What is a Merchant of Record?

What is a Merchant of Record?

As the rise of cross-border ecommerce continues to grow exponentially, so does the complexity. Once willing to accept the standard frictions of cross-border commerce, buyers now demand a localized experience. This means being able to navigate the site and having it feel familiar, as well as having the ability to pay in their local currency and preferred payment method. Keeping up with trends in countries all across the world adds a lot of complexity and hurts your bottom line.

 

What is a Merchant of Record? 

A Merchant of Record (MOR) is the term used to describe a domestic legal entity of a foreign business that acts, for legal and financial purposes, as the final seller of goods or services to the end customer. The Merchant of Record is also the entity authorized and held financially liable in that customer’s home country by the banks and payment providers to process transactions. They are also required to provide customer service to the end consumer. In addition, the Merchant of Record takes on the liability related to every transaction to an end customer in its jurisdiction of operation and is responsible for ensuring compliance with PCI, tax, data privacy regulations, and other country-specific laws and regulations.

The most traditional example of a Merchant of Record in the cross-border market is the local subsidiary. While this business entity is wholly owned by its parent corporation, it must still have a physical, local presence, appoint and hire directors and managers, and incur substantial costs in order to establish and maintain its local operations. 

But as cross-border ecommerce has grown and matured, so too has the Merchant of Record model. 3rd Party Merchant of Record networks have emerged through which businesses can contract a series of local entities that can help them reduce costs and expand into new markets more efficiently.

 

What is a 3rd Party Merchant of Record?

Many businesses operate as their own Merchant of Record, organizing the payment infrastructure and undertaking all the liability and processes involved in receiving or refunding a payment. This is standard for companies selling into their domestic market where they have existing relationships with local banks and understand the rules and regulations. But for international markets, businesses are starting to utilize the 3rd party Merchant of Record Model. 

3rd party Merchant of Record services acts as an intermediary between a business and its customers, taking responsibility for the payment processes and liabilities on behalf of the business. Ultimately they function as a reseller of the goods or services, with the customer paying the Merchant of Record during their purchase and the merchant then paying the business.

How does 3rd Party Merchant of Record work with Reach? 

Partnering with a 3rd party Merchant of Record doesn’t change much as far as your customers are concerned. They still visit your website to buy the goods and process their payment as usual. However, Reach will dynamically present the pricing in the local currency and allow the buyers to pay with their preferred payment methods based on their location. Reach is disclosed as the Merchant of Record in the Terms & Conditions on the website and is the entity that will receive the initial payment.

Transactions are routed through our vast global payments infrastructure already built and maintained by Reach. Reach takes on the liability for all payments and sales tax compliance associated with those transactions. Reach then pays the amount due to you once the fee and correct taxes have been deducted.

 

What are the benefits of utilizing Reach to be the Merchant of Record?

  • Increase conversion by offering customers the ability to pay in local currency and preferred payment method
  • Reduce processing fees by utilizing Reach’s global payment infrastructure, unlocking local processing power.
  • Offload all compliance and liability for Tax, PCI, & local regulations
  • Easily Expand quickly to new markets with confidence
  • No requirement to set up a legal entity outside of your domestic market.
  • Reduce complexity - Manage currency, payment methods, tax, & compliance all through a single integration. 

Want to learn more about how Reach can operate as your Merchant of Record? Check out our offerings for your specific business, or get in touch with our team!