When digital businesses expand into new countries or regions, transaction complexity often becomes the first real scaling constraint, well before product, demand, or customer acquisition become the limiting factors.
In cross-border digital commerce, misaligned merchant-of-record entities, unclear tax ownership, fragmented compliance rules, and dispute exposure tend to surface early. As transaction volume grows and market coverage expands, these issues rarely remain isolated. Instead, they compound over time and directly impact payment success rates, operational stability, and long-term scalability.
This article examines common transaction challenges faced by cross-border and digital businesses, explains the role of the Merchant of Record (MOR) in defining transaction responsibility, and outlines when this model becomes a practical option at different stages of growth.
Defining Merchant of Record (MOR)
Merchant of Record (MOR) is a transaction model that determines who is legally and financially responsible for a sale.
Under this structure, the MOR acts as the legal seller and payment recipient, assuming responsibility for payment processing, tax obligations, refunds, disputes, and regulatory compliance. At the same time, the merchant retains full control over the product, pricing, and customer relationship.
From a transaction-structure perspective, the value of MOR lies in separating business ownership from transaction liability. Without changing how a business operates commercially, transaction-level legal and financial responsibility is transferred to an entity designed to manage compliance and risk at scale.
Under Subotiz’s MOR model:
- Customers see Subotiz listed as the payment recipient on checkout pages, billing records, and invoices.
- Responsibilities related to payments, tax calculation and filing, refunds, and dispute handling are managed by Subotiz.
- Merchants remain responsible for product delivery, pricing strategy, and customer support.
This structure is commonly adopted by SaaS companies, subscription-based services, digital products, and cross-border businesses. It is also increasingly used in AI-driven services and agent-based products, where global monetization introduces early complexity around payments, taxes, and regulatory exposure.
Why Merchants Consider the MOR Model
In a self-managed payment model, merchants are typically required to:
- Act as the legal seller of record.
- Handle tax obligations associated with each transaction.
- Manage chargebacks, disputes, and payment risk directly.
When a business operates within a single market, these responsibilities may remain manageable. As soon as operations expand across borders, however, regulatory requirements and payment liabilities accumulate quickly, introducing ongoing operational drag.
The MOR model addresses this challenge by redefining responsibility at the transaction level. Instead of each merchant independently absorbing compliance, tax, and payment risk across markets, these obligations are centralized within a predefined transaction structure.
For this reason, choosing MOR is not simply a payment method decision. It is a decision about how transaction responsibility is allocated as a business scales.
Transaction Responsibilities Handled by MOR
Within an MOR structure, transaction-related responsibilities are assumed by the Merchant of Record through established and repeatable processes.
- Multi-Market Coverage Without Local Entities: Merchants can sell to customers in multiple countries without setting up local companies or payment entities in each market. The transaction structure remains consistent across regions, reducing the need for market-by-market operational adjustments.
- Centralized Handling of Disputes and Chargebacks: As the legal payment recipient, the MOR assumes external responsibility for disputes, chargebacks, and related payment risk. When issues arise, the MOR interfaces directly with acquiring banks and payment institutions, while merchants provide supporting evidence related to product delivery or service fulfillment.
- Unified Compliance and Tax Handling: Tax and compliance rules vary significantly by jurisdiction. Under an MOR model, these requirements are applied based on transaction location, product type, and applicable regulations through standardized workflows. This reduces the need for merchants to interpret regulatory rules on a per-transaction basis. Details on tax and compliance coverage are outlined on the Subotiz Tax & Compliance page.
- Transparent Settlement and Reporting: Although the MOR is the legal seller, merchants retain visibility into settlement results, transaction data, and fee structures. This enables accurate revenue tracking, reconciliation, and informed business analysis.
Operational Impact After Adopting MOR
Without MOR, merchants often need to continuously monitor transaction-level risks, such as changes in tax rules, spikes in chargeback rates, or payment method risk reviews. These issues may not occur daily, but when they do, they typically require immediate and specialized attention.
With MOR, these responsibilities are embedded into the transaction structure itself. Day-to-day operations shift from managing individual compliance or payment risks to overseeing settlement outcomes, aggregated transaction data, and reporting cycles.
In practice, this leads to:
- Operational decisions driven by structured settlement data rather than ad-hoc risk events.
- Reduced need for teams to track regulatory changes across multiple jurisdictions.
- More consistent financial analysis based on stable reporting sources.
For businesses with growing transaction volume and expanding market reach, this creates a more predictable operating environment. Risk exposure becomes more structured, allowing management focus to remain on product development, customer experience, and long-term growth rather than recurring transaction uncertainty.
MOR Compared With Other Payment Structures
Common transaction models include:
- Self-managed payments with a PSP: The merchant acts as the legal seller and directly bears all payment, tax, and compliance responsibility.
- Platform payment models: Platforms provide payment capabilities, but responsibility allocation varies depending on structure and contractual arrangements.
- Merchant of Record (MOR): The MOR serves as the legal seller, centralizing transaction responsibility while merchants manage products and customers.
The primary difference between these models is not the checkout flow, but where transaction responsibility ultimately resides.
Businesses Most Likely to Benefit From MOR
MOR is not a universal solution. It is typically most valuable for businesses that:
- Sell digital products, subscriptions, or online services.
- Operate or plan to operate across multiple countries without local entities.
- Have lean teams and want to reduce ongoing payment, tax, and compliance workload.
- Seek to expand internationally without significantly increasing legal and operational overhead.
Whether MOR is appropriate depends on a merchant’s business structure, growth plans, and tolerance for long-term transaction complexity.
Subotiz’s Role as Merchant of Record
Within the Subotiz platform, Merchant of Record functions as an integrated transaction structure that supports payment processing, tax handling, and compliance alongside existing billing and subscription workflows.
Under this structure, merchants operating across regions are no longer directly exposed to all external transaction liabilities. Specific terms related to fees, settlement cycles, and eligibility are defined in merchant agreements following approval.
Payment methods, settlement flows, and operational differences under MOR vary from self-managed models. These topics are covered in a follow-up article detailing how payments, settlement, and day-to-day operations function under the Subotiz MOR model.
For a detailed explanation of how payment collection, settlement, and day-to-day operations work under Subotiz’s MOR model, see: Merchant of Record（MOR）｜Roles, Responsibilities, and Operations.