated process because legal business entities must facilitate tax registration, a merchant account, and other essential payment-related operations. 

Unfortunately, many people start their businesses to create awesome products and, instead, are forced to handle a massive volume of highly-specific operational workload. Fortunately, an MoR solution can remove that burden. 

The Merchant of Record already has local entities in different jurisdictions, allowing you to bypass this step and start selling immediately. Additionally, to ensure payment localization, this solution takes on the responsibility of setting up merchant accounts in the countries your customers are in, improving acceptance rates and decreasing the number of failed transactions. MoRs are cost-effective solutions to selling products worldwide, saving time and money, and giving developers the freedom to return to what matters most to them: their business.

#### 4. Regaining your Business Focus 
Because SaaS and software products are global in nature, numerous developers feel that they can act as their own Merchant of Record, which is, of course, possible. Even if, at a glance, this option seems like the right one, we don’t believe it is. Whatever you may think you are gaining, know that you are, in fact, losing time and precious resources. A DIY solution is constantly generating engineering hardships or various revenue leaks, which can take a severe toll on the profitability and efficiency of the company. Basically, you might end up buried in operational tasks and completely disregarding the essence of your business: your product. 

A good Merchant of Record solution has a robust infrastructure designed to streamline global payment processing and everything it entails, from payment gateways to merchant banks. By establishing strong partnerships with MoR providers, you are able to market your products effectively in different countries. You can then focus on the improvements or enhancements your product requires to gain customer satisfaction. 

No longer bothered by financial tasks or responsibilities, you can quickly capitalize on growth opportunities across relevant areas like customer acquisition, retention, and expansion. You can free your staff from the burdens not necessarily connected to their areas of expertise and let them focus on other priorities

#### 5. Going Global Immediately 
As ironic as it sounds, going global is very much a local project. From the legal implications of selling SaaS internationally and handling compliance business regulations to managing relationships with local banks and payment processors, these struggles must be handled professionally. Without all of these mechanisms in place, achieving the ultimate goal, that of significantly boosting sales, is virtually impossible. 

Then there is the customer issue - an essential part of any successful worldwide expansion. Localizing payments on your checkout page is necessary for achieving the end goal. However, personalizing checkout experiences based on customer location can be a real challenge for SaaS developers and can take years to complete. 

Because the Merchant of Record has everything set up, once you sign up, the solution will immediately begin to take care of all the entanglements of selling online, including multi-currency support and the customization of your checkout experiences for your shoppers. Additionally, since MoRs work closely with local banks, you will benefit from increased approval rates and reduced exposure to currency conversions, leading to a significant rise in revenue and customer satisfaction.

#### 6. One Effective Solution for Payment Processing and Optimization 
Multiple complexities come with payment processing, from managing global taxes to handling chargebacks. Due to the nature of the business, as your customer count grows, so do your payment issues. Losing track of these operations can result in significant revenue leaks, affecting the business' cash flow. 

The biggest challenge arises when having to ensure payment security. Mass fraud detection systems that don't fully understand the product or the business model mistakenly flag legitimate transactions as scams. As you can imagine, this leads to substantial revenue losses and unhappy shoppers. 

A Merchant of Record solution will help you overcome these hurdles while streamlining and optimizing all processes. By performing advanced security verifications, keeping systems up-to-date, and contacting customers to verify suspicious activity, you can recover lost sales and win buyer loyalty. 

To ensure the best possible results, implementing custom rules that are constantly changing based on a 24/7 order flow might be required. Imagine how costly and time-consuming this process would be, should you have to manage it on a case-by-case basis internally, with no external assistance. Furthermore, trustworthy MoRs will offer customers payment-related support via multiple channels to quickly solve queries and misunderstandings for their buyers.

![The Benefits of Using an Merchant of record](https://blog.payproglobal.com/hs-fs/hubfs/One-Effective-Solution.png?width=730&height=471&name=One-Effective-Solution.png)


Read on to discover : 

- [The Price of Choosing the Wrong Merchant of Record](https://blog.payproglobal.com/what-is-a-merchant-of-record#A4)
- [Who Can and Should be Using Merchant Of Record, and Who Shouldn’t?](https://blog.payproglobal.com/what-is-a-merchant-of-record#A5)
- [How to Choose the Right Merchant of Record for Your Business?](https://blog.payproglobal.com/what-is-a-merchant-of-record#A6)
- [Is PayPro Global a Merchant of Record](https://blog.payproglobal.com/what-is-a-merchant-of-record#A7)
- [Merchant of Record FAQs](https://blog.payproglobal.com/what-is-a-merchant-of-record#A9)