Merchants of record
Software/SaaS companies are in the luxury position to be able to sell on a global scale from day one but this comes with global scale problems - such as taxes. Merchants of record can help alleviate some of this administrative pain (for a fee, of course).
What is a "merchant of record"?
A merchant of record (MoR) is a third-party entity that facilitates the transaction between a seller and a buyer by processing payments and managing the associated financial and legal responsibilities on behalf of the seller. In essence, an MoR acts as an intermediary between the seller and the payment processor, taking on the role of the official "seller" in the transaction. This means that the MoR is responsible for receiving payments from customers, handling refunds and disputes, and ensuring compliance with relevant laws and regulations.
Why would I use one of these?
This last part is the most important (to us) as it guarantees that we conform to all necessary local taxes when required. Our software is global but we don't have to know the intricacies of taxes, in the end we only have to account for the income we generate.
Other things to consider
While the pivotal role of a Merchant of Record in simplifying transactions and ensuring compliance cannot be overstated, it's essential to delve into the additional offerings that make this partnership even more valuable. Beyond the core responsibilities, a comprehensive Merchant of Record often provides a suite of features that enhance efficiency, customer experience, and troubleshooting.
A robust API
Of course, we're building software so we want to automate as much as possible. We should check that our MoR provides a strong developer experience with a well documented, powerful API that we can embed into our systems. This API empowers businesses to automate various aspects of payment processing, order management, and subscription renewals. By harnessing the power of automation, we can not only streamline operations but also reduce human error and enhance scalability.
Webhooks for keeping our data up to date
The accuracy and timeliness of transaction data are of paramount importance for effective decision-making. Webhooks provide a means to receive real-time updates about payment status changes, subscription renewals, chargebacks, and more. These webhooks ensure that our internal systems remain in sync with the latest transaction information.
A self-service portal for customers
Customers will likely want to update their payment details or modify their subscriptions in the future. Rather than investing time and resources to build a custom customer portal, sometimes MoRs provide a ready-made solution. These portals enable customers to modify their subscription plans, update card details, and view payment history autonomously, reducing the load on our support teams and enhancing customer satisfaction.
Customer support
Things go wrong and as payment processing is the backbone of our businesses, we need those things to be fixed ASAP. When issues emerge, whether they're related to failed payments, account discrepancies, or security concerns, having access to dedicated and responsive customer support is invaluable. A Merchant of Record with a proven track record of excellent support can swiftly resolve problems, minimising disruptions and maintaining the trust of both sellers and customers.