Business tips
How merchant of record reduces risk for SaaS businesses
Daniel Adeyemi
Feb 27, 2025
3 minutes
The global Software as a service (SaaS) market is on an explosive growth trajectory, projected to more than triple by 2032. For SaaS business owners, this presents a compelling opportunity but also a strategic imperative: how to efficiently manage operations and mitigate risks during rapid expansion. Particularly in emerging markets like Africa, where the SaaS sector is anticipated to grow at a remarkable 21.20% annually, reaching $6.15 billion by 2029, efficient global expansion is key.
To navigate these complexities, many SaaS businesses are turning to Merchants of Record (MoR). But what is an MoR, and how can it revolutionize your international growth strategy?
What is a Merchant of Record (MoR)?
A Merchant of Record (MoR) acts as the legal seller of goods or services, taking on the responsibility for various financial and legal obligations, thereby freeing up the SaaS business to concentrate on its core strengths: product development and customer acquisition. MoRs offer a comprehensive suite of services that address many of the pain points associated with international sales.
But why is this so important? Let’s break down the risks an MoR helps SaaS businesses avoid:
Mitigating payment processing risks and fraud
International online payments present several challenges, including failed transactions, fraud, and chargebacks. This happens because processing payments across borders involves navigating diverse payment methods, increasing the potential for failed transactions. Online businesses, particularly those handling international payments, are also susceptible to fraudulent activities. Furthermore, disputes and chargebacks can be costly and time-consuming to resolve.
Using an MoR provides SaaS businesses with strategic advantages in payment processing and fraud prevention. MoRs’ extensive network of payment processors and gateways ensures optimized routing, leading to fewer failed transactions. Their sophisticated fraud detection capabilities effectively block fraudulent activity, minimizing costly chargebacks. Critically, MoRs handle chargeback disputes, liberating businesses from administrative overhead and protecting their bottom line.
For instance, if a customer has a problem with a rejected transaction because of a local banking regulation, the MoR handles it. This frees the SaaS provider from having to handle each individual transaction and lets them concentrate on improving their analytics algorithms.
Ensuring Tax Compliance
Tax compliance presents a significant challenge for SaaS businesses, especially those selling digital goods internationally. Varying tax regulations across different jurisdictions create a complex landscape, making compliance a difficult and time-consuming task. Failure to comply can result in substantial fines and penalties.
MoRs simplify global tax compliance for SaaS businesses. They automate sales tax calculation, collection, and remittance across all jurisdictions, ensuring compliance and minimizing penalties. MoRs stay current with evolving tax laws, relieving businesses of this burden. By handling checkout taxation, MoRs free companies to focus on core operations.
Maintaining Regulatory Compliance
SaaS businesses face stringent regulatory requirements, particularly concerning data privacy and payment card information. Handling sensitive customer data necessitates compliance with regulations like GDPR and CCPA. Furthermore, accepting credit card payments requires adherence to PCI-DSS standards, a complex and demanding process.
MoRs offer specialized expertise in data privacy regulations, implementing robust measures to ensure adherence to relevant standards. Furthermore, they maintain PCI-DSS compliance, safeguarding sensitive customer data and significantly mitigating the risk of security breaches.
Facilitating Global Expansion
Global expansion presents significant challenges for businesses. Establishing local entities in new markets can be a time-consuming and costly undertaking. Managing international payments, with their diverse currencies, payment methods, and regulations, adds another layer of complexity.
The extensive global presence of MoRs ensures smooth international transactions, removing the necessity to establish local entities, thereby significantly reducing costs and administrative overhead. By providing localized payment options and language support, MoRs create a superior customer experience, driving international growth. This is particularly beneficial for SaaS startups, especially those with plugin or web development frameworks, who gain instant global market access. An MoR allows these companies to bypass the complexities of international sales and compliance, enabling swift and efficient global scaling.
🔔 Struggling with international payments and tax compliance for your SaaS business? Our Merchant of Record solution simplifies global expansion. Contact us today for a free consultation.
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