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
| Feature | Merchant 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 security | ✓ | Depends on service |
| Ensures tax compliance | ✓ | ✗ |
| Acts as the seller of record | ✓ | ✗ |
| Manages financial liability | ✓ | ✗ |
| Simple integration and setup | Depends on service | ✓ |
| Manages broader legal compliance | ✓ | ✗ |
What is a Payment Service Provider?
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?
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?
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.
