Selling your products and services internationally helps companies reach new customers in new markets and discover untapped revenue streams. But it comes with the challenge of business registration, and navigating international tax compliance, including VAT, customs duties, and fraud prevention.

Managing all these requirements across multiple can be challenging for most businesses, even when the apparent benefits of cross-border commerce justify the efforts.

One of the major ways businesses have handled this is to partner with a merchant of record (MoR) to ease the burden of legal and financial complexities.

What is a Merchant of Record (MOR)?

A Merchant of Record (MOR) is a company that acts as the legal seller for online transactions, assuming responsibility for processing payments, managing refunds, and ensuring compliance with local tax and regulatory requirements. Essentially, they act as the middleman between the actual seller and the customer, handling all the financial and legal complexities of the transaction. This allows businesses to expand their reach globally without having to navigate the complexities of international sales themselves.

What are the responsibilities of a Merchant of Record?

• Payment Processing: MORs handle all aspects of payment processing, including accepting payments from customers, processing refunds, and managing chargebacks. They ensure that payments are processed securely and efficiently.

• Tax Compliance: MORs are responsible for calculating, collecting, and remitting sales taxes to the appropriate authorities. They ensure that businesses comply with local tax laws and regulations, avoiding penalties and legal issues.

• Regulatory Compliance: MORs ensure that businesses comply with all relevant regulations and laws, including consumer protection laws, data privacy laws, and anti-money laundering regulations.

• Risk Management: MORs assume the financial and legal risks associated with online sales, such as chargebacks and fraud. They have systems in place to detect and prevent fraudulent activity.

• Customer Support: MORs often handle customer inquiries and complaints related to payments and refunds. They provide a level of customer support that can help businesses maintain a positive reputation.

How does partnering with an MoR benefit your business?

• Reduced Risk: By assuming the financial and legal risks of online sales, the MoR allows businesses to focus on their core operations without worrying about the complexities of international sales.

• Simplified Compliance: The MoR handles all the tax and regulatory compliance requirements, saving businesses time and money. Think: calculating, filing, and remittance of sales tax in all required locations.

• Global Expansion: The MoR enables businesses to expand their reach globally without having to establish a physical presence in each market. This process can take up to 6 months costing as high as $10,000.

• Payment processing: ​​By integrating with an MoR, you minimize payment declines and maximize transaction success rates by utilizing a sophisticated payment orchestration strategy that intelligently routes transactions across multiple providers. This approach reduces the risk of legitimate payments being mistakenly flagged as fraudulent.

• Currency conversion: MoR often provides a system to handle the conversion of payments made in foreign currencies by international customers.

• Disputes and refunds: Say goodbye to handling disputes. MoR helps with simplifying complex payment processes by effectively managing payment reconciliation, ensuring accurate and timely refunds, and resolving chargebacks efficiently.

What types of businesses benefit from an MoR?

Many types of businesses can benefit from using a Merchant of Record (MoR), but here are some that typically experience the greatest advantages:

1. E-commerce businesses expanding internationally

• Challenge: Navigating international tax laws, payment processing, and compliance can be a major hurdle for online businesses selling globally.

• How an MoR helps: An MoR handles these complexities, enabling smooth cross-border transactions, managing local regulations, and minimizing risk.

2. SaaS and digital subscription services

• Challenge: Recurring billing, managing international taxes on digital goods, and handling varying local regulations can be complex.

• How an MoR helps: An MoR streamlines recurring billing, ensures accurate tax calculation and remittance and simplifies compliance with local laws.

3. Online marketplaces and platforms

• Challenge: Onboarding international sellers, managing diverse payment methods, and ensuring compliance for a large network of vendors can be overwhelming.

• How an MoR helps: An MoR can handle seller onboarding, payment processing, and tax compliance, reducing the administrative burden for the platform.

4. Businesses with high-risk transactions

• Challenge: Certain industries or transaction types may be considered high-risk by payment processors, leading to higher fees or account termination.

• How an MoR helps: An MoR can often provide access to payment processing for high-risk businesses by assuming some of the risks themselves.

5. Companies without local entities

• Challenge: Expanding into new countries without establishing a local legal entity can be challenging due to regulatory and tax requirements.

• How an MoR helps: An MoR acts as the local entity, enabling businesses to operate in new markets without the complexities of setting up a subsidiary.

6. Small businesses with limited resources

• Challenge: Small businesses may lack the resources and expertise to manage international payments, taxes, and compliance effectively.

• How an MoR helps: An MoR provides a cost-effective solution by handling these complexities, allowing small businesses to focus on growth.

How can you choose the right Merchant of Record?

• Reputation: Choose a MoR with a good reputation in the industry and positive reviews from other businesses. Startbutton is an example of a reputable MoR.

• Experience: Look for a MoR with experience working with businesses in your industry and in your target markets.

• Fees: Compare the fees charged by different MoRs and choose one that offers competitive rates.

• Services: Make sure the MoR offers the services you need, such as payment processing, tax compliance, and regulatory compliance.

• Technology: Choose a MoR with a robust technology platform that can integrate with your existing systems.

• Customer Support: Make sure the MoR provides excellent customer support in case you have any questions or issues.

What are the popular providers of merchant of record services?

• Startbutton

Startbutton is a leading Merchant of Record service that helps multi-national businesses get paid in African countries in a compliant and tax-efficient manner, without the need to set up local offices.

Startbutton currently serves over 100 merchants across 25 countries in sectors like Travel and hospitality, financial services, gaming, and e-commerce. Its footprint spans 14 African countries, including Nigeria, Ghana, Tanzania, Rwanda, South Africa, and Uganda.

🔔 Struggling with international payments and tax compliance for your digital products? Our Merchant of Record solution simplifies global expansion. Contact us today for a free consultation.

• Adyen: Adyen’s MOR service provides a comprehensive solution for businesses expanding globally. They handle payment processing, ensure compliance with local tax laws and regulations, and manage risk, freeing you to focus on what you do best.

• DLocal: DLocal is a payment platform that specializes in emerging markets. They offer a Merchant of Record (MOR) service as part of their broader suite of solutions, and it’s particularly attractive to businesses looking to expand into Latin America, Africa, and Asia.

Merchant of record summary

A MOR can be a valuable partner for businesses that want to expand their online sales globally. By outsourcing the financial and legal complexities of international sales to a MOR, businesses can reduce their risk, simplify compliance, and focus on their core operations. When choosing a MOR, it is important to consider factors such as reputation, experience, fees, services, technology, and customer support.

FAQ on merchant of record

How does an MoR work?

When you use an MoR, they become the legal seller of your product or service in the target market. This means they:

• Process payments from customers in the local currency.

• Handle tax calculations and remittances.

• Ensure compliance with local laws and regulations.

• Assume liability for chargebacks and refunds.

What’s the difference between a merchant of record and a payment service provider (PSP)

While both Merchants of Record (MoRs) and Payment Service Providers (PSPs) play a role in facilitating online transactions, they differ significantly in scope and responsibility. Think of a PSP like a bridge that simply allows money to cross from the buyer’s bank account to the seller’s. A well-known example is Stripe.  They handle the technical aspects of the transaction but don’t get involved in the broader legal and financial implications.

An MoR, on the other hand, acts as the official seller of your product or service in a foreign market. They take on the complexities of local regulations, tax compliance, and even liability for issues like chargebacks and refunds. This is a much broader role than a PSP, making MoRs essential for businesses expanding internationally, especially those without local entities.

Essentially, a PSP handles the “how” of getting paid, while an MoR handles the “where” and “what next.” This includes navigating the maze of international laws, taxes, and compliance that can be a major headache for businesses going global.

By taking on these responsibilities, MoRs allow businesses to focus on their core strengths – developing products, marketing, and serving customers – without getting bogged down in the complexities of international commerce.

Do I still need a payment service provider (PSP) if I use an MoR?

An MoR often includes payment processing as part of its services, so you may not need a separate PSP. However, some businesses may choose to use both an MoR and a PSP depending on their specific needs and payment infrastructure.

What’s the difference between a merchant of record (MoR) and a seller of record (SoR)?

The MoR is your financial expert, ensuring smooth and compliant payment processing, navigating international tax laws, and assuming liability for financial risks. They’re like the cashier at the checkout, making sure the money flows correctly and all the rules are followed.

The SoR, on the other hand, is your logistics and customer service guru. They handle everything related to getting your product into the customer’s hands – from shipping and delivery to handling returns and answering customer inquiries. Think of them as the store manager, ensuring a smooth and satisfactory customer experience.

While some companies wear both hats, many choose to partner with specialists for each role, especially when venturing into new territories. This allows them to leverage expertise and navigate the complexities of international e-commerce more effectively.