Best Merchants of Record

Merchants of Record Guide

A merchant of record (MoR) is a business or entity responsible for handling the financial and legal aspects of a transaction between a buyer and a seller. The MoR manages the payment processing, customer billing, tax collection, and ensures compliance with various legal and regulatory requirements. This role is crucial in online commerce, as the MoR assumes the responsibility for ensuring that payments are processed securely and correctly. By serving as the MoR, the business is able to handle the complexities involved in international payments, fraud protection, and currency conversion, which are especially important for companies operating globally.

In addition to managing payment transactions, the merchant of record takes on liability in case of chargebacks, fraud, or disputes. This means the MoR is financially accountable for resolving issues that arise during the transaction process. The MoR is also in charge of managing customer service aspects, such as processing refunds or returns and addressing customer concerns regarding their payments. This ensures a smooth customer experience and reduces the risk for the seller by outsourcing the more complex aspects of financial transactions and legal obligations.

For companies that choose to use a merchant of record, they can focus more on their core business activities, such as marketing, product development, and customer relations. By outsourcing the payment processing and legal compliance, businesses can reduce their operational costs and avoid the need for complex financial infrastructure. This is particularly beneficial for small and medium-sized enterprises (SMEs) or startups that may not have the resources to manage the full spectrum of payment and regulatory requirements on their own. Ultimately, the MoR plays a vital role in ensuring that both the buyer and seller have a safe, efficient, and legally compliant transaction experience.

Merchants of Record Features

• Payment Processing: The MoR is responsible for handling the payment processing, ensuring that transactions are securely processed via credit/debit cards, bank transfers, or other payment methods. This includes authorization, settlement, and ensuring the transaction is successfully completed.
• Compliance Management: A key responsibility of the MoR is maintaining compliance with local, state, and international regulations, such as Payment Card Industry Data Security Standards (PCI DSS), General Data Protection Regulation (GDPR), and tax regulations. The MoR ensures that all financial transactions are compliant with the necessary legal frameworks, preventing legal risks for the business.
• Tax Management: The MoR manages the calculation, collection, and remittance of taxes, including sales tax, VAT, and other region-specific taxes. This feature is particularly important for international businesses, as tax laws can vary greatly from one jurisdiction to another.
• Fraud Prevention and Security: The MoR implements advanced fraud detection systems to identify and block suspicious transactions. This includes using machine learning algorithms, monitoring for chargeback risks, and ensuring that customer data is protected from breaches or misuse.
• Customer Support: The MoR typically offers customer support related to payment issues, including refunds, chargebacks, and inquiries about transaction history. This feature ensures that customers can get assistance quickly if they face any issues with payments or transactions.
• Payment Gateway Integration: The MoR provides seamless integration with various payment gateways, making it easier for businesses to accept a wide range of payment methods (credit/debit cards, e-wallets, and more). They ensure the smooth operation of these integrations to guarantee that payments are processed efficiently.
• Currency Management and Global Payments: The MoR supports multi-currency transactions, enabling businesses to handle payments from customers around the world. They convert currency at competitive rates and ensure that the right amount is charged and received, regardless of the customer's location.
• Subscription Management: For businesses that offer subscription-based services, the MoR can handle subscription billing, renewals, and management. This includes providing tools to set up recurring payments, offering discounts, and managing billing cycles.
• Chargeback Management: A significant task for the MoR is managing chargebacks—when a customer disputes a charge and demands a refund from the business. The MoR helps in handling chargeback cases by providing the necessary evidence, managing disputes, and working to reduce chargeback rates.
• Invoicing and Receipts: The MoR provides automated invoicing and receipt generation, allowing customers to receive accurate and timely invoices for their purchases. This simplifies accounting and helps customers track their payments.
• Risk and Compliance Reporting: The MoR offers detailed reporting on risk management and compliance, providing businesses with insights into their financial transactions, chargeback trends, fraud detection, and other key performance indicators. This helps businesses make informed decisions and maintain regulatory compliance.
• Refund and Return Management: The MoR handles customer refunds and returns in a way that ensures customers are reimbursed according to the business's policy. The MoR ensures that returns are processed smoothly and that refunds are handled promptly.
• Settlement and Payout Management: The MoR handles the disbursement of funds to the business, ensuring that payments are settled on time. They typically manage the timing of payouts to business accounts, taking into account various factors such as payment volume, fraud risks, and processing fees.
• Currency Conversion and Cross-Border Payments: With global operations, the MoR handles cross-border payments and currency conversion. This feature allows businesses to sell internationally without worrying about managing different currencies, exchange rates, or local payment methods.
• Customizable Payment Pages: Many MoRs provide customizable payment pages that can match the branding of the business. This allows businesses to create a seamless payment experience for customers while maintaining brand consistency.
• Settlement Reporting and Reconciliation: The MoR provides businesses with detailed settlement reports that allow for easy reconciliation of transactions. This helps businesses track payments, identify discrepancies, and streamline their financial processes.
• API Access for Integration: For businesses that require more flexibility, many MoRs provide API access to integrate their payment systems into the business's website, app, or platform. This feature allows for customized payment workflows and enhanced integration.
• Recurring Billing and Subscription Handling: The MoR facilitates the management of recurring billing, which is particularly useful for subscription-based businesses. This includes handling automatic billing, renewals, and adjustments, as well as sending reminders for upcoming charges.

Different Types of Merchants of Record

• Direct Merchant of Record (Direct MoR): The Direct MoR is the company that directly engages with the customer, handling payments and assuming full responsibility for the transaction. This includes processing payments, managing chargebacks, and complying with legal and regulatory requirements.
• Third-Party Merchant of Record (Third-Party MoR): A Third-Party MoR refers to an external entity that assumes the responsibility of handling transactions on behalf of the primary business. The third party takes on the risk and compliance associated with payments and sales.
• Platform as a Service Merchant of Record (PaaS MoR): In this model, the MoR operates as part of a broader platform that enables businesses to sell their products or services online, such as through an ecommerce platform.
• Payment Service Provider (PSP) as Merchant of Record: A Payment Service Provider may also act as the MoR, particularly in cases where a company needs a comprehensive solution for handling payments. In this case, the PSP processes payments for the business but assumes responsibility for handling transactions and associated risks.
• Marketplace Merchant of Record: In a marketplace MoR model, the marketplace platform acts as the MoR, collecting payments from customers and disbursing funds to individual sellers.
• Intermediary Merchant of Record (Aggregator MoR): This MoR type refers to a business that aggregates multiple smaller merchants under a single account or entity for payment processing. The intermediary assumes the merchant of record role for these smaller businesses.
• Subscription-based Merchant of Record: In this model, the MoR handles ongoing billing and subscription management for services that require recurring payments, such as SaaS (Software as a Service) platforms or subscription boxes.
• Hybrid Merchant of Record: A Hybrid MoR refers to a situation where the responsibilities and tasks of the MoR are split between different parties. For example, one party may handle payment processing, while another manages compliance or fraud detection.
• White Label Merchant of Record: In a white-label MoR arrangement, a third party provides a complete solution that allows businesses to sell under their own brand without managing payments or financial operations directly. The MoR acts behind the scenes to handle all payment-related activities.
• International Merchant of Record: An International MoR is responsible for handling transactions in multiple currencies and complying with international laws and regulations. This type of MoR is common for global businesses or companies that sell internationally.

Advantages of Merchants of Record

• Compliance with Legal and Regulatory Requirements: A MoR takes on the responsibility of ensuring that all transactions comply with local, national, and international regulations. This includes tax compliance, consumer protection laws, and data security standards (such as PCI-DSS).
• Simplified Tax Management: The MoR handles the collection, calculation, and remittance of taxes on behalf of the business. This includes sales tax, VAT, and other local taxes that might vary depending on the region.
• Fraud Prevention and Risk Management: MoRs typically implement advanced fraud prevention systems to monitor transactions and prevent unauthorized purchases or chargebacks. They also handle the risk management associated with payment disputes.
• Streamlined Payment Processing: A MoR manages the entire payment processing workflow, from capturing payments to handling refunds and cancellations. They provide payment gateway services, merchant accounts, and integrate with various payment methods (credit cards, digital wallets, etc.).
• Chargeback Management: The MoR handles any chargebacks or disputes that arise from customers disputing a charge with their bank or credit card provider.
• Customer Support and Service: MoRs often provide customer service to handle transactional issues such as order inquiries, payment issues, and refunds. Some MoRs also handle customer support for other transaction-related matters, providing support via email, chat, or phone.
• Global Market Reach: MoRs can facilitate sales in multiple international markets by managing the complexities of currency conversion, taxes, compliance, and local payment methods.
• Reduced Administrative Burden: The MoR assumes responsibility for managing various back-office tasks, including payment reconciliation, financial reporting, and transaction records.
• Customizable Business Solutions: Merchants of record offer tailored solutions to meet the specific needs of the business, such as providing branded invoicing, custom payment plans, or loyalty program integration.
• Scalability and Growth Support: MoRs are designed to scale with a business, providing flexible solutions that can accommodate rapid growth. This includes handling increased transaction volumes, managing new product lines, or supporting new currencies and languages.
• Reduced Liability: As the merchant of record, the MoR assumes legal and financial liability for the transactions, including issues such as payment fraud, chargebacks, and refund disputes.
• Improved Cash Flow Management: MoRs handle transaction settlements and typically provide businesses with regular payouts, ensuring a steady cash flow. They also manage refunds and chargebacks efficiently.
• Cost Savings: MoRs often offer competitive pricing structures and packages that consolidate various services (payment processing, fraud protection, tax handling) under one roof.
• Access to Advanced Reporting and Analytics: Many MoRs offer comprehensive reporting and analytics tools that provide businesses with insights into sales trends, customer behavior, and payment performance.

Types of Users That Use Merchants of Record

• eCommerce Businesses: eCommerce companies often rely on a Merchant of Record (MoR) to handle their payment processing and financial transactions. These businesses typically operate online stores or digital platforms that sell products or services directly to consumers. By partnering with an MoR, they offload responsibilities such as payment processing, tax collection, and fraud prevention, enabling them to focus on growth and sales. This is especially useful for international ecommerce sites that need to comply with varying global payment regulations.
• Subscription-Based Services: Subscription services, including software-as-a-service (SaaS) platforms, membership sites, and digital content providers (e.g., streaming services), frequently use a Merchant of Record. The MoR ensures that recurring payments are processed, invoices are generated, and taxes are appropriately handled for subscribers. This is critical for maintaining smooth cash flow and ensuring compliance with tax laws in multiple regions, particularly where the subscription model is widespread and global.
• Marketplaces and Online Platforms: Marketplaces (such as those selling third-party goods) often utilize a Merchant of Record to handle the complex financial transactions between buyers and sellers. The MoR manages the entire transaction, including payments, refunds, tax calculation, and disputes. It also ensures that the marketplace complies with financial regulations, reducing the operational burden for the platform owners who might otherwise have to handle each seller individually.
• Mobile App Developers: Developers of mobile applications, particularly those that include in-app purchases or subscription models (such as mobile games or services like dating apps), often work with a Merchant of Record. MoRs simplify the management of payments, tax reporting, and user authentication across multiple app stores, ensuring compliance with each platform's policies, such as the Apple App Store or Google Play Store, while handling sensitive customer payment information.
• International Businesses: International businesses that sell products or services in multiple countries often use a Merchant of Record to navigate the complexities of cross-border transactions. With different countries imposing varying tax rates, currencies, and payment methods, MoRs help simplify global sales by managing currency conversion, localization of payment methods, and compliance with international tax laws (like VAT in Europe). This is particularly important for businesses looking to expand into new international markets.
• Digital Goods Providers: Businesses selling digital goods—such as ebooks, online courses, downloadable software, and media content—use MoRs to handle the technical and legal complexities of digital transactions. MoRs ensure that digital goods are delivered correctly to customers, payments are processed securely, and that digital rights management (DRM) regulations are followed. Additionally, MoRs can ensure compliance with the unique sales tax laws that apply to digital goods in various jurisdictions.
• Nonprofits and Charities: Nonprofits, especially those that engage in online fundraising or sell goods (such as event tickets or merchandise), often rely on a Merchant of Record to handle payment processing, donations, and compliance with financial regulations. This allows these organizations to focus on their mission and programs, without worrying about the technicalities of payment acceptance or tax reporting. MoRs help ensure donations are securely processed and that tax exemptions or receipts are handled correctly.
• Crowdfunding Platforms: Crowdfunding websites (e.g., Kickstarter, GoFundMe) often use a Merchant of Record to manage transactions between backers and project creators. The MoR ensures that funds are collected securely, appropriate fees are deducted, taxes are calculated, and refunds are processed when necessary. Crowdfunding platforms are particularly susceptible to legal and compliance issues, so MoRs help navigate these challenges by managing financial responsibilities.
• Travel and Hospitality Providers: Travel companies, including online travel agencies (OTAs), airlines, and hotels, may use a Merchant of Record to handle bookings and payments. With a complex mix of services, taxes, and currencies, MoRs help these businesses manage financial transactions from customers worldwide. Additionally, they provide assistance with managing chargebacks, fraud protection, and ensuring compliance with industry regulations such as the International Air Transport Association (IATA) for airlines.
• Event Organizers: Event organizers, especially those who sell tickets for conferences, concerts, or festivals, frequently rely on a Merchant of Record to manage ticket sales and related payments. MoRs handle secure processing, tax compliance, and refunds for event tickets. They also ensure that the business remains compliant with financial regulations and laws for events that may span different states or countries, such as tax jurisdictional issues or event cancellations.
• B2B Service Providers: Business-to-business (B2B) service providers—such as consulting firms, digital marketing agencies, and IT service providers—may use MoRs to streamline their payment and billing processes. By partnering with an MoR, B2B companies can efficiently handle invoicing, payment collection, and even manage multiple payment methods (e.g., credit cards, ACH transfers) for clients without dealing with the complexities of financial compliance or fraud.
• Physical Goods Retailers (Brick-and-Mortar): While primarily focused on in-person sales, some brick-and-mortar retailers that also sell online may partner with a Merchant of Record for their ecommerce and omnichannel sales. MoRs help retailers streamline their online payment processing, reduce fraud risks, manage returns and exchanges, and ensure smooth operations between their physical and online sales channels.
• Government Services and Public Institutions: Government agencies and public service providers, especially those offering online services such as license renewals, fines payment, or application fees, often use a Merchant of Record for secure and compliant financial transactions. MoRs help ensure that payments are processed in accordance with governmental financial regulations, including security standards for payment data and proper allocation of collected fees or taxes.
• Financial Technology (FinTech) Startups: FinTech companies, particularly those providing payment solutions or peer-to-peer lending services, often use a Merchant of Record to manage customer transactions, maintain compliance with financial regulations, and mitigate risks such as fraud or chargebacks. MoRs allow FinTech startups to offload complex back-end financial management and regulatory compliance tasks, enabling them to focus on their innovative solutions.
• Affiliate Marketing Networks: Affiliate marketing networks, which connect advertisers with affiliate marketers, may work with a Merchant of Record to handle payment processing for commissions. The MoR ensures that payments are made to affiliates in a timely manner, provides reporting tools for both affiliates and advertisers, and ensures compliance with relevant tax regulations in various jurisdictions.

How Much Do Merchants of Record Cost?

The cost of a merchant of record (MOR) service can vary significantly depending on the provider and the complexity of your business needs. Typically, MOR fees are structured as a percentage of each transaction, often ranging from 1% to 5% of the total sale amount. In addition to transaction fees, there may be setup fees, monthly maintenance charges, or additional service fees depending on the features offered, such as fraud prevention, tax compliance, and reporting tools. Businesses with higher transaction volumes or those requiring specialized services may negotiate a lower fee percentage.

Some merchant of record services also offer tiered pricing based on transaction volume, where businesses that process a higher volume of payments may benefit from reduced rates. Additionally, the cost structure may include fees for chargeback management, currency conversion, or multi-currency support if you're operating internationally. It's important for businesses to assess the overall value of these services, including the potential savings in administrative costs and the reduction in liability exposure that comes with using a merchant of record.

What Software Can Integrate With Merchants of Record?

Merchants of record (MoR) are entities responsible for processing payments and managing transactions for goods or services sold online or in physical stores. To handle these responsibilities effectively, various types of software can integrate with MoRs. Payment gateways, for instance, are one of the primary software solutions that directly interface with MoRs to facilitate secure and efficient payment processing. These gateways encrypt transaction data and send it to the MoR, ensuring that payments are processed accurately and securely.

In addition to payment gateways, enterprise resource planning (ERP) software can also integrate with MoRs. ERPs often handle inventory, order management, and accounting, and by linking with MoRs, they can streamline the entire transaction lifecycle. The integration ensures that payment data flows seamlessly into the back-end systems, allowing for smoother reconciliation of sales and financial reporting.

eCommerce platforms like Shopify or WooCommerce also integrate with MoRs, helping online merchants manage their stores while the MoR takes care of payment processing. These platforms typically offer plugins or built-in features that communicate with MoRs to authorize payments and handle refunds or disputes.

Fraud prevention software is another category that integrates with MoRs to minimize risks related to chargebacks and fraudulent transactions. These systems analyze transaction data in real time, using algorithms and machine learning to flag suspicious activity before it reaches the MoR, which helps in reducing financial losses.

Customer relationship management (CRM) software can also be linked with MoRs, allowing businesses to maintain a detailed record of customer interactions, payments, and transactions. This integration helps in offering personalized services, tracking customer purchasing patterns, and handling customer service queries related to payment issues or refunds.

Together, these software solutions contribute to the efficient functioning of MoRs by improving payment processing, reducing fraud, and enhancing overall business operations.

What Are the Trends Relating to Merchants of Record?

• Shift Towards Outsourcing MoR Services: Many businesses are increasingly outsourcing their MoR responsibilities to specialized third-party service providers. This trend helps companies focus on their core competencies while ensuring they comply with complex payment regulations.
• Expansion of Global Markets: As companies expand into global markets, they need MoR services that can operate across multiple countries. This often involves dealing with different tax laws, currencies, and payment systems.
• Focus on Payment Compliance and Risk Management: With stricter regulations such as PSD2 (Payment Services Directive) in Europe and other local regulations, MoRs are responsible for maintaining payment compliance. Businesses are turning to MoRs to ensure they stay compliant with these ever-evolving rules.
• Rise of Subscription-Based Models: Subscription-based businesses, including SaaS (Software as a Service) and ecommerce subscription services, are increasingly relying on MoRs to manage recurring payments.
• Increased Demand for Digital Payment Methods: The rapid growth of digital wallets, mobile payments, and alternative payment methods (e.g., cryptocurrencies, BNPL: Buy Now Pay Later) is driving MoRs to integrate these technologies into their systems.
• Customization and Flexibility in MoR Services: Companies are seeking MoRs that can offer tailored solutions that align with their specific business models. This includes custom payment integrations, flexible chargeback management, and specialized fraud detection mechanisms.
• Automation and Technology Integration: Automation is playing a large role in MoR services. Technologies such as machine learning, AI, and automated fraud detection tools are being incorporated to streamline payment processing, improve security, and reduce manual effort.
• Integration with eCommerce Platforms: With the rise of ecommerce platforms like Shopify, WooCommerce, and Magento, there is a growing need for MoRs that can seamlessly integrate with these platforms.
• Increased Focus on Consumer Experience: Merchants are placing more emphasis on the consumer experience, which extends to the payment process. MoRs help create smooth, frictionless transactions that improve the checkout experience for customers.
• Strategic Partnerships with Banks and Payment Providers: More MoRs are forming strategic partnerships with banks, payment processors, and card networks to enhance their offerings. This includes providing better transaction rates, reducing fraud, and improving global payment processing capabilities.
• Data Privacy and Protection: As data privacy regulations, such as GDPR and CCPA, continue to evolve, MoRs must ensure they handle payment data securely and in compliance with these laws.
• MoRs and Tax Compliance: MoRs play a significant role in ensuring that businesses comply with tax obligations, particularly in the ecommerce space. This includes automatically calculating and collecting sales tax for transactions in different regions.
• MoR as a Growth Enabler for Startups: Startups, particularly in the tech and fintech sectors, are increasingly leveraging MoRs to scale quickly without needing to invest heavily in back-end payment infrastructure.
• Integration of Artificial Intelligence (AI) and Machine Learning (ML) for Fraud Prevention: AI and ML are becoming key components in the fraud prevention mechanisms of MoRs. By analyzing patterns in transaction data, these technologies help detect fraudulent activity in real time.
• Focus on Sustainability and Ethical Practices: There’s a growing trend toward sustainability, and MoRs are increasingly expected to integrate ethical payment processing practices. This includes supporting eco-friendly payment methods, ensuring fair labor practices in payment handling, and reducing carbon footprints associated with financial transactions.

How To Select the Right Merchant of Record

Selecting the right merchant of record (MOR) is a critical decision for any business. The MOR is the entity that assumes legal responsibility for processing transactions, handling customer payments, and managing financial records. To make the right choice, it’s essential to consider several factors. First, look at the merchant’s reputation. A reputable MOR should have a proven track record of security, reliability, and compliance with industry standards, such as PCI-DSS. This ensures that customer transactions are processed securely and in accordance with financial regulations.

Another important consideration is the level of customer support the MOR offers. A reliable merchant should provide excellent customer service, offering responsive support when issues arise. This is crucial for minimizing downtime or resolving payment-related concerns swiftly. You should also evaluate the range of payment options the MOR supports. Ideally, they should offer flexibility, allowing your business to accept a wide variety of payment methods, from credit cards to digital wallets and bank transfers.

The cost structure is another significant factor. Different MORs have varying pricing models, so it’s important to compare fees, transaction costs, and any additional charges that could affect your business’s profitability. Transparency in pricing is key to avoid unexpected costs down the line. Additionally, assess the scalability of the MOR. Your business may grow over time, and it’s crucial that the merchant can accommodate increased transaction volumes and support the expansion into new markets or product lines.

Lastly, ensure that the MOR aligns with your business goals and values. Some may offer more advanced features, like fraud protection or global payment capabilities, while others might be better suited for small businesses with simpler needs. Understanding your own business model and future plans will help ensure you select a merchant that can grow with you and offer the necessary tools to support your business in the long term.

On this page you will find available tools to compare merchants of record prices, features, integrations and more for you to choose the best software.