Merchant of Record vs. Payment Service Provider for Software, SaaS & Video Games

Funkcja 

Merchant of Record 

Payment Service Provider

What does it mean for you?

Rola 

As the authorized Merchant of Record, it assumes complete responsibility for compliance across all relevant regulations. This entity acts as the direct reseller to the end customer, managing the entire transaction from a legal and contractual standpoint.

The Payment Service Provider acts as a technology partner, offering the required infrastructure and services to facilitate payment processing between the merchant and the customer. It provides the technical connectivity and platform for various payment methods and facilitates obtaining a merchant account by the merchant. 

With an MoR: You can focus entirely on your core product and customer experience while offloading the complex legal and regulatory responsibilities. The MOR becomes the reseller of the product simplifying your operations and reducing administrative overhead.

Odpowiedzialność 

The Merchant of Record carries full liability, including the accurate calculation, collection, and remittance of applicable taxes. It ensures adherence to all relevant legal and regulatory frameworks and bears the responsibility for managing and mitigating fraudulent activities. Additionally provides PCI DSS compliance coverage, handles consumer protection regulations, and manages chargebacks and refund liabilities according to card scheme regulations and local laws.

The PSP’s liability is generally limited to the processing of payment transactions. While they implement security measures to prevent fraud, the ultimate liability for fraudulent transactions often rests with the merchant. The PSP is typically not responsible for tax calculation, collection, or remittance.

With an MoR: Your business risk is substantially reduced as the MOR assumes liability for tax compliance, fraud management, and regulatory adherence. You’ll no longer need to maintain expensive tax and compliance resources internally.

Zarządzanie subskrypcjami 

The MoR model typically offers comprehensive features for managing subscriptions, including recurring billing, plan modifications, upgrades, downgrades, and cancellation processes.

While some PSPs may offer basic tools for recurring billing, these functionalities are often handled by the merchant or a dedicated subscription management platform.

With an MoR: You gain access to sophisticated subscription management tools without additional development or integration costs. Your customers enjoy a seamless experience when changing plans or managing their subscriptions, while you benefit from optimized revenue through properly managed billing cycles. 

Globalny zasięg 

The Merchant of Record enables extensive global market access by supporting a wide array of international payment methods and currencies. Importantly, it removes the necessity for the original merchant to establish and maintain local legal entities in each target market.

The PSP is generally limited to working with merchants in a certain region

With an MoR: You can rapidly expand into new international markets without establishing local entities or navigating complex regional requirements. At the same time, you are given access to strategic range of payment methods and currencies. 

the PSP is generally limited to working with merchants in a certain region

Obsługa Klienta 

The Merchant of Record directly manages customer service inquiries pertaining to all payment-related aspects of the transaction, such as billing inquiries, refund processing, and payment dispute resolution.

The PSP’s customer service primarily focuses on the technical aspects of payment processing and platform functionality. Customer inquiries related to billing, refunds, or payment disputes are generally directed to the merchant. The PSP doesn’t handle end-customer service related to the transaction itself.

With an MoR: Your customer support team is freed from handling payment-related issues, allowing them to focus on product-related support. Your customers receive faster resolution on payment matters from specialists familiar with complex payment scenarios.

Funkcja 

Merchant of Record

Bramka płatnicza

What does it mean for the user? 

Sales Tax/VAT Collection

✅ Handles all tax calculations with guaranteed accuracy and compliance across all jurisdictions.

⚠️ Limited tax collection functionality, possibly achieved through different third-party systems, and no tax calculation functionality. 

With an MoR: The MoR eliminates significant compliance risk and the substantial resources required to maintain global tax rate accuracy. 

Tax Filing, Remittance & Reporting 

✅ The MOR takes over everything, from management of all tax filings and payments to tax reporting. 

❌ No support, the merchant is responsible for all tax obligations

With an MoR: The MoR saves thousands of hours annually in tax administration while eliminating the risk of costly filing errors.

Tax Registration Management

✅ Handles tax registrations across global jurisdictions

❌ No registration services; the merchant must manage all tax registration

With an MoR: The MoR eliminates the need for specialized tax expertise in each market.

Tax Rate Updates

✅ Continuously monitors and implements tax rate changes.

❌ No tax update monitoring; the merchant is responsible. 

With an MoR: The MoR ensures continuous compliance without requiring dedicated resources to track global tax law changes

Tax Nexus And Threshold Determination

✅ Proactive monitoring of nexus and sales thresholds that trigger tax obligations

❌ No responsibility  – the merchant needs to handle it 

With an MoR: Your MOR partner prevents surprise liabilities by tracking thresholds across all jurisdictions

Tax Exemption Handling

✅ Professional management of all tax exemption certificates and verification processes

❌ No exemption handling; the merchant must implement their own exemption processes

With an MoR: The MoR efficiently manages B2B tax exemptions, reducing administrative overhead and improving customer experience

VAT/GST Invoicing

✅ Automatically generates fully compliant tax invoices for all transactions

❌ No invoicing service

With an MoR: The MoR ensures perfect invoice compliance without requiring specialized knowledge of regional requirements

Data Privacy (e.g., GDPR, CCPA)

✅ Full data privacy compliance for payment operations 

❌ No support offered; merchant must navigate all data privacy regulations. 

With an MoR: The MoR protects businesses from regulatory penalties and significantly reduces the compliance resources required.

Consumer Protection Laws

✅ MoR ensures all transactions meet consumer protection requirements in each jurisdiction

❌ No support offered; merchant must navigate all consumer protection laws

With an MoR: The MoR provides protection from consumer protection violations, potentially resulting in penalties.

PCI DSS & Financial Compliance 

✅ Ensures full PCI-DSS compliance 

⚠️ Basic PCI compliance ; the merchant must maintain PCI compliance.

With an MoR: This business model reduces the cost and complexity of maintaining PCI compliance.

AML & KYC Requirements

✅ Manages complete AML/KYC programs

❌ No support offered; merchant must navigate AML & KYC programs

With an MoR: The MoR handles AML/KYC programs, eliminating the need for significant expertise

Regulatory Monitoring

✅ Continuous monitoring and implementation of regulatory changes worldwide

❌ No regulatory monitoring;

With an MoR: The MoR eliminates the need for dedicated regulatory monitoring.

Fraud Detection & Liability

✅ Assumes primary responsibility for fraud detection and prevention

⚠️ Assumes the responsibility for fraud detection and prevention. The merchant has full liability for fraud & risk. 

With an MoR: Your business partner focuses on minimizing the appearance of fraudulent transactions. 

Chargeback Management

✅ Chargeback handling ensured 

⚠️ Basic dispute tools

With an MoR: The MoR eliminates the resource-intensive chargeback management process.

Fraud Prevention Tools & Customization

✅ Sophisticated fraud detection systems using advanced AI and machine learning and industry-specific fraud rules. 

⚠️ Limited fraud screening tools and customization options.

With an MoR: The MoR provides superior protection through specialized fraud rules for specific business models

Audit Support

✅ Undergoes comprehensive compliance audits, reducing merchant burden

❌ No support, the merchant will also be audited periodically by the PSP. 

With an MoR: The MoR reduces the scope and cost of compliance audits required for the merchant

Service Level Agreements (SLAs) 

✅ Dedicated SLAs covering the entire transaction lifecycle with dedicated support

⚠️ Limited SLAs focused only on payment uptime

With an MoR: The MoR provides superior protection against service disruptions across the entire customer journey.

Market Entry Speed

✅ Immediate market entry with no local entity requirements

⚠️ Slow market entry requiring local establishment and local PSP contracting

With An MoR: The MoR enables expansion into new markets in days rather than the months typically required with a PSP approach

Supported Payment Methods

✅ Strategic coverage of payment methods optimized for maximum conversion

⚠️ Broad, but not optimized according to business requirements, and depending on jurisdiction

With an MoR: The MoR’s optimized catalog of payment methods typically delivers higher conversion rates than generic coverage.

Local Currency Support

✅ Fully Provided 

⚠️ Basic currency conversion

With an MoR: The MoR facilitates higher conversion rates in international markets. 

Currency Conversion Protection

✅ Financial protection against currency fluctuations built into the service

❌ No protection

With an MoR: The MoR eliminates currency risk that can significantly impact profit margins on international transactions.

Regional Payment Preferences

✅ Data-driven regional payment optimization

⚠️ Limited payment options depending on the PsP’s/ acquirer’s region.

With an MoR: MoRs utilize intelligence to optimize regional payment preferences. 

Geographic Restrictions

✅ No restrictions 

⚠️ Local entity required, as well as local PSP/acquirer connection 

Language Localization

✅ Comprehensive checkout localization optimized for conversion

⚠️ Basic capabilities

With an MoR: MoR’s extensive checkout localization leads to higher conversion rates. 

Local Business Requirements

✅ Eliminates the need for local business registration in most markets

⚠️ Zequires local business establishments

With an MoR: The MoR removes significant barriers to international expansion by eliminating complex local registration requirements

Expansion Scalability

✅ Effortless scaling to new markets with minimal operational effort

⚠️ Scaling requires extensive resources and maintaining relationships with multiple PSPs and acquiring banks. 

With an MoR: The MoR enables efficient global scaling with substantially reduced operational overhead

Funkcja 

Merchant of Record

Bramka płatnicza

What does it mean for the user? 

Recurring Billing Infrastructure 

✅ Provides complete subscription management system with billing logic

❌ Offers payment processing for subscriptions; the merchant needs to ensure subscription management through third-party solutions 

With an MoR: Due to the MoR’s specialized recurring billing systems, which are able to handle complex payment scenarios, billing errors are reduced. 

Zarządzanie windykacją należności 

✅ Automatically handles failed payments with optimized retry logic, including communications and payment retries

⚠️  Basic retry functionality; for additional functionalities, merchants need to consider third-party partnerships 

With an MoR: Subscribers are provided targeted payment failure notifications with clear instructions, leading to lower churn rates. 

Payment Method Updater

✅ Includes automatic card updater services

⚠️ May offer card updater services as an add-on; it depends on the provider

With an MoR: Through systematic and automatic notification, MoRs ensure uninterrupted services for subscribers and consistent revenue for subscription businesses. 

Subscription Compliance

✅ Manages regulatory compliance for auto-renewals 

❌ No support; the responsibility rests with the merchant

With an MoR: They have the experience, technological infrastructure, and expertise to monitor and communicate compliance in all regions and jurisdictions. 

Trial Period Management

✅ Fully supports trial periods with automatic conversion to paid 

⚠️ Technically recognizes trials, but does not offer support in creating the flow

With an MoR: Through the MoR’s sophisticated subscription billing systems, users enjoy a smooth transition from free to paid. 

Subscription Notifications

✅ Maintains subscription communication with the end-user 

❌ No support; this responsibility falls with the merchant

With an MoR: The MoR ensures that subscribers receive consistent, timely communications about subscription status, upcoming renewals, payment issues, and changes to terms.

Additional Revenue Streams

✅ Opportunities for upselling, cross-selling, and bundling through sophisticated platform capabilities

❌ No additional revenue generation features.

With an MoR: The Merchant of Record model allows additional revenue streams, unlike payment gateways. 

Plan & Price Management

✅ Handles multiple subscription tiers, pricing models, and currencies

❌ Processes payments only; the merchant manages plan structures separately

With an MoR: MoRs can provide merchants with guidance for better product pricing due to access to market data. 

Upgrade/Downgrade Processing

✅ Built-in workflows for subscription changes with appropriate billing adjustments

❌ No support, PSPs only process payments, merchants must build upgrade/downgrade logic

With an MoR: Merchants can rely on the MoR model to ensure billing adjustments for various subscription changes while providing uninterrupted service to subscribers. 

Subscription Analytics

✅ Provides subscription-specific data for better decision-making

⚠️ Basic payment reporting

With an MoR: MoRs offer extensive subscription insights and patterns for better decision making. 

Cancellation Processing

✅ Handles cancellation workflows, including compliance with local requirements

❌ No support; this responsibility falls with the merchant

With an MoR: This business model adequately handles the cancellation process while also communicating the required information to the user. 

Free to Paid Conversion

✅ Built-in flows for converting free users to paid subscriptions

❌ No support; the merchant is required to build the conversion logic

With an MoR: Merchants will find guidance and support with the MoR in creating dedicated free-to-paid flows. 

Payment Failures & Recovery

✅ Sophisticated retry strategies and payment optimization tools

⚠️ Basic retry functionality

With an MoR: MoRs employ sophisticated payment recovery tools, including smart routing and cascading systems, to improve transaction success rates. 

Subscription Pause Functionality

✅ Includes pause/resume capabilities with appropriate billing adjustments

❌ No support in building the logic; PSPs only process the resulting transactions

With an MoR: MoRs provide subscribers the option to pause their service, adequately adjusting billing and ensuring clear communication. 

Usage-based Billing Components

✅ Include metered billing capabilities 

❌ No support; this generally requires third-party integration 

With an MoR: Merchants can rely on MoRs to offer variable, consumption-focused tools to ensure flexible pricing. 

Funkcja 

Merchant of Record

Bramka płatnicza

What does it mean for the user? 

Payment Support for Customers

✅ Handles payment-related customer inquiries directly

❌ No support

With an MoR: Users receive dedicated payment support from a specialized team, resulting in faster resolution of payment issues and reduced burden on the merchant’s support team. 

Refund Processing

✅ Manages refund process and policies according to local regulations

⚠️ Limited management; the merchant is responsible for policy compliance 

With an MoR: Merchants benefit from a compliant refund process across different jurisdictions when partnering with an MoR. 

Order Management System

✅ Provides order management capabilities and customer notifications

⚠️ Some PSPs may provide order management support due to third-party integrations 

With an MoR: Order management follows consistent protocols

Customer Communication

✅ Handles transactional emails (receipts, order confirmations)

❌ No support

With an MoR: Acting as a reseller, the MoR maintains the communications with the end customers. 

Multi-language Support

✅ Provides support in multiple languages across markets

❌ No support; this responsibility rests with the merchant

With an MoR: To ensure clarity and brand trust, MoRs can provide merchants with localized customer service experiences. 

Customer Self-service Tools

✅ Provides customer portals for order history, subscriptions, etc.

⚠️ Limited self-service capabilities 

With an MoR: MoRs offer the required self-service tools to ensure easy access to purchase-related information. 

integracja

✅ Fast and assisted integration for rapid market entry 

⚠️ Intensive implementation – need for developers

With an MoR: MoRs provide faster time-to-market and fewer technical hurdles in the onboarding process due to the assisted and simplified approach. 

Risk Assessment

✅ Careful business model and product review, due to the fact that the MoR assumes full liability of the reselling of products. 

⚠️ Basic KYC/AML checks focused; liability rests with the merchant 

With an MoR: Due to the liability shift, the MoRs ensure security screening and product validation, limiting potential risks. 

Account Management

✅ Ensures dedicated account managers for strategic guidance and rapid response 

⚠️ Service levels may vary, usually dependent on business size; merchants can be limited to self-service. 

With an MoR: All accounts are awarded with a dedicated manager to ensure a fast and simplified resolution of possible issues, as well as strategic guidance. 

Vendor Portal

✅ Complete and unified dashboard for sales, tax, compliance, and customer data

⚠️ Payment-focused dashboard with limited information 

With an MoR: MoR dashboards give merchants better insights to improve offerings and customer experiences over time.

Technical Integration Support

✅ Extensive integration support including customization options

⚠️ Integration documentation and limited technical support

With an MoR: MoRs ensure focused technical integrations, eliminating hurdles and difficulties. 

Rozstrzyganie sporów 

✅ Handles dispute management processes with customers

⚠️ Limited to facilitating the chargeback process information

With an MoR: The MoR’s approach to standardized processes ensures compliance with card network requirements and regulatory standards across all markets.