Navigating the payment landscape can be a challenge for any company, but those operating internationally can find it to be even more arduous. For that reason, many sellers opt to partner with a service known as a merchant of record (MOR). 

Understanding what MORs are, and how they affect funds exchanges as well as regulatory compliance and effective sales transactions, can enable you to decide if you should partner with one or become a MOR in your own right.

Merchant of Record Services defined

A MOR is a professional entity that acts on behalf of the seller. Its purpose is to facilitate the sale of goods and services to consumers. Businesses opt to collaborate with a MOR primarily because this service takes responsibility for all legal liabilities associated with the transaction. 

These include complying with regulations, collecting sales taxes, taking care of chargebacks and refunds and managing currency exchange rates.

Although it is possible for a company to act as its own MOR, many sellers choose to work with a third-party vendor. This often saves them time and administrative headaches while also furnishing them with local expertise in their customers’ home country that they probably do not have on their own.

How do MORs work?

Think of a MOR as the middleman between your store and your customer. 

When the buyer makes a purchase, they don’t pay you directly. Instead, funds go through the MOR, who takes steps to smooth out any kinks that might arise during international payment processing.

The customer first arrives at your branded website, browsing your product selections and coming to a decision about what they want to buy. Once the payment is processed, it is the MOR’s name that will appear on the shopper’s credit card statement. 

Should there be any disputes or other legal issues associated with the sale, it will be the MOR that will be held liable.

Once the payment gateway has approved the transaction and the funds are withdrawn from the customer’s card, they are temporarily held in a secure financial repository known as a merchant account. 

After a time period of anywhere between two to seven days when settlement is complete, the merchant account provider transfers the funds – minus any fees – to the seller’s standard business account.

Types of MORs

In a marketplace setting such as Amazon, a MOR takes care of the intricacies of transactions under its own name, even addressing customer service issues and returns. The MOR charges a fee for each sale, and everything takes place on the MOR’s website.

Alternatively, payment facilitator MORs function as intermediaries between sub-merchants and acquiring banks. Their primary duties involve assisting in the establishment of merchant accounts, and they also act on behalf of merchants during the underwriting process. 

Payfac MORs make it easy for sub-merchants to quickly gain a robust payments infrastructure without the need to build it on their own.

Important MOR features

When you are selecting the best MOR with whom to partner, take a close look at the services they offer. A reputable provider should offer tax management across the jurisdictions where your customers live. 

They should also give assistance with chargebacks and disputes, and support for various payment types in multiple currencies to accommodate your international customers.

A good MOR should give you everything you need to integrate with the third-party programs and tools you are already using. They should be experts in regulatory compliance in the jurisdictions you serve and have a laser focus on security, anti-fraud measures and data privacy.

Reporting and analytics should also be strongly supported, allowing you to track sales and revenue that will assist you in future marketing campaigns as well as tax preparation. 

The MOR should have the ability to grow with your business in the international arena and should provide prompt and effective support services to resolve any compliance, payment or technical issues.

Becoming a MOR

If you want to become a MOR in your own right, you will need to work hard to establish relationships with payment processing companies, banks and other financial institutions. 

You also must have a merchant account, negotiate fees with a payment processor, develop transparent chargeback and refund policies, be in compliance with all pertinent regulations including the Payment Card Data Security Standard (PCI DSS) and have strong security and anti-fraud protocols in place. 

You  will also need to obtain the services of an attorney and, in many cases, an accounting firm that will ensure that you are in compliance with all tax requirements in the areas you serve.

Advantages of partnering with a MOR for international sellers

If you are interested in getting up and running quickly in the international sales arena and are not well-versed in the complex tax and regulatory compliance requirements of each jurisdiction, working with a MOR can be a cost-effective, reliable solution. 

With the assistance of the MOR’s legal team, you can rest assured that you are adhering to all rules and are meeting requirements. As a result, you can avoid associated risks and fines, instead putting your focus on expanding your business.

Additionally, you don’t need to spend time and energy establishing relationships with financial institutions and payment processing companies. Your MOR can take care of all of that while also ensuring that the shopping environment your customers encounter is safe and secure. 

This is particularly vital in the foreign marketplace where earning trust is even more important in surpassing local competitors.

A MOR further adds to the customer service by accepting multiple payment types in the currencies that your customers prefer and trust. This flexibility helps to convince foreign buyers that your company cares about them and is willing to go the extra mile to gain their business. 

Should concerns or disputes arise, the MOR will be there to handle customer service in the languages your clients speak.

The downsides of MORs

Before you opt to partner with a MOR, keep in mind that this model also has its disadvantages. For one thing, you become dependent on a third-party company. If it experiences technical problems or goes out of business, your store will suffer.

What’s more, because the MOR’s name appears on customers’ billing statements, your branding might become diluted. Also, you could experience problems or disruptions if you get into a dispute with the MOR for any reason.

Should you decide to pursue this partnership, the good news is that working with a MOR can greatly simplify and streamline your international payment processing and reduce your compliance and security worries. 

Teaming up with a MOR provider might be exactly what your business needs in order to succeed in the international sales arena.