What are the Benefits and Challenges of Using a Merchant of Record?

5 minutes

Business across borders has been picking up pace quickly, increasing the need for safe and secure payment solutions. In May 2020, cross border eCommerce sales in the United States saw a 42% increase compared to the previous year. China takes a comfortable first place globally when it comes to cross-border sales, with more than $100 billion captured in 2020.

Therefore, delivering a seamless purchasing experience is vital to running a global online business, but you need partnerships and payments strategies.

Accepting payments for online business is challenging when you operate internationally and require currency conversion, sales tax management and compliance management in a foreign jurisdiction you may not be familiar with, and fraud control.

This is where an MoR saves the day.

A Merchant of Record (MoR) – or reseller model as otherwise known – can provide the commerce support needed to scale your business seamlessly through the globe without boundaries.

In this article, we’ll cover everything you need to know from:

  • The Responsibilities and Services of Merchant of Record
  • The Benefit of Using a Merchant of Records
  • The Difficulty of Being a Merchant of Record


What Are the Responsibilities of an MoR

Processing online payments involves a lot of moving parts.

Some of the duties of an MoR include:



Merchant of Record Benefits

With MOR solutions, merchants can quickly sell online, accept online payments, and transact business globally by outsourcing their payment process.

Merchants can provide all of these services in-house, but it’s expensive and challenging. Plus, you didn’t go into business to spend days learning about different tax laws and regulations, and you certainly didn’t go into business to invest in these additional departments.

Below are some ways businesses can benefit from the services of a merchant of record:


Guaranteed Compliance

An MOR provides compliance security, so you operate without the extra task of checking all country-specific financial industry or privacy laws. This break can be a significant relief for anyone running a business and doesn’t have the time to check all the latest regulations. Opt for an MoR when you want to outsource the full liability for laws and regulations in the markets where you sell to.


One-Stop Solution to Multiple Problems

An MOR wears several hats for your business. You won’t need to bother with calculating the correct taxes, integrating multiple payment methods, paying different fees and commissions, dealing with consumer or business buyer regulations, chargebacks, handling currency conversion, or settling disputes, refunds, and chargebacks.

The MoR handles all these leaving you to focus solely on your core business operations.


Entry Into Global Markets

More and more businesses emphasize customer experience because of the great value it provides to them.

Usually, localizing checkout experience and currency is a project that often takes most businesses years to build.

With an MoR, all that is already taken care of. A global MoR provides the preferred payment methods, currency, and checkout experience customized for your customers, enabling you to operate globally with little worry. On top of this, most MoR providers offer 24×7 end-customer support for payment and order-related issues, most often than not in multiple languages, via more channels – email as a minimum, if not even phone or chat. While you sleep, orders from the other side of the globe are being taken care of in a timely manner.


Cost Saving Benefits

Using an MOR saves you the cost of paying an accountant or tax advisor to figure out your customers’ different country-specific tax laws and payment regulations, plus the additional cost incurred by customer support.

An MoR (like 2Checkout) already understands multiple payment gateways, local taxes, payment processing, and more. This makes it a very cost-efficient way to process payments from a global customer base.

In addition, by comparison to a Payment Service Provider (PSP), which will generally work with acquirers in the merchant’s own home country, a Merchant of Record usually works with local acquirers. This has a huge impact on your authorization rates – local acquirers can get you up to 12% extra in authorization rates, as 2Checkout data shows.




The Difficulty of Being a Merchant of Record

There are apparent reasons why small businesses may want to act as their own Merchant of Record.

However, being your own MOR involves more than just processing credit card payments; you assume financial responsibilities with billing and processing the customer’s payments.

To act as your MOR, you must be prepared to open and manage your own merchant accounts, manage your contract with payment service providers, set up payment gateways, comply with PCI DSS, and sieve through several local taxation laws.

Unfortunately, payment liabilities and responsibilities do not decrease with time – if anything, they get more complex and expensive.

Unless you have the time and the resources to handle being your MOR, combining your core business responsibilities with preliminary activities could turn out to be more harm than good.

If you choose not to use a Merchant of Record, here are the challenges you may face:


1. Payment and Data Compliance

Card security compliance in the international game field can be risky unless you know your way around it. Unfortunately, these things are complex and do not get any easier as your business expands.

Without an MOR, you’ll have to ensure worldwide compliance with PCI-DSS standards and other payment laws yourself. This ensures that all relevant data requirements are kept and that customers’ payment and data information laws are not breached.


2. Merchant Account

To process card payments, you need a merchant account. Businesses that operate locally may experience significant success doing so. All that is required from them is simply getting in touch with an acquiring bank.

However, obtaining one can be pretty challenging when dealing with the international market. Not everyone qualifies since several factors like business history and credit score come into play when assessing suitability.

Merchant accounts on a global scale is a whole different ball game and nothing you really want to do yourself.   Not to mention all the additional local payment methods such as eWallets, direct debits and so on – that are top of preferences in some countries and increasingly important around the world, which need additional effort to integrate and process.


3. Tax Calculation and Remittances

After signing off contracts for currencies and payment methods for all your global customers, there’s also the issue of transacting taxes and remittances.

Keeping up with local tax laws is taxing as it is. In the U.S. alone, tax laws vary from state to state, county to county, and city to city. Knowing the sales tax to apply whenever a transaction occurs and under which overall sales volume threshold is very challenging.

If you choose to be your own MOR, you’ll take up the added responsibility of having to also do this globally.

This includes keeping up with the ever-changing tax laws that apply to each country where you have a customer base. Now, that’s only for collection.

You’ll still be faced with the rigor of filing taxes for each jurisdiction and then remitting them to the appropriate bodies concerned–talk about stress.


4. Local entity creation

Acting as your own MOR would require you to set up local business entities to manage tax registration, merchant accounts, payment relationships, and so on.



Providing a merchant of record services is certainly no easy task. Suppose you aren’t using a Merchant of Record service. In that case, you’re deciding to do the work yourself and, in essence, assuming all the liabilities, risks, and responsibilities that come with doing so.

At 2Checkout, we provide you with an all-in-one payment solution that incorporates all these functionalities for your business.

Reach out today; let’s discover how our MoR services can serve your business.


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