What is a Merchant of Record and why is it so important for a cross-border eCommerce strategy?

Por Go Global Ecommerce

07 gen. 2022

To stay competitive in today’s market, you need to sell online. Of course, it’s not enough just to have a shop window with our products, it’s essential to allow users to make secure online payments, and to be able to manage all the most popular methods that our customers are familiar with.

This means not only having the right technological know-how, but also being familiar with payments, invoicing and taxes, which can differ from country to country. This can be particularly complicated, which is why more and more companies are turning to Merchants of Record, a new figure that is becoming increasingly popular in international eCommerce.

What is a Merchant of Record?

A Merchant of Record (MoR) is an online sales legal entity, authorised by a financial institution to process online credit and debit card payments.

It is an intermediary between the seller and the end customer and acts as an eCommerce legal entity. The name of the MoR is what will appear on the user’s credit or debit card statement, next to the expense item.

The MoR is also responsible for collecting taxes on online transactions, handling refunds and transaction cancellations, or chargebacks. Your MoR will also handle relations with financial service providers, for example, to enable installment payments.

As an eCommerce legal entity, it is also responsible for ensuring compliance with the PCI-DSS, which means that it must always remain up to date on all laws in the countries where transactions take place.

Difficulties in selling online abroad

To sell online across borders you need to know the laws and rules of all the countries you want to export to. This applies not only to ensuring that the goods reach the end customer on time and in the agreed manner, but also to taxes and payment processing.

MoR exist to simplify operations related to the financial side, relieving the seller of the burden of processing payments, with the absolute certainty of always operating in accordance with the regulations in force.

This allows the company to save resources and time that can be used in other areas, such as the development of their business and the enlargement of their customer base. A Merchant of Record can be a strategic partner that helps the business grow because, even with a higher volume of sales and more customers to deal with, it will continue to provide the same standards of service.

Finally, the economic aspect should not be underestimated: a MoR is not only safer and more efficient, it is also a tool that saves money compared with relying on traditional accountants and the management of several local offices located in the various countries of interest.

Key differences between a Merchant of Record, a Seller of Record and a payment service provider

A MoR is distinct from a Seller of Record. Although they both handle payments, all financial elements and taxes, the main difference is that the MoR is responsible for all legal land claims from your customers. Another aspect that differentiates the MoR and the Vendor is that the former buys the goods from the company and then resells them to the customer – acting as a de facto reseller – while the latter only manages the economic and financial part.

In turn, the MoR and the Seller of Record are different from the Payment Service Provider. First of all, the latter is not considered as a legal entity for online sales. This means that it is the company that is legally responsible for handling taxes, payments and any refunds or cancellations of transactions.

Payment Service Providers validate transactions ensuring that funds are available to complete the purchase and act as the connection point between the business and access to funds.

Does Go Global Ecommerce constitute a Merchant of Record?

Go Global Ecommerce handles all financial and tax-related matters in all the countries in which it operates. It also handles relations with its customers’ partners and suppliers, including shipping and delivery to the end customer.

It acts as a partner to its customers, saving them time and resources and allowing them to run their business more efficiently, and it constitutes a legal entity for online sales, responding to all legal requests made by end customers.

In light of all these considerations, we can definitely say that Go Global Ecommerce is an efficient example of a MoR.