Merchant of Record: What Every Business Owner Needs to Know

Meredith Galante, Writer

You have a small business and you’ve decided to process credit card payments. You may realize that handling payments, billing, and taxes can be among the more complicated parts of running your business. You may wonder what a merchant of record is, and how you might have to do business differently. Here’s what you should know to get started.

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What is a merchant of record?

A merchant of record (MoR) is the entity that is authorized, and held liable, by a financial institution to process a consumer’s credit and debit card transactions. The MoR is also the name that appears on the consumer’s credit card statement.

The merchant of record is responsible for maintaining a merchant account, processing all payments, and managing all credit card processing fees. The MoR also ensures compliance with the PCI-DSS, stays up to date on any laws where the transactions are taking place, and handles any chargebacks.

What’s the difference between a merchant of record and a payments solution?

Many businesses may think of a merchant of record and a payments solution as one and the same, but that isn’t the case. The difference between an MoR and a payments-only solution is that an MoR assumes financial responsibility for its clients, whereas a payments-only solution strictly processes payments.

A payments-only solution requires your business to be responsible for all financial liability and any complex administrative tasks.

What difficulties will I face without a merchant of record?

If your business is going to assume financial liability for all payments, you must invest the time and effort to resolve payment issues that come up. Here are some of the financial responsibilities you take on without a merchant of record:

  • Maintain a merchant account
  • Negotiate credit card processing fees
  • Ensure compliance with PCI-DSS standards and other payment laws
  • Manage tax calculation
  • Administer refunds and chargebacks

Also keep in mind that the more customers you have, the more likely these issues are to arise. So while on the surface a payments-only solution might seem more affordable, keep in mind the resources you will need and the time you may lose dealing with any payment issues.

If you choose an MoR, it is responsible for all the administrative and financial tasks that come with processing payments and staying compliant.

Is Square a merchant of record?

Yes. If you’re looking for an affordable MoR, Square acts as the merchant of record for your small business.

As a payment service provider (PSP), Square ensures your business is PCI compliant, which means you need fewer people on your payroll to handle this area of the business. Square ensures your payments are secure, because we fight fraud and disputed payments, or chargebacks, for you — which means your income is protected. Square also integrates with your online platform, like Weebly, to ensure a seamless process for you and your customers.

Square takes on the responsibility of financial liability, which mitigates risk for you, the merchant.

Meredith is a freelancer writer based in New York City. She’s been writing for Square since 2017 where she’s covered everything from the best software for restaurants to use to maximize profit, minimum wage laws across the country, and tips for entrepreneurs to maximize their impact.