You’ve probably seen the term Merchant of Record (or “MoR,” for short) thrown around quite a bit. And while it may seem like a rather commonplace concept in the already acronym-filled e-commerce space, the truth is, very few people truly understand what a MoR really is and why it’s such a critical component to get right when running an online business.
In this article, we’ll provide a brief overview of what a MoR is, the two primary MoR operating models businesses can adopt, and the relative pros and cons of each model.
WHAT IS A MERCHANT OF RECORD?
For starters, here’s an all-encompassing Merchant of Record definition:
A Merchant of Record (MoR) can be an entity that operates a webstore or platform to manage interactions with its customers, sellers (sub-merchants) or suppliers, providing due diligence and oversight over all commercial activity that happens on that platform, including:
Let’s look at a quick example to put it into context at a high level.
Say your business sells software online. After shoppers have filled their shopping cart, it’s time to start the checkout process. This is where local or region-based taxes will be displayed in addition to the base price of the purchase. The MoR calculates, applies, collects, and remits these taxes on your business’s behalf.
This all takes place seamlessly within your business’s over-arching customer experience; there’s no distinction whatsoever between your brand and the MoR managing the transaction.
Now, it’s time to pay. Your customers input their credit or debit card information to get this underway. This is where a payment gateway will securely transfer that information over to the payment processor used by the merchant bank (both entities are part of your MoR merchant account relationship) for authorization. Once authorized, the payment amount, less any taxes or payment processor transaction fees, will be sent to your account. You’ve now been paid—and your customers can enjoy their software!
If any billing-related issues arise or if a customer decides to request a refund or process a chargeback/dispute, the MoR is typically the first point of contact for customer support. This is because it’s the MoR’s name that shoppers see on their credit card statements or payment confirmations.
PRIMARY RESPONSIBILITIES OF A MERCHANT OF RECORD
Even though this example above paints a fairly simple picture of how an MoR operates behind the scenes, it also begins to highlight the important role MoRs play in maintaining full financial liability over the products and services sold. This translates into the following day-to-day duties:
TWO WAYS TO OPERATE AS A MERCHANT OF RECORD
There are two primary MoR operating models used by businesses today. To help you figure out which model is the best fit for your business, we’ve broken down the basics for you:
As an online business, you are legally obligated to act as your own MoR by default. This means you are required to tackle all of the administrative tasks mentioned above on your own.
The first thought you may have is that this all sounds like a big headache. It can be, especially if you don’t know your way around the global payment processing ecosystem. However, there still may be times when you’re still better off operating as your own MoR:
The long story short: if you’ve got the right resources in house—and have a limited sales footprint and sell in a single currency only—being your own MoR is doable. It’s just not always easy navigating the complex payment, tax, and regulation landscape on your own. This is oftentimes the reason why many online businesses opt for option number two.
2. Partner with a reseller as your Merchant of Record
If you weren’t able to say “yes” to any of the bullet points above, then you are most definitely in need of a partner who can manage all aspects of being a MoR on behalf of your online business.
This is especially true if you plan to sell across borders, as MoR responsibilities grow exponentially with every additional currency, country, or region you transact in. In fact, as your business expands globally, this is what your MoR responsibilities will be:
The reason why many global online businesses look to resellers to operate as their MoR is because they don’t want to deal with the hassle of all of these compliance measures at the local, regional, and global levels on their own.
Not only are resellers experts at dealing with all of these minute details, but they can also help mitigate your business’s sales liabilities and risks. For this reason, resellers are oftentimes seen as cost-, time-, and resource-effective ways to grow and scale your online business, fast.
If you’re still convinced that you can do it on your own, here are a few additional benefits that resellers bring to the table in operating as your MoR:
TRUST NEXWAY TO BE YOUR MERCHANT OF RECORD
The good news for you is that Nexway has years of experience serving as the MoR for online businesses of all sizes. We provide an all-in-one solution that saves you time, money, and effort— and keeps your business compliant with all local and global regulations—as you scale and grow your business to operate in multiple currencies, languages, and payment methods. And we do this by providing 100% transparency around the fees you pay for.
Another perk of our platform: it gives you a better, more unified way to access relevant sales data all in one place, helping you monitor your business’s health, anticipate new trends, identify the success of your expansion efforts, capture new audiences, and maximize conversions (by optimizing your checkout process), all in real-time.
Our goal is also to help you create the best customer experience possible by equipping your business with top-tier, localized customer support in multiple languages.
All in all, we are here to help you manage your entire payment journey—from accepting payments to preventing fraud to maintaining security and data compliance to adhering to local sales tax regulations.
Nexway can help your business thrive and grow. Contact us today to learn how.
The Nexway Team
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