Expanding a SaaS business across borders looks simple on paper. The reality? Payment processing becomes a maze of tax laws, compliance requirements, and regional regulations that can drain resources faster than expected. What starts as adding international payment options quickly turns into managing VAT registrations in multiple countries, tracking changing tax codes, and handling fraud risks across different markets.

This is where the Merchant of Record decision becomes critical for growing companies. The choice affects everything from daily operations to long-term scalability.

Understanding What a Merchant of Record Actually Does

A Merchant of Record takes legal responsibility for processing transactions on behalf of another business. Think of it as outsourcing the entire payment infrastructure to a specialized provider.

The MoR handles:

• Payment collection and processing
• Tax compliance and remittance across regions
• Fraud prevention and chargeback management
• Legal liability for all transactions
• Invoice generation and customer billing

The business keeps focusing on the product while the Merchant of Record handles the complex backend operations that come with global sales.

Breaking Down the Money Question

The fee structure tells an important story. Standard payment processors charge around 2.9% plus a small fixed fee per transaction. Merchant of Record services typically take 5-10% of each transaction. On $100,000 in monthly revenue, that’s roughly $3,000 versus $5,000-$10,000 in fees.

But percentages don’t show the whole picture. Those extra fees buy something valuable: time. Time that would otherwise go toward hiring compliance experts, setting up legal entities in foreign countries, and managing ongoing tax filings.

When the Higher Fees Make Perfect Sense

Early-stage companies with limited resources benefit most from Merchant of Record services. Here’s why the model works for specific situations:

Speed matters more than margins

• Launching in new markets within weeks instead of months
• Testing international demand without infrastructure investment
• Entering multiple regions simultaneously without a local setup

Internal expertise doesn’t exist

• No dedicated finance team for compliance
• Limited legal resources for international regulations
• Small engineering team focused on product development

Risk tolerance is low

• Avoiding potential compliance violations and penalties
• Offloading fraud management to specialists
• Protecting against chargeback-related account issues

The Breaking Point That Changes Everything

With around $200,000 in monthly recurring revenue, the calculation shifts. At this scale, minor improvements in payment performance create a significant financial impact. A 2% increase in approval rates or 1% reduction in processing costs generates thousands in additional monthly revenue.

Companies at this level need different capabilities. Payment routing control becomes valuable. The ability to customize checkout flows matters. Access to detailed transaction data for analysis becomes essential. Standard Merchant of Record platforms don’t offer these tools.

Signs It’s Time to Move Beyond MoR

The limitations start showing when specific needs emerge:

• Complex billing models with usage-based pricing
• Enterprise customers requiring customized invoicing
• Need for specific regional payment methods like Alipay or PIX
• Desire to optimize routing across multiple payment processors
• Requirements for detailed analytics and customer payment data

Wise Decision Making for SaaS Growth

The right choice depends on current circumstances, not theoretical ideals. Small teams moving fast across multiple markets gain more from Merchant of Record services than they lose in higher fees. Established companies with significant transaction volumes and specific requirements often need direct processor relationships.

The Hybrid Approach Worth Considering

Some companies blend both models effectively:

• Using MoR for new market testing and expansion
• Maintaining direct processing in established core markets
• Routing small business customers through MoR platforms
• Handling enterprise deals through customized direct integrations

This approach balances speed with optimization. New markets get tested quickly through the Merchant of Record model. Once a market proves viable and reaches scale, the company can build direct infrastructure there.

What Nobody Mentions About Switching Later

Migration between payment systems creates real challenges. Customer subscriptions need careful transfer without service disruption. Billing cycles must align properly. Transaction history requires access or transfer. The checkout experience changes, which can confuse existing customers.

The switching cost doesn’t lock companies in permanently, but it does mean choosing carefully upfront matters. Starting with a Merchant of Record and migrating later makes sense for many businesses. Building custom infrastructure too early often wastes resources on premature optimization.

Making the Call

The Merchant of Record decision comes down to resource allocation and strategic priorities. Companies with limited teams benefit from trading margin for focus. The ability to concentrate on growth activities instead of payment infrastructure often outweighs the higher transaction fees.

Businesses operating at scale, requiring payment flexibility, or targeting specific optimization opportunities, get better returns from direct processor relationships. The investment in team and infrastructure pays off through improved conversion rates and reduced costs.

What matters most is making the decision deliberately. Understanding the tradeoffs clearly helps align the choice with business goals. Some companies absolutely should hire a Merchant of Record. Others need to build their own payment infrastructure. Many benefit from starting with an MoR and transitioning later as economics justify the change.

The framework isn’t about finding one correct answer for everyone. It’s about matching the payment approach to specific company circumstances, growth stage, and resource reality. Payment infrastructure shapes unit economics, customer experience, and expansion speed. The wrong approach creates unnecessary friction. The right approach supports sustainable growth while keeping the team focused on what actually drives the business forward.