Merchant of Record: An Explainer for Tour and Activity Operators

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February 3, 2022

2 min read
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What is a Merchant of Record?

A Merchant of Record (MoR) is a term used to describe the entity authorized to process customer credit and debit card payments on behalf of a business. The MoR holds a merchant account with the processing bank.

If you are a Merchant of Record, you will be in charge of collecting and processing payments from your guests. You are responsible for the liability related to transactions, including maintaining payment card industry (PCI) compliance, ensuring adherence to tax laws, and accepting refunds and chargebacks.

Tour operators can either be their own MoR or rely on another service provider. For example, Expedia has two business models—the merchant model and the agency model. In the merchant model, Expedia is the Merchant of Record, and under the agency model, the activity supplier is the MoR.

Another example is Airbnb, which acts as the MoR. They charge the guests, collect payments, and wire the funds to property managers after deducting their fees.

Understanding Merchant of Record in the Zaui System

In Zaui’s Fee per Booking and the Free Plan, you, as the supplier, hold the Merchant of Record. The suppliers have control over their accounts.

They are financially liable for payment processing, refunds, cancellations, and payouts. However, processing through Stripe addresses the previous hassles around payment and data compliance.

An image explaining merchant of record concept for tour operators

Zaui acts only as a booking platform, decoupling itself from handling and holding supplier funds. Zaui Free customers hold the MoR. The suppliers will be in control of payment processing and funds by setting their MoR directly with Stripe.

It may not be the case for all reservation booking systems, with various other restech providers opting to act as the Merchant of Record instead of the supplier. They can limit operators from earning a business line of credit moving forward.

Benefits of Being a Merchant of Record

Gives You More Control: When you are the MoR, your business has a direct contract with the processing bank, giving you more control over your money. The guest payments go directly to your bank account, which means you have easier access to it with typically quicker payouts.

When someone else holds the MoR for your business, you will have to rely on their schedule for payments. And the revenue and cash flow are not in your hands.

Helps Your Future Business Moves: Being an MoR can help you build a strong credit score. The merchant account can help you get a new line of credit when your business scales up, especially for small tour operators.

Wrapping Up

The administrative and financial challenges of being a Merchant of Record may seem tricky. However, the control and flexibility it gives to your business make it convenient. Whatever payment-processing model you choose, make sure that it works best for you and is optimal for your business.

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