Why is the Merchant of Record the SaaS CFO’s Secret Weapon?
The dynamics in the global software as a service (SaaS) marketplace are constantly changing.
For many SaaS companies, this means expanding to offer their products or services to customers around the world. The capability of expanding beyond borders, seizing opportunities in new, untapped markets, and catering to a diverse customer base has never been stronger.
However, selling to people in different countries isn’t as simple as it sounds. SaaS companies looking to serve customers in other countries face a formidable challenge: localization.
Localization refers to the process of adapting one’s products to meet the needs of a particular locale.
This might include translating a website into another language, but it also refers to understanding and respecting a vast array of local sales tax regulations, currency exchange rates, security and privacy laws, and more.
For chief financial officers (CFOs) steering the financial ship of SaaS companies, the complexities of this global landscape can be daunting. This is where the Merchant of Record (MOR) comes into play.
What is a Merchant of Record (MOR)?
The Merchant of Record is a third-party legal entity acting as a reseller and taking full legal responsibility for the entire transaction process of online transactions made between the end customer and the software companies selling the goods and services.
In addition to acting as a “middle man” between the seller and the end customer, the Merchant of Record service includes the entire payment process, taking care of complex aspects of sales such as invoicing, billing, payment processing, global tax compliance, ensuring adherence to PCI data security standards, and offering payment-related support to your customer base.
By outsourcing these tasks to an MOR, you can devote your time and energy to growing your business and providing top-notch products to your customers, wherever they may be.
The Global Challenge for SaaS CFOs
SaaS companies looking to expand into the global marketplace must contend with obvious challenges like processing digital transactions, translating their branded materials, and converting various currencies. They are also tasked with navigating the intricate web of payment localization, global tax obligations, VAT, and the many compliance issues involved.
Expanding internationally brings with it a multitude of tax-related intricacies. Each country has its laws and regulations regarding sales taxes, which can vary widely from one jurisdiction to another.
Value Added Tax (VAT) or Goods and Services Tax (GST) regulations can be confusing. The rates and requirements vary from country to country, and understanding these nuances is essential for accurate tax collection and reporting.
Different countries require distinct tax reporting structures, and compliance often involves complex documentation and reporting processes.
Regulatory compliance extends beyond tax rules. It includes adherence to legal frameworks related to customer data protection, consumer rights, and other industry-specific regulations.
Different countries have varying legal regulatory requirements, such as data privacy regulations like GDPR in Europe or specific industry standards that must be adhered to.
Understanding and respecting consumer rights protections and contract laws in various markets is necessary to avoid potential legal issues.
Payment Processing and Localization
Businesses operating globally know that selling worldwide means more than simply translating your checkout page.
True localization is found in handling international payment methods, processing payments in various currencies, and adjusting prices to fit local economies.
CFOs require efficient and robust payment processing solutions that turn monetization into a competitive edge, boosting global revenue and reducing friction.
Revenue Recognition and Reporting
Ensuring financial transparency and accounting compliance with ASC 606 or IFRS 15 standards is part of the CFO's responsibility.
However, global expansion introduces complexities that can transform revenue tracking and recognition into laborious, intricate, and notably expensive undertakings.
Proper revenue recognition across geographies means abiding by both international and local laws and regulations,
Investing resources into establishing and managing accounting teams in the countries where you are selling your products and exposing your SaaS to potentially hefty fines will undoubtedly eat into your profit.
Without the implementation of efficient systems designed to mitigate operational burdens, reduce expenses, and manage risks, CFOs may find themselves inundated with paperwork and documentation.
The Strategic Advantage of the MOR
Different from a payment processor or a payment gateway, having a Merchant of Record by your side offers strategic advantages that can be transformative for a company's financial operations and overall success.
Localization at Scale
Indeed, expanding your SaaS business to international markets requires more than just offering your product in different languages.
Selling in different countries requires opening merchant accounts in specific countries, an operation that can prove to be time and resource-draining, is lifted from your shoulders by the MOR.
This complex payments infrastructure makes it possible to simultaneously tailor your operations to many different locales, as they can facilitate local payment methods, often preferred by customers in different regions. This significantly improves conversion rates and boosts customer satisfaction.
A Merchant of Record can handle multiple currencies, making it easy for customers to transact in their local currencies. This not only simplifies their experience but also mitigates the risk of currency exchange fluctuations. And, of course, MORs ensure that your business remains compliant with local tax laws and regulations.
Financial And Sales Tax Compliance
Merchant of Record service providers calculate, collect, and remit sales taxes accurately, reducing the risk of errors and non-compliance. This simplifies your financial operations and reduces administrative overhead.
MORs handle invoicing and billing, ensuring that every transaction is accurately recorded and reported.
Maintaining security for payment processing is a mandatory task. And by choosing to partner with a Payment Card Industry Data Security Standard (PCI-DSS) certified Merchant of Record, you will be able to ensure the highest security standards, making sure that your customers’ payment data is securely handled and your SaaS is protected from data breaches.
Finally, the Merchant of Record offers a multi-layer approach to revenue recovery.
Through powerful cascading technologies and smart routing systems, Merchants of Record work to optimize revenue streams, boosting your payment acceptance rate by eliminating revenue leakages.
Secondly, Merchant of Record services include complete chargeback management and simplifying business operations. When customers require a refund or question a charge, MORs can make this process smooth and simple, ensuring that customers are satisfied and more likely to continue doing business with your company, thereby preventing future revenue loss.
MORs also employ robust fraud prevention measures, performing advanced security verifications, keeping systems up-to-date, and contacting customers to check suspicious activity, thus recovering lost sales and ultimately winning buyer loyalty.
The Impact of MOR on a CFO’s KPIs
While these aforementioned capabilities are exciting, it’s important to note the ways in which the Merchant of Record can impact your bottom line as a CFO.
MORs can have a significant effect on your company’s revenue growth, transaction processing costs, profit margins, and customer satisfaction - all of which are important factors in the overall growth of your company.
MORs can enable your business to expand to new markets more rapidly and efficiently, boosting online payments and capturing a broader customer base. One of the most critical KPIs for any CFO is revenue growth.
MORs can directly impact the optimization of the payment process, reduce payment failure rates, and streamline the handling of refunds.
MORs help keep costs under control by streamlining financial operations, preventing fraud, and preventing costly tax-related penalties and chargeback fees.
And, of course, in facilitating payment localization, MORs help your company deliver a better customer experience, thereby promoting your long-term success.
The Future of E-commerce and Global SaaS Expansions
There is no question that the SaaS landscape is becoming ever more global. Companies in the SaaS space have an unprecedented opportunity to expand their reach all over the world.
However, they must adapt to evolving regulatory environments, emerging technologies, and shifting consumer expectations if they wish to succeed.
The use of sophisticated solutions like Merchants of Record (MORs) will become increasingly common, enabling businesses to navigate global complexities, provide tailored experiences, and expand their global footprint with greater efficiency and confidence.
Sustainable global growth cannot be achieved in the absence of a collaboration with a robust payment infrastructure like the Merchant of Record.
Is PayPro Global a Merchant of Record?
Yes, PayPro Global offers a unique Merchant of Record model specifically created to aid SaaS, software, video gaming, and digital goods businesses to scale worldwide.
The real question is, what makes PayPro Global’s payments solution the right choice for thousands of software companies around the globe?
Lifting the Tax Burden
With PayPro Global as your trusted MOR partner, you no longer have to worry about ever-changing local tax rules. Our experienced team will take care of the entire tax management, handling all operations flawlessly in any market or jurisdiction your customers are in.
Going Local to Grow Global
To help you answer diverse preferences and accept payments worldwide, we offer the right mix strong mix of international payment methods and currencies, as well as all relevant supported languages, together with high-performing localization tools.
Remarkable Conversion Growth
Through localized iFrame, pop-up, as well as branded and frictionless desktop and mobile checkouts, we enable extraordinary payment experiences for your shoppers worldwide that boost conversions.
Complete Subscription and Billing Management
With access to monthly or annual subscriptions, manual, automatic, or on-demand renewals, upgrades, and real-time payment reporting, you can rapidly experiment with pricing and easily respond to growth opportunities.
AI-Powered Payment Routing
PayPro Global's MoR solution is equipped with an AI-trained cascading system by means of which you can optimize your revenue streams, increasing the payment acceptance rate and recovering international payments.
Top-Notch Customer Service
From offering payment-related support to managing refunds, our dedicated and experienced team offers professional services to help you overcome the hurdles and struggles of your global growth journey.
Start Selling Immediately
Our MoR business model offers rapid and assisted integration for growth acceleration, keeping you ahead of the game and saving time and resources.
Enhanced Security & Compliance
PayPro Global is a certified PCI-DSS Level 1 company offering SaaS, software, and digital goods developers with robust fraud detection and prevention tools and processes. Additionally, through our complete chargeback management services, we are effectively solving customer disputes.
Find out more about how PayPro Global’s Merchant of Record can strategically help your business grow in global markets, or book a demo and learn from specialists what this solution can do for your SaaS.
Key Takeaways for SaaS CFOs
For CFOs, a Merchant of Record partnership presents the opportunity to take full advantage of this new global landscape and propel their organizations forward.
With the help of MORs, chief financial officers can expand their customer base, successfully manage worldwide financial transactions, achieve impressive revenue growth, overcome global tax and compliance issues, and mitigate risk, all while optimizing for costs and efficiency.
More than a payment service provider, the Merchant of Record is the one-in-all solution that can take your SaaS global.
Author Name: Joseph Meyers
Bio: Joseph “OG” Meyers. Has been helping founders find their #1 growth blocks for almost 5 years now. When we don’t have answers, in Joe, we trust.
He is also why Quarantine Karaoke exists, and the world is better for it.
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Hanna Barabakh is a Brand Ambassador at PayPro Global | Discover a collection of articles on B2B marketing, subscriptions and e-commerce strategies
Adina Cretu is a Content Marketing Manager at PayPro Global | Discover a collection of articles on B2B marketing, subscriptions and e-commerce strategies
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