Defining Ecommerce: What Is Merchant of Record?

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1 Defining Ecommerce: What Is Merchant of Record?

2 Your guide to merchant of record Merchant of record or MoR is one of those terms that gets tossed around a lot in the acronym-fueled world of ecommerce. While it might sound a little official or intimidating, the concept of merchant of record can be distilled to a few straightforward points: 1. To accept debit or credit card payments for any products you sell online, you need an MoR. 2. You can either act as your own MoR or outsource these responsibilities to a reseller. 3. MoR responsibilities include administrative tasks around processing payments, collecting and remitting taxes, and ensuring the security of customer data. Not so bad, right? Let s get started with some definitions... What is a merchant of record? The merchant of record is an entity that is authorized to process debit and credit card transactions because it has established relationships with merchant banks and payment processors. These relationships are called merchant accounts. For example, say your store sells software. That software is subject to region-based tax that you must transparently display to customers during the purchase process; this tax is calculated, applied and ultimately remitted by the MoR. When a customer hits the payment portal (like the checkout on your website) and purchases your software by entering their credit or debit card info, the payment gateway securely transfers the information to the payment processor used by the merchant bank that s the bank with which the MoR has a merchant account. 2

3 Once the payment has been authorized, the customer s payment ends up with you (minus any card fees collected by the payment processor). This all goes on behind the scenes in milliseconds; your customer gets the software and enjoys a frictionless checkout experience. Your business can be its own merchant of record. Alternatively, you can partner with a reseller who will manage these tasks on your behalf. Acting as your own merchant of record By default, your online business is legally obligated to act as its own MoR (this doesn t have to be the case, though more on that in a bit). As your own MoR, you re responsible for handling a variety of administrative tasks around making sure that the transactions taking place on your site are fully compliant. This includes: Opening up merchant accounts with banks Installing and integrating payment gateways on your website Managing contracts with global payment service providers Submitting associated credit card fees to payment processors Ensuring compliance with PCI-DSS standards and other regulations that protect customer data Calculating, collecting and remitting all various taxes according to region 3

4 When does it make sense to act as your own MoR? If you re selling only domestically, with simple credit cards in your domestic currency If you have the finance/accounting resources to open a merchant account with an acquiring bank If you have the development resources to install a payment gateway on your website If you re willing and able to conduct ongoing maintenance like: Securing customer and payment data Collecting and remitting tax to the proper authorities Fielding billing inquiries and refund requests from customers Reducing fraud and handling chargebacks In short, acting as your own MoR isn t easy. But it s certainly doable, assuming that you aren t trying to navigate the vast expanse of payment, taxation and compliance complexities that you ll inevitably encounter in the global landscape. If your goal is global sales, partnering with a reseller is probably your best bet. Why outsource the merchant of record role to a reseller? You want to take over the world, right? Of course you do. But consider this as you plan to grow your global sales: venturing outside of domestic borders complicates MoR responsibilities exponentially. 4

5 Here are a few of the MoR requirements for global transactions: Relationships with acquirers all over the globe, with different rates for different currencies International merchant accounts to accommodate regional payment methods like country-specific credit cards (Carte Bancaire, Carte Bleue, Maestro UK, Visa Debit, MasterCard Debit, etc.) Payment contracts for each currency that you make available to your international customers Global tax calculation (sales tax differs by state, city and country in the US; European VAT regulations are constantly evolving, etc.), collection and remittance (involves filing for each jurisdiction) So how will a reseller help sort this out? For some some added clarity, check out the visual aid on the next page to see how a reseller can drastically simplify international ecommerce. Reseller Agreement Your Business Reseller (Your MoR) Purchase Agreement (Tmers & Consitions) Your Customers Payment Contracts Merchant Banks & Payment Processors As you see, the only agreement you re actually maintaining is the one with your reseller. 5

6 Instead of your business handling the endless regulatory details for every single transaction that come with acting as your own MoR, a reseller s got you covered with: Collecting funds from customers and paying them out to your business Managing relationships with global payment processors (and because they process a higher transaction volume, you benefit from a rate much lower than you d pay on your own!) Keeping strict compliance with PCI DSS standards and other data security regulations Staying up-to-date on ever-changing global taxation requirements Complying with country-specific payment legislation At this point, we must mention that cleverbridge can act as your merchant of record, supporting all of the above, plus more. What are the benefits of trusting cleverbridge as your merchant of record? Hopefully, it s obvious by now that we re excited about the ins and outs of online payments. It s what we do, and we do it well. Here s our spiel; we ll keep it short. As your ecommerce provider, cleverbridge can act as your MoR from managing relationships with merchant banks and payment providers to processing payments, recording and reconciling your transaction data and managing currency exchange. We also offer services like proactive fraud prevention and world-class customer service for mitigating refunds and handling billing-related inquiries with ease. But don t just take it from us. You can also learn more on our website. Happy selling! 6

7 Who Are We? We re cleverbridge, a provider of global subscription billing solutions for companies focused on building long-term customer relationships. We have in-depth expertise of subscription business models, and we help our clients monetize their products and services. We know how difficult it is to expand your global customer base, so we help our clients create seamless online experiences for their customers and increase their global recurring revenues. To learn more about cleverbridge, please contact inquiry@cleverbridge.com or visit Cologne, Germany Gereonstr Cologne, Germany Chicago, USA 350 N. Clark Street Suite 700 Chicago, IL p f p f San Francisco, USA 333 Bryant St. Suite LL120 San Francisco, CA Tokyo, Japan Wakamatsu Bldg. Level Nihonbashi-Honcho Chuo-ku, Tokyo , Japan p p +81 (0) f +81 (0)