What is a merchant of record? Definition, meaning, and why fashion brands don't need one
Find out why fashion brands don’t need a merchant of record to succeed in cross-border ecommerce.
Expanding into new markets is a huge growth opportunity for fashion brands. Cross-border sales are expected to grow twice as quickly as the overall ecommerce market by 2030. But while selling to multiple markets may seem straightforward in theory, it can be challenging in practice. The financial and legal responsibilities involved in cross-border ecommerce are substantial. To simplify cross-border sales, many brands partner with a merchant of record (MoR) to handle payments, taxes, and compliance, ensuring smoother operations and mitigating risks.
But here’s the thing. Brands typically choose to work with a merchant of record because of the technology limitations within their own online store.
In this blog, we’re taking a deep dive into everything fashion brands should know about a merchant of record, including why they maybe, probably, definitely don’t need one.
What is a merchant of record? Definition and meaning
Before discussing whether fashion brands need a MoR, let's clarify the merchant of record definition: a merchant of record is a company that handles the entire payment process on behalf of an online retailer, including transaction processing, tax management, and compliance. The MoR serves as an intermediary between the retailer and its customers, taking responsibility for the financial aspects of ecommerce transactions.
Responsibilities of a merchant of record:
Managing transactions, cancellations, disputes, and refunds
Supporting shoppers as the first point of contact
Assisting in financial dispute resolution
Monitoring of products and services to make sure they are not illegal, prohibited, or counterfeit
A merchant of record doesn’t impact the customer experience when it comes to making purchases. Shoppers still visit a brand’s online store, purchase goods, and make payments as usual. The MoR is the entity that receives the initial payment, then deducts fees and taxes, after which it transfers the remaining amount to the brand.
Important features of a merchant of record
Now that we’ve established the merchant of record meaning, let’s take a look at some of the features it typically offers.
Payment processing
Support for various payment methods (credit/debit cards, digital wallets, bank transfers) and multiple currencies to facilitate global transactions.
Tax management
Automated calculation, collection, and remittance of sales taxes, VAT, and other applicable taxes across different regions.
Compliance
Robust measures to ensure compliance with local financial regulations, including anti-money laundering (AML) and know your customer (KYC) requirements.
Fraud prevention
Advanced fraud detection and prevention tools to minimize chargebacks and protect brands against unauthorized transactions.
Chargeback management
Assistance with handling chargebacks, disputes, and related customer issues to minimize revenue loss and maintain a healthy merchant account.
Reporting and analytics
Comprehensive reporting and analytics tools to help brands monitor transactions, revenue, taxes, and other key metrics.
Integration capabilities
Integration with popular ecommerce platforms, content management systems, and other relevant third-party tools.
Global expansion support
Features and resources to support brands in expanding their businesses into new markets, including currency conversion, localization, and market-specific payment methods.
Customer support
Responsive and knowledgeable customer support to assist with issues and enquiries related to payment processing, tax management, or compliance.
Security
Strong security measures, including encryption and tokenization, to protect sensitive customer data and payment information.
Beyond merchant of record: what it really takes to expand globally
There’s no denying it—a merchant of record simplifies cross-border ecommerce by handling financial complexities. But it’s not a guaranteed path to global success.
Many brands turn to a merchant of record when expanding into multiple markets because their ecommerce platform lacks robust cross-border capabilities. Managing billing, local taxes, and VAT calculations across multiple, individual storefronts is a resource-intensive, largely manual process. In these cases, partnering with a merchant of record may be their only viable option.
However, even with an MoR, brands still face challenges in delivering a truly local experience for customers. Factors like language, currency, preferred payment methods, and product information preferences vary widely across markets—none of which an MoR alone can fully address.
Enter Centra.
Why fashion brands on Centra don’t need a merchant of record
Centra was built for cross-border growth, supporting both DTC and wholesale transactions across multiple markets—without the need for a merchant of record. Everything a MoR offers in terms of features and functionality, Centra either provides natively or can be seamlessly integrated into the platform. Brands can operate multiple stores efficiently by using a single back-end system, so there’s no strain on resources or additional fees eating into profit margins.
With Centra’s functionality and a strong cross-border pricing strategy, brands can operate internationally and deliver a customer experience on their own terms in new markets, all without ever relying on a MoR.
Let’s take a closer look at how Centra covers the features and functionality of a merchant of record.
How Centra replaces merchant of record features
| Covered by Centra? | |
|---|---|
| Payment processing: MoRs support various payment methods such as credit and debit cards, digital wallets, and local payment options, enabling businesses to provide a seamless payment experience for customers worldwide. | Yes, through pre-built integrations with payment service providers |
| Global coverage: MoRs facilitate transactions in multiple currencies and countries, making it easier for businesses to expand their ecommerce operations internationally. | Centra handles pricing/catalog localization natively, while Stripe, Adyen, Qliro and Klarna handle currency conversion and settlement |
| Tax management: calculation, collection and remittance of sales taxes, VAT, and other applicable taxes on behalf of the merchant, ensuring compliance with tax regulations across different jurisdictions. | Yes, native support for global tax logic |
| Compliance with local financial regulations, including anti-money laundering (AML) and know your customer (KYC) requirements. | Yes, through pre-built integrations with payment service providers. Payment processing platforms and financial service providers are required to comply with anti-money laundering (AML) and know your customer (KYC) regulations in the jurisdictions where they operate. |
| Advanced fraud detection and prevention tools to help businesses minimize chargebacks and protect against unauthorized transactions. | Yes, through pre-built integrations with payment service providers |
| Handling chargebacks, disputes, and related customer inquiries to minimize revenue loss and maintain a healthy merchant account. | Yes, through pre-built integrations with payment service providers |
| Comprehensive reporting and analytics tools to help merchants monitor transactions, revenue, taxes, and other key metrics. | Yes, natively |
| Integration with popular ecommerce platforms, content management systems, and other relevant third-party tools to streamline operations. | Yes, natively |
| Customer support to assist with any issues or inquiries related to payment processing, tax management, or compliance. | Payment providers integrated in Centra (e.g. Stripe, Adyen, Qliro, and Klarna) provide customer support to assist with issues or inquiries related to payment processing, tax management, and compliance. Their support services may vary in scope, responsiveness, and communication channels, but they generally offer help and guidance to their merchant clients. |
| Security measures, such as encryption and tokenization, to protect sensitive customer data and payment information. | Yes, through pre-built integrations with payment service providers |
Built-in tax management & transparent pricing
Centra ensures accurate VAT and tax compliance across the EU and North America, without added complexity for ecommerce teams:
EU VAT: Real-time validation of VAT numbers and automatic tax application
US Sales Tax: Supports origin, destination, and hybrid state tax calculations
Canadian Sales Tax: Displays the required tax breakdowns on commercial documents
Brands simply set the final retail price they want customers to see, and Centra automatically determines the tax portion based on the tax rule provided for the customer's region.
For example, if you want to display a retail price of €100 in France, where VAT is 20%—
Instead of calculating: €83.33 + 20% VAT = €100
You simply tell Centra: "This product should be priced at €100 (with tax)"
Centra then back-calculates: €83.33 (net) + €16.67 (VAT) = €100
Localized shopping experiences
Centra enables brands to create hyper-localized online stores with:
Region-specific checkouts featuring local payment methods, delivery options, and pricing
Local size units for each size chart (cm/inches)
Custom price lists for different territories and currencies
Unlimited languages available for all markets
Segment products by market
Smart payment routing to the best payment service provider (PSP) based on customer location, improving conversions
Enterprise-grade security & compliance
Centra gives brands full control over where personal data is stored to meet strict privacy regulations. Key security features include:
Global edge data centers to speed up access (excluding sensitive data).
Continuous monitoring and multi-layer security protections.
Full compliance with GDPR and CCPA, including data extraction and customer anonymization options.
Conclusion: Is a merchant of record necessary for global ecommerce?
While a merchant of record can help manage certain challenges in cross-border ecommerce, it doesn’t address everything brands need for global success. It also adds an extra layer of unnecessary costs—taking a percentage of sales plus additional fees. For fashion brands, these expenses can cut into margins and impact profitability.
A more integrated approach allows brands to expand internationally with more flexibility and less complexity. With Centra, brands have built-in cross border tools and integrations with best-in-breed payment service providers, eliminating the need for a merchant of record. The result? Full control over operations across multiple markets while delivering the best experience for customers.
