Want to sell things online? Great! You’ll need a way to take payments. When you start looking into it, you’ll see terms like Merchant of Record (MOR) and Payment Service Provider (PSP). These can sound confusing, right?

You’re not alone if you’re scratching your head. Many business owners wonder what the difference is and which one is better for them.

This blog post will make it easy to understand. We’ll explain what MORs and PSPs are, what they do, and the good and bad of each. By the end, you’ll know which payment option is the smart choice for your business. Let’s make online payments clear and simple!

Payment Service Provider (PSP)

Let’s start with Payment Service Providers (PSPs). Think of a PSP as your payment helper. They are companies that help businesses like yours take payments online. You’ve probably heard of some big PSPs like Stripe, Square, and PayPal.

So, what exactly does a PSP do?

• Makes taking payments easy: PSPs give you the tools to accept credit cards, debit cards, and other payments on your website. You don’t have to build everything yourself.
• Acts like a middleman: Instead of making a payment deal directly with a bank (that’s called a “merchant account”), you use the PSP’s account. You become like a “sub-merchant” under their umbrella.
• Quick to set up: PSPs are known for being fast to get started with. You don’t need tons of paperwork to sign up, which is great when you’re in a hurry.
• Simple pricing: Many PSPs use simple, flat-rate pricing. You pay the same small fee for each sale, no matter what type of card is used. This makes it easy to know what you’ll pay.
• Extras included: PSPs often give you extra tools like making invoices, getting reports, and sometimes even tools to sell in person. It’s like getting a payment package deal.
• Basic security covered: PSPs usually handle basic security rules (like PCI compliance) for you, which is one less thing to worry about.

Benefits about PSPs:

• Easy for beginners: If you’re new to online selling, PSPs are usually very easy to use and set up.
• Flexible: They are a good choice if you’re not sure what your payment needs will be long-term.
• Lots of features: You often get more than just payment processing – you get extra tools to help your business.
• Simple fees: Flat-rate fees make it easier to plan your budget.
• Works online and in person: Many PSPs let you take payments online and with card readers in a store or at events.

Limitations of Payment Service Providers (PSPs):

• Fees can add up: Those per-sale fees, while simple, can become expensive as you sell more.
• Money holds: PSPs can sometimes freeze or hold your money if they see something they think is risky (like big changes in your sales or customer complaints). This can cause problems for your business.
• Limited support: Customer support from PSPs can be basic. Getting help with special issues might be harder.
• Less control of your customer info: Some PSPs keep a lot of the customer data on their system, meaning you might not have direct access to all of it.

Merchant of Record (MOR): Letting Someone Else Handle the Payments

An MOR is very different. With an MOR, you hand over a lot of the work and responsibility for payments to another company.

What happens when you use a Merchant of Record?

• They become the official seller: The MOR company legally becomes the seller of your product in each sale. When a customer buys from you, they are technically buying from the MOR.
• Taxes taken care of: The MOR deals with figuring out, collecting, and sending in sales taxes, VAT (taxes in other countries), and other taxes. This is a huge help, especially if you sell to customers in different countries.
• Rules and laws handled: MORs understand and follow all the international payment rules, data privacy laws, and local rules. This takes a big weight off your shoulders.
• They take on payment risks: The MOR takes on more of the risks if something goes wrong with a payment, like fraud or chargebacks.

Think of it like this: With a PSP, you are still the seller, but you use the PSP’s tools to take payments. With an MOR, you’re saying, “MOR company, you be the seller for these payments, and handle all the complicated payment stuff!”

Benefits of a Merchant of Record (MOR):

• Easy to sell worldwide: MORs are fantastic if you sell to customers all over the world. They make dealing with international taxes and rules much simpler.
• Less stress about rules: You don’t have to worry as much about keeping up with all the payment laws and tax rules in different places.
• Lower risk for you: The MOR takes on more of the payment risk, giving you more protection.
• Focus on your business: By letting the MOR handle payments, you can spend more time on making your product better and growing your business.

Limitations of Merchant of Record (MOR):

• Can cost more: MOR services usually have higher fees than PSPs because they do more for you and take on more risk.
• Less direct control: You give up some control over the payment process because the MOR is acting as the seller.
• Less customization: You might not be able to customize the payment process as much as you could with a PSP, depending on the MOR company.
• Still need a payment gateway (but they handle it): MORs still use payment gateways to process the payments, but they usually take care of setting that up.

PSP vs. MOR: The Key Differences in a Table

Let’s put the main differences between Payment Service Providers and Merchants of Record in a simple table:

Feature	Payment Service Provider (PSP)	Merchant of Record (MOR)
Who’s the Seller?	Your business is the seller	The MOR company becomes the legal seller
Taxes	You handle taxes	MOR handles sales tax, VAT, etc.
Rules & Laws	You’re responsible for following payment rules & laws	MOR handles payment rules, data privacy laws, etc.
Payment Risk	You take most of the payment risk	MOR takes on more of the payment risk
Control	You have more control over the payment process	Less direct control, more of a standard service
Complexity	Simpler for basic payments	Handles complex payments, taxes, and rules
Cost (Fees)	Usually lower fees per sale	Usually higher fees (for more services and less hassle)
Best for	New businesses, selling mainly in one country, simple payments	Selling worldwide, digital products, wants less payment hassle
Examples of Companies	Stripe, Square, PayPal	Paddle, FastSpring, Digital River

When is a Payment Service Provider (PSP) Right for You?

Choose a PSP if your business:

• Is just starting out: They are easy to use and don’t cost much to start.
• Mostly sells in your own country: Taxes and international rules are less of a problem.
• Has simple payment needs: You just need to take basic online payments.
• Wants to be in control: You prefer to have more control over your payments.

When is a Merchant of Record (MOR) Right for You?

Choose an MOR if your business:

• Sells to customers around the world: Dealing with global taxes and rules is a big challenge.
• Sells digital products online: Digital products often have tricky international tax rules.
• Wants to avoid payment headaches: You want to spend less time worrying about payment rules and taxes.
• Values simplicity over full control: You’re okay with less control to get an easier, more complete payment solution.

Conclusion: Pick the Payment Path That Helps You Grow

The choice between a Payment Service Provider and a Merchant of Record really depends on what your business needs now and in the future.

• PSPs are a great starting point for many businesses. They are easy to use, affordable, and offer lots of useful features for businesses selling mostly in their own country.
• MORs are a smart investment if you’re selling globally. They take away the pain of international taxes and rules, letting you grow your business in new markets with more confidence.

Think about your business size, where you sell, and how much help you want with payments. Choose the payment option that sets you up for growth and success! Understanding PSPs and MORs is the first step to building a strong payment system for your business.

To optimize your international payment strategy, BRISKPE provides a specialized approach for businesses focused on efficiently and compliantly receiving funds from global sources for Indian companies. 

If streamlining inbound cross-border transactions is a key priority, explore how BRISKPE can enhance your global financial operations.