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What Is a Merchant of Record?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJune 20222 min read

Accepting payments online can present a number of challenges, especially when it comes to mitigating the risk of fraud, for both businesses and customers. If you run an online business, you’ll need both a merchant account and a merchant of record (MoR). A merchant of record provides businesses with a way of processing their credit and debit card transactions without having to build their own payments stack.

A merchant of record takes on responsibility for the legalities surrounding payments and ensures you stay compliant, no matter where you conduct your business geographically. With your payment processing taken care of, you can concentrate on the day to day running of the business and growing your customer base.

In this post, we’ll discuss what a merchant of record is and look at how it differs from a seller of record and payment gateway.

Definition of merchant of record

A merchant of record is the entity that’s authorised to sell and process customer credit and debit card payments. Bottom line, it’s the entity that handles all payments. A merchant of record is the name that appears on a customer’s card statement.

While it’s possible for a company to be its own merchant of record, it's usually preferable to outsource card processing to a third party MoR provider, since they can take over the liabilities involved in your transactions. They can not only process your payments but keep you compliant, as well as take care of all refunds andchargebacks on your behalf.

A merchant of record also takes away the worry around taxation and compliance issues that come with accepting payments from abroad.

Merchant of record example

Airbnb is a merchant of record. They charge guests and deduct their fees, passing the remaining funds onto the property managers. With other travel sites, it's often the property managers themselves who are often responsible for charging their guests and collecting payments.

Merchant of record vs seller of record

A seller of record is the online payment system used by a business. It is identified as the seller of products or services to a paying customer. Your seller of record has the legal right to sell your items using your company name and identity. The seller of record can be used to outsource your liabilities and manage all customer recourse. The seller of record represents the business and is responsible for the brand reputation of that company.

A merchant of record doesn’t assume the identity of the business that sells goods or services, instead, they are termed a third party. The merchant of record will appear on the customer’s bank statement. However, the transaction can be traced to the business that sold them the goods or services.

Merchant of record vs payment gateway

A payment gateway is a software that allows merchants to process credit cards online. It acts like a bridge connecting your customer’s bank (or another payment method) to your merchant account. Examples of payment gateway include PayPal, Stripe and WorldPay. Data is encrypted by the system to protect it from fraud.

A merchant of record goes far beyond collecting payments, it’s responsible for all kinds of things relating to the sales process, for example, merchant funding, transaction processing fees, chargeback management and taxation and compliance issues.

If you run an online business, you can be your own merchant of record. However, setting this up can be time consuming and expensive. Engaging with the services of a third party merchant of record may be the best option, as they cover your liabilities and ensure payments are safe and secure, wherever you conduct operations in the world.

If your business accepts customer payments, you may want to look into GoCardless as a potential solution. GoCardless can be used to collect payments directly from customer’s bank accounts, and because it’s used for both one-off and recurring payments, it’s a great choice for subscription-based businesses, as well as companies utilising a more traditional business model.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.