Key Differences Between a Merchant of Record, Seller of Record, and Payment Service Provider

  • What each term means
  • How Merchant of Record is different from Seller of Record
  • How it’s different from a Payment Service Provider
  • A side-by-side comparison between the three
  • How to choose the right partner for your online business, and
  • Implications of each model on payment authorization and conversion rate

What is a Merchant of Record?

A merchant of record (MoR), also referred to as a “reseller”, is the legal entity authorized to sell to customers and process their credit and debit card transactions on behalf of a merchant.

How does a Merchant of Record work?

A Merchant of Record works like an intermediary reseller; they receive payments from your customer; pay you for the products, and ship to the buyer.

Merchants of Records is helpful if you want:

  1. Global Financial Compliance: If you sell to a global audience, MoR will help you collect and remit taxes to comply with consumer protection regulations.
  2. Borderless SaaS Payment: An MoR can collect subscriptions and process payments frictionlessly.
  3. Pro Merchant accounting: An MoR is cheaper, safer, and more efficient than traditional merchant accounting, setting up local offices and other infrastructures necessary for processing cross-regional payments.

What is a Seller of Record?

A Seller of Record is simply the legal entity referred to and identified as the seller of a product to the end consumer.

How does a Seller of Record work?

The goal of a Seller of Record is typically to simplify sales tax and maintain commerce policies for online sales.

Seller of Record is helpful if you want:

  1. Outsource liabilities: you can focus on customer acquisition and product upgrades and outsource the seller’s liability and legalities to an SoR.
  2. Reputation Control: an SoR identifies the original seller to control the production brand through a seller contract.
  3. Manage Recourse: In an unsuccessful purchase, a Seller of Record is responsible for customers’ legal rights that demand compensation or refund.

What is a Payment Service Provider?

A Payment Service Provider (PSP) is a third party that allows merchants to accept payments.

How does a Payment Service Provider work?

A Payment Service Provider is more than a Payment Gateway.

Payment Service Provider is helpful if you want:

  1. Manage your transactions: accept various online payment methods, like online banking, credit cards, debit cards, e-wallets, cash cards, and more.
  2. Reduce processing cost: financial institutions cut processing costs for PSPs because they manage in bulk. This will cost way more if you try to partner directly.

Merchant of Record vs. Seller of Record

The main difference between Merchant of Record and Seller of Record is that MoR acts as a reseller and doesn’t necessarily take up the seller’s identity.

Merchant of Record vs. Payment Service Provider

The main difference between a Payment Service Provider and a Merchant of Record is that a PSP is a payment-only solution.

Merchant of Record vs. Payment Gateway

A Merchant of Record is different from a Payment Gateway.

Difference Between a Merchant Of Record, A Seller Of Record, And A Payment Service Provider

Which Kind of Partner is Right for Your Online Business?

Depending on your business, you may need one or a combination of these payment systems.

Here are some key factors you should consider while choosing a partner:

1. Security

Nothing beats using a secure system when dealing with payment processing.

2. Support

You can’t and do not want to afford downtime as this could increase your bounce rate.

3. Easy Integration

You want to ensure that your payment solution is easy to integrate.

Implications on Payments — Authorization and Conversion Rates

The type of payment provider you opt for can have different effects on your authorization and conversion rate, which is vital in surviving in today’s retail landscape.

What are Authorization Rates?

Every time a customer inserts or swipes their credit or debit card, it requires authorization.

What are Conversion Rates?

Although they are closely related, authorization rates are not the same as conversion rates.

What are the Implications of Higher Auth Rates and Conversion Rates to Merchants?

Choose a payment gateway that allows customers to complete their transactions in the first attempt.

Bottom Line

While Merchants of Records, Sellers of Record, and Payment Service Providers are often used interchangeably, they perform different functions for your business.



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2Checkout (now Verifone)

2Checkout (now Verifone)

2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.