Two models, and the point where the dearer one is cheaper
A payment service provider moves money for you and leaves you as the seller. A Merchant of Record becomes the seller. The first is cheaper per transaction and always will be. The real question is what the compliance you keep costs you, and when that passes the spread.
Where the two models actually differ
- Who the buyer contracts with
- With a PSP, you. Your terms, your invoice, your name on the dispute. With a Merchant of Record, the platform is the seller and the customer's contract is with it.
- Who holds the tax registrations
- A PSP has none of your obligations. You register where you owe, calculate, remit and file. An MoR is already registered, because it is the party making the sale.
- Who loses a chargeback
- Under a PSP the dispute is against you, usually with a fee of $15 to $30 attached whether you win or lose. Under an MoR it is against the platform.
- What it costs per transaction
- Stripe publishes 2.9% + 30¢ for a domestic card. Merchant of Record pricing sits higher — ours is 5% + 50¢. That gap is the whole commercial question.
- How much control you keep
- A PSP gives you primitives: your own acquiring relationship, your choice of tax engine, your own fraud rules and rates you can negotiate at volume. An MoR is one arrangement, taken as it comes.
- What entering a new market involves
- With a PSP, a registration, a filing schedule and someone to own it. With an MoR, nothing — you sell into the market and the party registered in it is not you.
How to work out which one you are
- 01
Count the jurisdictions you already sell into
Not the ones you plan to. Export last quarter and list the buyer countries. Most digital businesses find the list is longer than they assumed and started earlier than they remember.
- 02
Price the compliance, not only the tax
Registration, a tax engine, filings and the accountant hours. Stripe Tax starts at $90 a month or 0.5% per transaction and still leaves you liable, so the software is a floor rather than the total.
- 03
Price the spread on your real volume
Take twelve months of transactions, apply both rates, and take the difference. That figure is exactly what you would be paying to stop being the seller. Sometimes it is obviously worth it, sometimes it obviously is not.
- 04
Pick, knowing it is reversible
Moving between models costs integration time rather than a fee. Starting on a processor and switching when the tax work outgrows it is a perfectly reasonable plan, provided you switch before the letter arrives.
Being fair to the PSP model
It is cheaper, and not by a rounding error
At 2.9% + 30¢ against a Merchant of Record rate, a processor costs roughly half. On revenue concentrated in one or two jurisdictions where you are already registered, you would be paying an MoR for cross-border compliance you do not need.
You keep control and portability
Your own acquiring contract means negotiated rates at volume, your own risk rules, your own tax vendor and a payment stack you can rebuild elsewhere. An MoR takes those decisions off your desk, which is a benefit right up until you want one of them back.
A Merchant of Record cannot sell everything
The model is for digital goods. Physical products, services with a human in the loop, in-person terminals and marketplaces paying third parties are outside it — Stripe Managed Payments excludes all of those and so do we. If that describes you, a processor is not the cheaper option, it is the only one.
Where the MoR case stops being close
Back-registering in a market you have been selling into for two years means back-filings, interest, penalties and the hours to reconstruct what was owed. The spread is a known monthly cost; the exposure is not, and that asymmetry is what most teams are actually buying out of.
What sellers say once they have switched
★★★★★ 4.8/5 from 10 reviews on G2 →
Vadim Finayev “We work with quite a few merchants of record, but none comes close to the support and speed of implementation of Fungies. If you want a payment partner that actually gives you the feeling they want to work with you — rather than leaving you on read for three days or randomly restricting your account — you are in the right place.”
David Elliott “I researched the options and Fungies was the best fit for functionality and customisation within a store builder you can connect to your own domain. Taking a small percentage of sales, instead of charging a subscription for every environment and plugin, is refreshing.”
Elnura Abdimanap Kyzy “The platform is user-friendly, integrates easily with APIs and webhooks, and simplifies managing digital products and subscriptions. We were up and running quickly and support has been responsive throughout. Fungies is clearly tailored to the needs of SaaS businesses.”
Francisco Magnone Rienzi “Fungies has been a great partner — fast setup, competitive pricing, and real humans providing quick answers. They are constantly rolling out new features, and I am excited to see what is next.”
Questions about the two models
What the model is, who it suits, and how it compares.
Do the arithmetic before the argument
Price last year's transactions under both models, then add the hours you spent on registrations and returns. The answer is usually obvious once it is a number.