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Merchant of Record Responsibilities: Support for Your Business

By: Ted Rogers
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Running a business requires juggling a million tasks, and handling financial transactions often seems like several more balls up in the air. Between accepting payments, ensuring secure transactions, navigating complex tax regulations, and managing fraud prevention, it’s easy to feel overwhelmed.

Fortunately, there’s a solution that can streamline your operations and alleviate a significant portion of your operational burden — the merchant of record.

What is a Merchant of Record and how can they help?

Before looking into how they can support your ecommerce business, it’s important to quickly summarize the main responsibilities of a merchant of record.

They act as a third-party intermediary, taking on the legal and financial responsibility for processing customer payments on your behalf.

When a customer makes a purchase, a merchant of record collects the payment, handles all compliance and tax requirements, manages chargebacks and refunds, and assumes liability for fraudulent transactions. They essentially become the legal seller of your goods (e.g., physical products) or services.

Key Benefits

  • Reduced Administrative Burden: Free up your time and resources to focus on core business activities like marketing, product development, and customer relationships, whether B2B or B2C.
  • Simplified Compliance: Stay compliant with complex tax regulations and payment processing standards without worrying about the details.
  • Minimized Financial Risks: Reduce fraud losses and chargeback headaches with advanced fraud detection and management systems.
  • Faster International Expansion: Access new markets quickly and easily without dealing with complicated international regulations and localization requirements.
  • Scalability and Flexibility: Adapt to changing business needs without investing in additional infrastructure or expertise.

Who should consider using a Merchant of Record?

  • Startups and Small Businesses: With limited resources, offloading operational complexities can be a game-changer.
  • Businesses Selling Internationally: Expanding globally is simpler with a merchant of record handling tax, regulations, and localization.
  • Businesses Operating with Recurring Billing and Digital Transactions: Leverage experts in subscription management and digital sales solutions.
  • Businesses With High-Risk Products or Services: Mitigate fraud risks associated with certain industries.

Merchant of Record responsibilities

Now that you’re up to speed with the services available – let’s look into what tasks can be taken care of for your business.

Payment processing

Integrating various payment gateways, managing transaction authorization, and ensuring PCI compliance are just a few tasks a merchant of record handles. This frees you from the technical complexities and security risks associated with handling payments yourself.

Tax compliance

Keeping up with ever-changing tax regulations and calculating sales tax for different jurisdictions can be a major headache. A merchant of record handles tax registration, collection, and remittance, ensuring you stay compliant and avoid penalties.

International commerce

Selling internationally involves complex regulations and tax requirements, plus the ability to provide localized customer experiences. A merchant of record with global expertise can facilitate smooth international expansion, allowing you to reach new markets without the hassle of navigating unfamiliar regulations and localization needs.

Fraud prevention and chargeback management

A merchants of record should have advanced fraud detection systems and processes to identify and prevent fraudulent transactions, minimizing financial losses. They also handle chargebacks efficiently, saving you time and resources. As merchant of record, Digital River takes on these and many other responsibilities for you, allowing you to accelerate your reach into new markets.

Customer service for transactions

While customer service for your product or service remains your responsibility, a merchant of record fields inquiries and disputes related to payments, refunds, and chargebacks, which reduces your customer support workload.

Reporting and reconciliation

Reconciling transactions, generating reports, and maintaining accurate financial records can be tedious. A merchant of record provides detailed reports and automates reconciliation, giving you clear insights into your financial performance.

5 ways a Merchant of Record can help boost your ecommerce business

For ecommerce businesses, the benefits of utilizing a merchant of record go beyond streamlined operations and compliance. Here’s how they can directly contribute to your online success:

  1. Enhanced Conversion Rates: A smooth and secure checkout experience is crucial for converting website visitors into customers. Offering a variety of locally and internationally preferred payment methods allows you to cater to a broader audience and eliminate friction at the point of purchase. A merchant of record also ensures PCI compliance and robust fraud prevention, increasing customer trust and reducing abandoned carts.
  2. Global Expansion Made Easy: Expanding internationally can be daunting, especially when navigating different tax regulations and payment landscapes. A merchant of record with global reach eliminates these hurdles. They handle international sales tax compliance, offer localized payment options, and ensure transactions adhere to regional regulations, allowing you to enter new markets and reach a wider customer base seamlessly.
  3. Improved Customer Satisfaction: When payment issues arise, they can quickly become customer-support headaches. A merchants of record providea basic customer support for payment-related inquiries, freeing your team to focus on product-specific questions and building deeper customer relationships. This minimizes friction and improves post-purchase satisfaction.
  4. Data-Driven Optimization: Some providers offer detailed reporting and analytics on your transactions. This valuable data offers insights into sales trends, customer behavior, and popular payment methods. You can leverage this information to optimize your product offerings, marketing campaigns, and pricing strategies for increased revenue and customer engagement.
  5. Reduced Operational Costs: Setting up and managing your payment infrastructure can be expensive, especially when scaling your business.A merchants of record eliminates the need for upfront investments and ongoing maintenance costs, allowing you to focus your resources on core business activities like marketing and product development.

Choosing the Right Merchant of Record

Several factors come into play when choosing the right merchant of record, including industry expertise, supported payment methods, geographical coverage, pricing structure, and customer support. Conducting thorough research and comparing different providers is crucial.

For ecommerce businesses, partnering with a merchant of record is not just about offloading responsibilities; it’s about unlocking growth potential. By providing a frictionless checkout experience, simplifying international expansion, enhancing customer satisfaction, and offering valuable data insights, they can empower you to focus on what truly matters – serving your customers and growing your business.

Contact us today to find out how Digital River can take on the financial and legal responsibilities of selling online to simplify and accelerate your ability to reach new markets. Our one-stop integration covers global payments, tax, fraud, compliance, and data insights. For more news and updates, be sure to check back in with our Ecommerce Resources.