Global Payment and Merchant Services information for eCommerce Business Owners
What is Digital Commerce?
Today’s ecommerce business owners are not only facing challenges from brick and mortar stores and other ecommerce sites, but from online vendors all over the globe as well. Expansion into new cross border markets brings with it financial complexities such as tax and regulatory compliance as well as the need for ecommerce fraud protection to ensure secure transactions.
So, business owners must either invest a great deal of money in software and time learning about foreign currencies and regulations or save time and money by securing cross border logistics and financial management services from a trusted partner.
The billing procedure for online global customers is complex, and requires at least five functions of a Merchant of Record (MOR), also known as a seller of record:
- Open up merchant accounts
- Put payment gateways in place
- Manage contracts with global payment service providers.
- Comply with PCI DSS
- Abide by global taxation requirements.
Keep in mind that this all has to be done quickly and seamlessly in order to compete with other omnichannel 3pl services and ecommerce merchants to provide a positive Customer Experience (CX). When doing business solely in-country, there are great advantages to being one’s own merchant of record, but in the international arena, the financial complexities and liabilities of doing so can be daunting.
Think Twice About Going Global as Your Own Merchant of Record
It’s an amazing and exciting experience when a product or service becomes so popular that its sales begin to rapidly grow in different regions. However, this cross-border expansion brings big changes to a businesses’ MOR (Merchant of Record) responsibilities. Businesses widening into other countries must deal with their new customers using different rates for different currencies, with back-ups in place to ensure uninterrupted service. The international merchant of record accounts required for global transactions mean that companies need to sign and handle payment contracts for each currency that they want to offer their customers, and additionally for each payment method, to realize customer journey optimization.
The challenges of building a truly global payment infrastructure that is secure, compliant, scalable and in real-time are such that more and more cross border e commerce sellers are opting to use the services of third party MORs. These are third party legal entities; they are authorized by financial institutions to process each customer’s credit cards. The administrative tasks involved with being a global MOR can be so time-consuming and onerous that when online merchants and manufacturers are looking to expand quickly and easily, they often choose to appoint these third-party representatives.
What is the Difference Between a Merchant of Record and a Payment Solution?
Unlike a payments-only solution which strictly processes payment types, an MOR assumes financial responsibility for such payments on behalf of its clients A business using a payments-only solution, is responsible for all of the financial liabilities and any complex administrative tasks associated with global, cross-border ecommerce.
Among other responsibilities, a third party international Merchant of Record is required to:
- Maintain a merchant account and a payment gateway to process payments.
- Negotiate and manage ongoing credit card processing fees
- Ensure compliance with PCI-DSS (Payment Card Industry – Data Security Standard) for handling cardholder information and other data security regulations
- Manage all tax calculation, collection and remittance
- Manage and maintain relationships with global service providers and payment processors to ensure advantage logistics and control reverse logistics e commerce
- Ensure compliance with country-specific payment laws and regulations, e.g. WEEE (Waste from Electrical and Electronic Equipment) PCL (Provisions for Credit Losses)
- Stay up-to-date and comply with ever-changing card association regulations.
- Manage refund requests and handle chargebacks.
MORs and Taxes – A Deeper Dive
Because tax laws are constantly changing, one of the biggest challenges for ecommerce companies is to keep up with tax policy changes.
Taxes for online transactions conducted solely within the United States can be confusing as each state, county and city makes its own tax laws. Knowing what sales tax to apply to each transaction requires the know-how of more than finance and IT departments.
Remaining ecommerce tax compliant is an even greater task when dealing with international sales from a cloud-based e commerce platform. Not only are cross-border tax policies in a constant state of flux, but currency changes and proper remittance procedures complicate the process.
Each country has its own set of Value-Added-Taxes (VAT) or Goods and Services Taxes (SGT), that are collected incrementally based upon the value added at each stage of production. Usually, they are implemented as a destination-based tax (i.e., the tax rate is based on the location of the customer), but this may however, vary, depending on the country.
This is why many companies that are considering entry into global ecommerce make the decision to use the resources of an international third-party MOR rather than burden their own financial departments and other corporate resources.
Ecommerce MOR providers, also known as resellers, will assume the entire task of financial responsibility for its clients. These service providers allow growing businesses to allocate funds where they will do the most good for the core business, rather than bogging down in the transactional details of global ecommerce.
MOR Financial Management Services (FMS) the Natural Adjunct to Transactional Services
Successful scalability for new or start-up businesses begins with the help of outsourced omnichannel services like those of Merchants of Record. These MORs, aside from aiding businesses with taxes, are able to provide financial services such as Compliance Services (PCI, SOX, SSA16, WEEE, PCL), debt collection, Reconciliation and Remittance services, Chargeback and Refund handling, eInvoicing, and Fraud Management services.
The heart of FMS are the payment services, flanked by these value-added financial management services as the logical extension to reduce financial complexity. FMS takes ecommerce clients beyond the basics of payment transactions and adds this vital layer of services which include:
- VAT, indirect tax models, import/export taxing and reporting, Intrastat reporting and support for regulatory or industry body compliance such as the European Waste Electrical and Electronic Equipment Directive.
- Multiple corporate finance services, including general ledger, accounts receivable and purchase order management, credit collections, e-invoicing, revenue recognition support and comprehensive statutory reporting.
By outsourcing financial services, companies can focus on bringing innovation to their product lines, rather than having to reinvent the product journey ‘from click to doorstep’. MORs with FMS services can manage all aspects of the process, including customer service, payment management, quality control, shipment delivery, call centers, and the returns process. The automated and modular end to end ecommerce solutions provided by third party MORs can handle as much or as little as a business needs to compliment, improve or create a strong and cost-effective direct-to-consumer business.
Financial Services and So Much MOR
MORs will also help a business with an aspect of online global commerce that is subtle but very important in maintaining an excellent customer experience – Cultural Customs. There are a myriad of cultural differences worldwide and failing to consider these local institutions can create customer confusion or even worse, offend potential customers. For instance, in some countries, payment is only collected after the product has been delivered. Asking for prepayment would be considered rude or embarrassing.
Along with the cultural customs involved with an international ecommerce order, taxation regulations and financial services, an MOR can assist with global payments. This involves several platforms that enable MORs to create a seamless and superior customer experience for their clients.
It All Begins With Store Setup
An MOR can guide even a seasoned retailer or B2B (Business to Business) company though a quick and easy Store Setup geared to an international audience. All of the intricate facets involved with the setting up of a company’s enterprise-level online shop, from the page layouts to the back-end technology support like hosting and maintenance, can be provided by an MOR with omnichannel services and ecommerce solutions.
Site deployment options often include public SaaS (Software as a Service), private SaaS and traditional licensed formats with managed services. Such options provide the flexibility that can suit the needs of differing businesses. The options offer on-demand capacity, scalability, data privacy and control. Other features include multichannel support, ecommerce order management, address verification and mobile compatibility.
Management of the product catalog and pricing, the facilitation of various promotions for different products, are additional MOR services that help companies optimize the traffic that arrives on their branded online store. By providing performance analytics such as website traffic and bounce rates, MOR business management tools enable companies to make well-informed decisions that can improve business. Companies furnished with these insights (many in real-time) can quickly interpret how well certain initiatives are performing so that any adjustments can be made as needed.
When launching into foreign markets, it is essential that the website be cross global and constructed to accept multiple currencies and to calculate the international taxes. And since some countries still do not approve of credit cards as a payment method, it is important that the site can not only accept, but also exchange and transfer foreign currencies.
Superior Customer Care Equals Customer Satisfaction
An MOR can enable customer service representatives to fully see the entire order process, and it allows the rep to provide support during each phase of the sales cycle, including purchase, payment, and product returns. MOR’s can help explain “what is omnichannel supply chain?” and even deliver visibility into the supply chain, enabling agents to quickly verify a customer’s eligibility to return a product and issue a Return Merchandise Authorization (RMA) promptly and efficiently. Agents can connect with consumers in a variety of formats, and multi-lingual support ensures that end-user customers can always communicate in their preferred language.
State-of-the-Art Order Fulfillment Means Happy Customers
As ecommerce has evolved, consumers have become accustomed to easily purchasing and returning products online, at any time they wish.
Third party MORs also help their customers with risk management tools that perform over 120 industry-standard checks that protect businesses against fraud and chargebacks.
- Easy and seamless ways to integrate recurring billing and subscription solutions payment transactions with processing based on PCI compliant secure tokenization standards.
- Cloud-based Business Intelligence Platforms that give merchants tools for reporting, monitoring and analysis.
- A single integration gateway through which all transactions can be routed and processed, facilitates payment processing across multiple channels. Mobile point-of-sale, eCommerce, mCommerce and eTerminal (MOTO) are all configured and managed through a single dashboard.
- Fraud prevention tools and risk settings that enable merchants to lower chargeback fees, increase conversion rates and ultimately boost sales.
- Corporate finance services that include management of general ledger, accounts receivable and purchase order management, credit and collections, e-invoicing, revenue recognition support and comprehensive statutory reporting
- ERP Integration – SAP-based infrastructure allows for seamless integration into corporate ERP strategy
MORs and IT Infrastructure
Initially, it may not seem as though a company’s IT infrastructure is a crucial item to consider when beginning a global e commerce expansion project. But costs can mount if the corporate IT infrastructure is not designed to scale as the business grows. The last thing that a fast-growing company needs is to have to start from scratch each time it enters a new market.
The security of an online payments processing system is important in obvious ways such as customer satisfaction and avoidance of cyberattacks. Then there are the subtleties of ensuring that the collection and remittance of appropriate sales taxes are completed in a secure manner.
The resources of a third-party MOR can make sure that the IT infrastructure is aligned with the long-term goals of the company.
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