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What is a Merchant of Record?

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Last editedMar 20222 min read

A Merchant of Record service provides your business with an alternative payment system that takes responsibility for all the legal liabilities involved in the transaction when a customer buys your product. This includes ensuring compliance with PCI-DSS standards, taxes that vary from country to country, and currency exchange rates.

The purpose of partnering with a Merchant of Record is to allow you to focus on the daily operations of your business, improving your product, presentation and marketing, and ultimately growing your customer base.

Merchant of Record payment processing services are ideal for some businesses, especially those expanding globally. Let’s look closer at what a Merchant of Record means and any similar services also available.

What a Merchant of Record is

A Merchant of Record is the term to describe a legal entity that handles all payments. In addition, it takes on the liability related to every transaction to an end customer, be it the selling of goods or a service. It arranges all due tax payments, ensures PCI compliance and takes care of any refunds and chargebacks.

Many businesses operate as their own Merchant of Record, organising the payment infrastructure themselves and undertaking all the processes involved in receiving or refunding a payment. Third-party Merchant of Record services act as an intermediary between a business and its customers, taking responsibility for all of the payment processes and liabilities on behalf of the business. Ultimately they act 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 a Merchant of Record Works

Partnering with a 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, the Merchant of Record is the entity that will receive the initial payment, before paying the due amount to you once the fee and correct taxes have been deducted.

One big difference for the customer post-purchase is that it is the Merchant of Record’s name that will appear on their bank statement, and not the name of your business. It is also the Merchant of Record who the customer must take issue with should there be any dispute with the payment, as they are the liable party.

Seller of Record vs Merchant of Record

A seller of record often gets confused with Merchant of Record because they are very similar. A seller of record is the online payment system referred to and identified as the seller of a product to the end consumer. Merchant of Records do not assume the identity of the business selling the goods, and will be identified separately as the third party they are.

When you partner with a seller of record, you are essentially giving them the legal right to sell your goods using your company name and identify as if they were actually the original seller.

Using a seller of record can have certain benefits, including:

  • Outsourcing of liabilities

  • Management of customer recourse

Outsourcing a seller’s legal liabilities has obvious benefits as you can focus on your daily operations to grow your business. The seller of record will also handle all unsuccessful purchases by managing all customer recourse.

It should be noted that while a Merchant of Record will appear on the bank statement of the customer, the transaction can still be traced to the business who owns the store or website that sold the goods in the first place. A seller of record will already be representing the business having ‘assumed’ their identity for the sake of the payment process. They also then take responsibility for the brand reputation of the business they are partnered with.

We can help

If you’re interested in finding out more about Merchant of Record payment processing, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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