Understanding Merchant of Record (MoR): What it is and How it Works

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.

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.