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Merchant of Record vs. Payment Service Provider: A Simple Guide For Mobile Game Developers

Selling directly to mobile gamers on a web store, outside of Apple or Google’s ecosystem, means you’re responsible for everything needed to sell globally.

That includes processing payments, handling refunds, chargebacks, and fraud, abiding by country-specific regulatory compliance, paying sales tax, and more. 

Publishers who wish to outsource some or all of these responsibilities generally have two types of providers to choose from – a Merchant of Record (MoR) – such as Appcharge, or a Payment Service Provider (PSP) – such as Stripe.

But there’s a big difference between these two solutions and what they cover, which is why we put together this guide. Let’s dive in. 

Merchant of Record vs. Payment Service Provider: A Quick Comparison

FeatureMerchant of Record (MoR)Payment Service Provider (PSP)
Provides payment processing tech 
Connects to banking network
Offers a broad range of payment methods
Protects against fraud(For additional cost)
Handles chargebacks and disputes(For additional cost)
Handles customer service issues(For additional cost)
Responsible for data securityDepends on service
Ensures tax compliance
Acts as the seller of record
Manages financial liability
Simple integration and setupDepends on service
Manages broader legal compliance

What is a Payment Service Provider?

Graphic representation of a digital transaction process using PayPal, featuring a clear and modern interface. The screen shows an option to buy coins for $9.90 with payment methods including Apple Pay, a hyperlink for faster payment, and traditional credit card entry. An orange alert box notes that PayPal only handles transaction facilitation, emphasizing its role in secure transactions

PSPs are the middleman between customer bank accounts and payment methods (like Visa or Paypal). They facilitate the payment transaction, and take a fee for this. 

PSPs do not serve as the legal seller nor do they assist with various other financial responsibilities shown in the table above.   

Examples of PSPs:

Stripe, Nuvei, Checkout.com, Adyen 

What you get with a PSP 

Payment processing: The core function of a PSP is the technology to accept various payment methods, process payments, and connect to the banking network.

Fraud Protection [for additional cost]: Some PSPs will give the option to pay for fraud protection in addition to payment processing. 

Chargebacks and disputes [for additional cost]: Chargebacks are a real financial and time burden for merchants. Some PSPs will offer a service to handle chargebacks for an additional fee.

What kind of gaming company should use a PSP? 

Choosing a PSP instead of an MoR makes sense if your game is heavily focused on one market, and therefore doesn’t need to pay fees for international coverage and global tax compliance. Such companies can still supplement the core payment processing functionality of a PSP with additional features like fraud protection and chargeback support, for extra fees. 

Another scenario in which a PSP might make most sense is when publishers have already built their own D2C ecosystems, with in-house finance specialists. They might need only the payment processing technology of a PSP and not the whole payment operations stack of an MoR. 

What is a Merchant of Record?

Screenshot of a mobile game purchase screen from 'Space Race', featuring a 'Welcome Offer' for $19.90. The offer includes 100,000,000,000 coins, 2 gems, and 2 potions displayed on a vibrant purple and space-themed background. Multiple payment options are shown including Apple Pay, PayPal, and various credit cards. The screen is part of a user interface design, highlighting an interactive and streamlined checkout process

A Merchant of Record is a holistic, one-stop solution for your D2C payments.

Your MoR acts as the seller of record in transactions, assuming full financial liability for transactions, including taxes, chargebacks, and refunds. 

Examples of general MoR companies:

  • Fast Spring
  • Reach 

Examples of gaming-focused MoR companies:

  • Appcharge 
  • Xsolla

What you get with an MOR

Payment processing – An MoR will integrate and maintain multiple B2B payment processors or payment service providers to facilitate payment routing and cascading, reducing the risk of payments being mistakenly declined as fraudulent and resulting in lost revenue.

Fraud protection – An MoR will offer detection of fraudulent orders, manual review of suspicious orders, and custom rules to protect your business.

Merchant Accounts – An MoR will set up multiple merchant bank accounts in countries where you have a significant customer base, enabling you to accept global payments.

Disputes and refunds – An MoR handles payment reconciliation, refunds, and chargebacks, ensuring a smooth process for both you and your customers.

Local entity creation – An MoR will set up local business entities to facilitate merchant accounts, tax registration, payment relationships, and more. 

Currency conversion – To reduce any friction from the user’s payment experience, an MoR will automatically convert the prices to local currencies.

Tax compliance – An MoR will calculate, file, and remit software sales tax in the locations your customers reside in, ensuring compliance with local regulations.

All of these things are required to power global D2C sales – the decision is whether you want to outsource everything to an MoR, or combine a PSP (with limited add-ons) with in-house specialists. 

What kind of gaming company should use an MoR? 

4 6

Publishers selling D2C web store items to a global market, who would rather outsource the complexities this entails to a trusted partner instead of hiring finance teams in-house.    

Merchant of Record vs. Payment Service Provider: Which Option is Best For Mobile Game Publishers?

The boring answer is that it depends. Both options offer varying benefits, but the choice relies heavily on your company’s specific needs, the extent of your global market reach, and how much of the financial and legal responsibilities you’re willing to manage in-house.

We’ll take this moment before you go to mention that we offer gaming-specialized MoR services that are battle-tested with some of the world’s biggest publishers. Should you wish to get in touch to learn more, you can book a demo via our homepage.

The Appcharge Manifesto

When we launched Appcharge in 2022, we knew we wanted to not only bring positive change to the mobile games industry, but also do things differently. 

Taking publishers into the direct-to-consumer (DTC) ecosystem is a big responsibility, one that can achieve an elusive win-win combination for players and publishers alike. 

A win for players, who get more value for their money plus a fun experience to complement their gameplay; and a win for publishers, who increase their financial resilience, their autonomy, and their game’s retention rates and user LTVs. 

Recognizing the sheer value of the DTC opportunity we could unlock for the industry, and the shortcomings of existing solutions in the market, myself and my co-founders sat down and, over many brainstorming sessions, refined Appcharge’s core manifesto. 

Our non-negotiables, our principles, and the value we knew we had to unwaveringly provide our customers with. Here they are.

A vibrant web banner featuring the bold statement 'Publishers Must Own Their Audience' in white against a vivid orange background. The banner integrates circular portrait cut-outs of diverse individuals engaged in gaming or possibly streaming, emphasizing the human element of digital content publishing and the importance of direct audience connection.

The days of being totally at the mercy of the traditional gatekeepers are over. 

It’s not only a right, but also a strategic imperative for mobile game publishers to truly own their audience, to sell to players on their terms, to not lose 30 per cent on every transaction, and to take back what’s theirs. 

It feels quite revolutionary in spirit, but it shouldn’t be. 

We’re just facilitating what should have already been possible: the right to sell directly to players.

2 The Web Store Opportunity Must Be Democratized 1

The strategic advantage publishers gain by going direct-to-consumer with web stores is clear.

The biggest publishers like Rovio, Supercell, Moon Active and Scopely have all built web stores in-house, pouncing on the DTC opportunity early. 

But here’s the thing: most other publishers can’t afford to build a web store internally. It simply takes too much time and costs too much money, when their manpower needs to be razor focused on existing development and game design tasks.  

With the gap already widening between the biggest publishers and the rest – a quick look at the top grossing charts shows the domination of legacy games and studios – it’s clear that the industry needs a more level playing field in the realm of web stores.

That’s why we created a white label web store platform, to enable mobile game publishers of all sizes to access the DTC opportunities that the largest companies are already capitalizing on. 

3 A Personalized Ux Must Be Prioritized

Our team’s background at mobile gaming titans such as Moon Active, one of the most sophisticated publishers in terms of their data centric culture and use of segmentation, helped us crystalize our product strategy and vision:

For a web store to be fun, it must provide a personalized, relevant experience to every user. 

And so we set off to build a robust segmentation tool that lets publishers serve their players the most relevant offers and web store UI, in real time. 

Whether the user is entering the web store for the first time or they’re a long-time spender, whether they’re entering the store for the fifth day in a row or returning after a month away, we give publishers the tech they need to serve a personalized experience that delights players and maximizes their LTV.

4 Web Stores Should Be Fun

We saw how existing game web stores looked and felt, and we wanted to help publishers do things better.

Too many web stores focused too much on selling, while forgetting a crucial part of the puzzle: fun. No publisher would launch a game that isn’t fun, and we firmly believe that this ethos extends to web stores too. 

Players should enjoy spending time in web stores – it should feel like an extension of the game experience. That’s why gamification mechanics are a core feature of Appcharge’s web store builder. 

5 Web Stores Platforms Should Be Transparent

Breaking out of the walled gardens maintained by the gatekeepers is all about retaking control of your games business. 

A web store platform that is secretive, vague, or misleading with its fee structure goes against the very ethos of leading publishers into the direct-to-consumer ecosystem.  

That’s why Appcharge will always be clear and reasonable with our fee structure. 

We’re here to help publishers win, not to empty their pockets. 

6 Web Stores Should Be Built By Gaming Experts Not Suits

Great products are built by people who truly get the needs of the niche they’re serving. 

Appcharge’s platform was built by product and monetization veterans from leading companies like Moon Active and Rovio, where they had hands-on experience building a web store internally.

And we believe that for a web store platform to truly meet the needs of games publishers, it must be built by experts who’ve been in the trenches of mobile gaming. 

This ethos permeates our customer success strategy: we work as an extension of our customers’ monetization team, consulting them in order to push their DTC strategies forward. 

7 Handling Payments Shouldnt Eat Into Your Margins

Those who try to justify the 30 percent tax taken by Apple and Google point to the payment complexities they take care of.

It’s true: managing payments is a complex, intimidating task. 

However, publishers shouldn’t have to sacrifice such a significant chunk of their hard-earned profits just for payment technology and Merchant of Record services. 

We believe there is a fairer way, a way that leaves publishers with a feeling that they have a partner to grow with, not a giant to shake them down.

From Code to Checkout: Tackling the Top 5 Challenges in Crafting Your Game’s Web Store

By now, it’s no secret that a web store is the golden ticket to catapulting your mobile game revenue into the stratosphere. But the path to building a successful web store is riddled with challenges, requiring a strategic combination of skilled professionals and a carefully allocated budget. 

Game developers often plunge into this venture unaware of the intricacies, only to find themselves tumbling down the rabbit hole of unforeseen costs and missed deadlines. Here’s our top list of challenges to take into consideration before you start building a web store from scratch, to ensure you’re well-prepared for the complexities that lie ahead.

1. Assembling your team

Sure, assembling a team seems like a breeze: after all, your game studio is teeming with superstar developers, product managers, designers, and analysts. But how web-savvy are they? Proficient in game app development, your team might lack the expertise required for the intricate task of building a web store.

Moreover, as a game developer, you’ll probably want to prioritize… well, game development goals, reserving your best talents for the game, and leaving a junior team grappling with a sizeable project. Balancing your team’s skill set is crucial to the success of your web store venture.

2. Doubling your effort (and then some)

Building a web store is not a one-off event; it’s an ongoing endeavor. Unfortunately, we often see gaming companies launch a basic web store only to let it gather dust due to the costs of maintenance. Ensuring the commitment of your entire team, from marketing to LiveOps, increases the workload for everyone involved in terms of development as well as maintenance, but is also essential.

3. Being your own Merchant of Record

Launching a direct-to-player platform and avoiding the usual 30% transaction fees is (oh so) enticing, but what does it mean to handle your own transactions? How expensive is it? In case you decided to build both a web store and a checkout system, you are now not only delving into the web development sphere, but also embarking on a journey into the complex world of payments.

Becoming your own Merchant of Record means grappling with local taxes, currencies, exchange rates, invoicing, billing and fraud prevention. This newfound responsibility introduces the risk of exceeding chargeback limits, potentially resulting in penalties or even the blocking of your game by payment providers. If managing these financial intricacies seems overwhelming, opting for a third-party payment solution is a prudent choice.

4. Getting players to your store 

Bringing players to your store is a challenge in itself. Due to legal constraints, advertising your store within your game is impossible. You’ll need a creative approach to user acquisition, including retargeting campaigns, direct messaging your whales, and leveraging online communities on platforms like Facebook, Instagram, or Discord, depending on where your audience is.

Training your community and account managers to navigate this uncharted territory is essential. Opting for an out-of-the-box store via a dedicated platform can be helpful, as the supplier can offer best practices and insights based on player behavior patterns across the industry. While you’re at it, be sure to also ask them for business strategy recommendations regarding which monetization tools are best to use for your particular game.

5. Keeping up with industry trends 

The gaming industry moves at breakneck speed. New monetization tools emerge daily, promising unprecedented revenue increases. Amidst the daily grind of game maintenance, player management, and team oversight, keeping pace with these innovations becomes a formidable task. Developing and introducing new web store monetization tools to your audience requires vigilance, dedication, and of course, a substantial part of your budget.

Embarking on the journey of building a web store is undoubtedly an ambitious undertaking. But with meticulous planning, the right team, a decent budget and a clear understanding of the challenges, you can transform this endeavor into a lucrative opportunity for your game. 

Explore plug-and-play web store solutions that minimize hassle while boosting revenue

Play it Safe: The Appcharge Approach to Risk Mitigation

As game developers, we pour our hearts and souls into creating captivating experiences, while the risk of fraud and fraudulent chargebacks is always lurking in the shadows. The need for a robust risk mitigation strategy has never been more crucial.

In this article, we’ll delve into why risk mitigation is paramount for mobile game developers and explore how the Appcharge platform empowers you to safeguard your transactions effectively.

Appcharge’s Fraud Score

At the heart of Appcharge’s risk mitigation strategy lies the Fraud Score. Every transaction passing through our platform is meticulously evaluated and assigned a fraud score. This score serves as an initial assessment of the transaction’s risk level.

But how is this score calculated? It’s a blend of cutting-edge algorithms and historical data analysis. We consider various factors, such as transaction history, user behavior, and payment method, to assign a score that reflects the likelihood of fraudulent activity.

Transactions with high fraud scores aren’t dismissed outright. Instead, they are flagged for further review. We understand that false positives can be costly, so our approach is not overly cautious. Instead, it’s calculated and precise.

In our commitment to excellence, Appcharge collaborates with third-party anti-fraud software of the highest standards. This partnership ensures that our fraud detection capabilities are at the forefront of industry security. Your peace of mind is our priority.

Blacklisting Serial Fraudsters

At Appcharge, we have zero tolerance for serial fraudsters. Our platform blacklists individuals with a history of fraudulent activities across all games, creating a robust shield against repeat offenders.

Machine Learning Customization

Our machine learning capabilities allow you to define custom rules based on your unique business goals. Alternatively, you can opt for our recommended optimal settings, harnessing the power of AI to protect your transactions.

Optimized Manual Review

Appcharge streamlines the manual review process. We provide a centralized view of all flagged transactions, accompanied by rich contextual data explaining why each transaction was flagged for review. This ensures that your team can efficiently evaluate and address any concerns.

Extra Authentication for High-Risk Transactions

We understand the delicate balance between security and user experience. Appcharge applies extra authentication measures to high-risk transactions, without compromising your conversion rates. This targeted approach ensures that only transactions with elevated risk receive additional scrutiny.

Multiple Payment Methods

An e-commerce checkout interface on a mobile device screen, with an option to purchase an 'Amethyst Crystal' for $12.99. Multiple payment methods including Apple Pay and credit cards are visible. The user's information is pre-filled, ready for purchase. The background is a vibrant orange with a Euro currency symbol on one side and a Dollar sign on the other, indicating multi-currency support. Snippets of code in the background suggest a secure and programmable payment gateway.

Offering multiple payment methods minimizes risk by adding layers of security and verification, making it harder for fraudsters to exploit vulnerabilities. Digital wallets require extra customer verification, such as biometrics or passcodes, while bank debits add an additional layer of security by verifying account ownership.

By providing these secure payment options, Appcharge ensures not only a smooth user experience but also a significant reduction in the risk of fraud, safeguarding both your revenue and player trust.

Chargeback Fraud: Navigating the Storm

Chargebacks can be costly, both financially and in terms of reputation. If your business loses a dispute, you could be liable for more than just the original transaction amount. Here’s how to handle chargeback disputes:

Customer-Centric Approach: When a dispute arises, it is recommended you proactively reach out to the customer, aiming to resolve the issue amicably.

Submitting Evidence: Timeliness is key. While reaching out to the customer for resolution, it’s crucial to also submit evidence within the required timeframe to prevent default wins for the other party.

Card Issuer’s Decision: It’s essential to note that Appcharge doesn’t make the final call on dispute outcomes. Card issuers have the authority to decide. We play our part by confirming that the evidence submitted meets requirements and promptly communicate the decision to you through our dashboard, webhooks, and API.

Appcharge’s multifaceted approach, encompassing advanced fraud detection mechanisms, efficient chargeback management, and the provision of secure payment choices, empowers developers with invaluable defenses against the evolving landscape of mobile gaming risks.

Understanding and implementing these strategies ensures that developers can forge ahead in their creative endeavors, fortified by the knowledge that Appcharge is a trusted partner in their journey.

Google Play Proposes Third-Party Payments in the UK – But is it a Good Deal for Developers?

Google has proposed opening up the Google Play store to third-party payment systems in the UK in a move that would see it take a reduced revenue share. But all is not as it seems.

The proposal, if enacted, would enable developers who provide options for both Google Pay and alternative billing to have Google’s revenue cut reduced by 4% to a 26% share (or 11% on their first $1 million)—if users pay through a different payment service provider (PSP). However, if developers do not offer Google Pay as an option, they will be penalised and the standard platform fee would only be cut by 3% to 27% (or 12% on their first $1 million). 

Should users choose to pay with Google Pay, the revenue share will remain at a 70/30 split.

The changes would be rolled out for non-gaming apps first, before eventually allowing games developers to be eligible for the new billing rates and options “no later than October 2023”.

Google claims this would help ensure a “smooth transition for developers and to allow for the necessary changes to be made to our systems”. For context: In Q1 2023, data.ai estimates a large majority of worldwide consumer spending on Google Play came from the games category. It’s effectively a cash cow that is often treated differently by mobile platform holders than other categories.

The proposed changes would only impact in-app purchases in the UK, though similar actions have been taken in other countries.

Why Proposes Third-Party Payments Now?

Google’s announcement comes in response to an investigation by the UK’s Competition and Markets Authority (CMA), which began in June 2022, to look into “suspected anti-competitive conduct” by the tech giant. A particular focus of the ongoing investigation concerns Google Play’s rules which “oblige app developers offering digital content to use Google Play’s own billing system for in-app purchases”.

In response, on April 19, 2023, Google outlined the above changes to its rules and the CMA has now opened a call for feedback on the proposals. Public consultation on the new commitments will run until May 19, 2023. Following the end of the investigation and feedback from the public, the CMA will decide whether to accept or reject the changes.

At present, the CMA’s position is that it believes the new commitments from Google are “sufficient to address the competition concerns”. While no final decision has been made, pending consultation, the CMA has proposed to accept the changes.

What Do the Changes Really Mean?

Any climbdown from the standard 30% revenue share should be considered significant, as Apple and Google fight tooth and nail to retain the status quo. This latest proposal is another example of platform holders making as small a concession as possible to retain their lucrative cash cows.

But while it may seem like a concession, for developers, the reality is that it will not make a notable difference to their businesses on the current terms. A reduction of 3% to 4% will not cover the costs of using an alternative billing system, where the revenue share is often 5% or more (AppCharge takes a 5% cut per transaction).

PSPs charge such fees to cover the costs of billing, invoicing, fraud, chargeback cover, etc. Such a small reduction in Google’s share means that, should customers use another payment system, it would actually cost developers a greater share of their revenue, not reduce it.

Google has claimed that such a reduction is enough to cover developers’ “average payment processing costs” while also leaving a margin for customer support and other payment processing services. 

These terms mean that Google Pay keeps its position as the preferential payment method, while creating a challenging environment for alternative options. And of course, in any event, Google will continue to maintain its standard 30% share on all Google Pay transactions, thus effectively retaining the status quo. Of course, if you’d like to discuss potential alternative PSPs for an both in-app and out-of-app solution, you can speak to the AppCharge team.

Rick VanMeter, executive director of advocacy group The Coalition for App Fairness, which champions app store reform, told TechCrunch he believes the proposals would enable Google to “continue taking a massive cut on services they do not even provide”. He added: “This solution will not create meaningful competition and is a bad deal for developers and consumers.”

It remains to be seen whether the CMA will ultimately accept or reject Google’s proposals, and what the future of third-party payments will look like on the marketplace in the UK.

Regulatory Pressure

Apple and Google have both come under increasing pressure around the world over concerns about anti-competitive practices, namely over the exclusive use of their own payment systems in their app stores. 

Google was hit with a $162 million fine by the Competition Commission of India over anti-competitive practices in October 2022. Following this, as part of efforts to appease the regulator, Google announced in February 2023 that it would support third-party billing systems on Google Play in the country, reducing its fee by 4% for transactions made through alternative payment services.

It had previously introduced a similar measure in South Korea, following strong regulatory pressure and criticism. A smaller reduction of 3% in its fees for purchases made through other PSPs has also been enacted in the European Economic Area (EEA).

The UK proposal is now following suit with its previous successful negotiations with regulators.

Out-of-App Solutions

While it’s a positive step for Google to introduce alternative billing systems on its UK Play store, the current proposals aren’t a particularly attractive proposition. For developers really looking to take advantage of the $30 billion opportunity in the mobile games market – which is the amount of revenue the App Store and Google Play took last year from in-app purchases – the best solution still remains in utilising web stores.

By bringing your community of players to a web store, developers can offer better deals to players, all while retaining a higher share of revenue. Regulators continue to chip away at the app store monopolies, but the industry is a long way off from a fairer deal for all.

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