5 Drawbacks of Merchant of Record Alternatives

5 Drawbacks of Merchant of Record Alternatives


As the SaaS market soared to a staggering $213.9 billion in revenue in 2022, it's evident that this industry offers substantial opportunities. What sets it apart from your business perspective is the significant contribution of international customers to your overall profitability.

Still, as with all good things in life, achieving success often requires a lot of hard work and complex challenges. 

Because, in reality, embarking on a global growth journey without a trusted partner is an endeavor sure to be fraught with difficulties.

But who is that partner that can help scale SaaS and software businesses? In a nutshell, the Merchant of Record is the answer to these frustrations. 

Check out our guide about the Merchant of Record business model to understand better why this all-in-one payments solution is the best option for boosting SaaS global sales in today’s market. 

Or, on second thought, let’s try a different approach. Let’s look at how other payment solutions handle challenges associated with international payments to assess the real growth potential of an MOR partnership. 

Tax and Compliance Issues

One of the biggest challenges of selling across the world is none other than achieving sales tax compliance. Even though a number of payment service providers offer regulatory compliance services to some extent, sales tax management is something completely different. 

For instance, a payment facilitator and a payment processor handle payment processing but not tax management. 

5-Regulation-Types-Merchant-of-Record-Must-Follow

While possible, acting as your own Merchant of Record means resolving your tax obligations and keeping up with ever-changing tax regulations.  This requires investing in dedicated accounting tools and building an internal team of experts who can continuously monitor the landscape. 

While there is also the option to partner with a third party ready to handle tax management, this also means extensive resources and potential technical issues that arise due to other system integrations. 

Working with a Merchant of Record, on the other hand, gives you access to a complete payment infrastructure that extensively covers tax management across the entire world, widely understood as a less costly solution option. 

Payment Processing Challenges

To gain a competitive edge and expand your global sales reach, it's a great strategic move to align with your customer's preferred payment methods and currencies in your target markets. 

However, implementing this can be a resource-intensive and costly endeavor. You'll need to navigate the intricacies of managing relationships between payment processors and the available payment gateway options in the regions where you operate. This can lead to technical integration challenges and a heightened risk of increased payment failure rates.

Choosing the right Merchant of Record (MoR), which assumes full financial responsibility for your entire payment process, can seriously simplify this complex landscape. By partnering with an MoR, you also gain a diverse range of local payment methods seamlessly integrated into your operations.

How-to-Effectively-Evaluate-Merchant-of-Record-Solutions

The MoR employs an innovative infrastructure, complete with payment gateways, processors, and additional localization tools. These resources empower businesses like yours to easily capture more international sales opportunities. 

Limited Expertise 

Even though there is a large number of financial service providers, each has its own area of expertise. As they should. 

Payment gateways, as well as PayFacs specialize in payment processing, whereas Sellers of Record excel in the post-purchase processes. 

Payment-processor

To gain the amount of expertise required to scale online across different territories, you would be required to create your own MOR payments infrastructure encompassing various payment service alternatives, with each catering to specific areas. 

Luckily, you don’t have to get lost in this complex web of payment services. Because the Merchant of Record service providers furnish partners with a wide range of services, developed to meet the distinct business growth requirements, you don’t have to settle for less than what you need and want. 

Joining forces with a Merchant of Record will provide you with the expert knowledge to navigate payment regulations and local taxes effectively.  

Business Scalability

Whether you’ve established a global presence for your business or intend to do so, you need to be able to count on a dedicated partner who has the experience to help you scale while being fully aligned with your business plans. 

Let’s say you want to enter the EU market and grow your business in that area since you feel this territory can substantially increase business profitability. 

To scale globally, you are required to set up local business entities in the territories you wish to enter. This means time and money, two elements that will significantly slow down your international growth. 

Plus, there are compliance issues and payment complexities you need to understand and manage in order to ensure your business is operating flawlessly in all parts of the world. 

Even though you can find an independent solution for each of these challenges, the issue is speed. How long would it take to set up a business scalability infrastructure ready to yield impressive global results? 

The opportunity to charter less competitive markets with great growth potential would vanish by the time you finish connecting systems. 

Fraud Prevention and Detection 

Given their specific areas of expertise, alternatives to the Merchant of Record system unfortunately face challenges in providing a robust fraud detection and prevention strategy.

what every merchant of record needs to uphold

While some of these alternatives may include basic security measures that line up with their core focus, they often lack the broader infrastructure and advanced tools needed to expand their capabilities beyond their specialized domains.

On the contrary, a Merchant of Record is required to adhere to a multitude of regulations, each governing the services they offer. This necessity is what drives the development of a comprehensive anti-fraud strategy.

Additionally, these payment solutions make use of cutting-edge technologies such as AI or machine learning algorithms to automate processes further and consistently yield impressive results.

Meet PayPro Global.

The Merchant of Record that helps you grow

PayPro Global takes away the headache of selling your products worldwide. From local payment methods to simplified subscription handling and tax management, we give you the eCommerce tools you need to scale your business smoothly into the global market.

 

How Is PayPro Global Different?

Having been part of the payments industry for over 15 years, PayPro Global knows precisely what a complete all-in-one solution should consist of. 

Operating on a unique Merchant of Record business model with extensive features meant to considerably scale online payments for SaaS and software businesses across the entire world, PayPro Global’s payment infrastructure is the right global growth partner for your needs.

As a PCI-DSS Level One Certified Partner, with access to over 140 currencies and more than 70 preferred payment methods, secure transaction processing, multi-language 24/7 support designed to solve customer inquiries quickly, complete management of sales taxes, and a robust, holistic fraud prevention and detection approach, our MOR takes away the frustrations of selling internationally and gives you the freedom to focus on perfecting your product. 

Better still,  through multi-level internal systems that merge advanced monitoring tools, automated alerting systems, and machine learning algorithms with regular audits and manual verifications, we can proactively detect and rapidly address any anomalies or performance barriers.

Find out more about our complete payment infrastructure and how it can strategically scale your business in global markets.

Final Thoughts

The growth potential of the SaaS industry, driven by international customers, is undeniable. However, ensuring your company's stability and profitability requires compliance with local and international laws.

You have two paths ahead:

The MOR alternative involves piecing together your own infrastructure, relying on various systems, and hoping for smooth integration and ongoing success.

Alternatively, you can simplify your approach by partnering with a reputable Merchant of Record. This choice provides your SaaS business with the comprehensive services needed for global growth and the expertise required to ensure the safety of your operations at all times.

 

Frequently Asked Questions

What challenges are faced in managing international sales tax compliance?

Handling international sales tax compliance involves complex tax regulation monitoring, leading significant resources invested in acquiring and implementing dedicated accounting tools, and as well as hiring expert teams.

How does a Merchant of Record simplify global payment processing?

Bringing forward a highly innovative payments infrastructure, a Merchant of Record considerably simplifies global payment processing by handling all financial responsibilities, providing access to diverse payment methods and currencies, and adhering to all payment security regulations.

Why is expertise a challenge in scaling online without a Merchant of Record?

Scaling online across different regions requires specialized expertise in payment processing and post-purchase processes, which are complex and resource-intensive without a Merchant of Record.

What are the drawbacks of setting up local entities for global business scalability?

The process of setting up local business entities for global scalability is a time-consuming and costly endeavor, often involving complex compliance knowledge and payment regulations that apply in each region.

How do Merchant of Record alternatives fall short in fraud prevention?

Because they do not provide a wide range of services covering multiple business growth needs, they lack an all-encompassing perspective on things. This also means that alternatives to Merchant of Record do not have a comprehensive infrastructure and advanced tools for effective fraud detection and prevention, limiting their security capabilities.

 
Bloggers

Meir Amzallag

Co-founder and CEO of PayPro Global | Discover a collection of articles on B2B marketing, subscriptions, and e-commerce strategies

Ioana Grigorescu

Content Marketing Manager at PayPro Global | Discover a collection of articles on B2B marketing, subscriptions, and e-commerce strategies

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