Who should be the Merchant of Record in vacation rental transactions? This is a topic that’s often overlooked by property managers. While some are aware of the importance of having a deliberate approach, others don’t realise the value it can have for their business.

To give you an advantage, we’ve compiled an article that has all the information you need to decide whether you should be your own Merchant of Record, outsource the responsibility to the channels you advertise on, or opt for a mixed approach. 

Below, we cover: 

  • What is a Merchant of Record? 
  • What’s the difference between Merchant of Record and Payment Service Provider?
  • What are the benefits of being your own Merchant of Record? 
  • Pros of using a channel that is the MoR
  • Should your Channel Manager be your MoR?  

Let’s dive in!

What is a Merchant of Record?

Merchant of Record (MoR) is a term used to describe the entity that is authorised and held responsible for selling goods or services to a cardholder and to whom the cardholder owes payment for such goods and services. They process all payments and take on all of the liability related to those transactions, including ensuring payment card industry (PCI) compliance and accepting refunds and chargebacks. 

Simply put, a Merchant of Record is the party that processes and distributes the actual payment for a product or service.

Property Managers can choose to be their own Merchant of Record (MoR) or use channels’ MoR service to take the burden of payment processing and compliance away from those who prefer to spend their in-house resources elsewhere.

For example, Airbnb is the Merchant of Record: they charge the guests themselves and then deduct their fees and pass the remaining funds onto the property managers. Whereas with Booking.com and Vrbo, the property managers are responsible for charging the guest and collecting payment.


What’s the difference between a Merchant of Record and a Payment Service Provider (PSP)?

Many people think that MoR and PSP are the same, but this isn’t the case. 

The main difference between an MoR and a PSP is that a Merchant of Record handles your entire order process, including taking on the related responsibilities. In contrast, a Payment Service Provider only handles the transaction process – the part where money leaves your customer’s bank account and arrives in yours.

A Payment Service Provider such as Stripe doesn’t take on any of the financial or taxation responsibilities of the transactions you make through their gateway. An MoR takes care of all of them. 

Payment Service Providers are also only one part of your broader payments infrastructure; you’ll need to manage and integrate other tools to build a sufficient tech billing stack.

What are the benefits of being your own Merchant of Record? 

There are several benefits to being your Merchant of Record, including:

  • More control.
  • More flexibility.
  • Better experience for guests and homeowners.

Being a property manager, not only do you have to pay homeowners, but you also have your own costs. When money handling is outsourced, that puts your revenue and cash-flow into some else’s control. 

When you are waiting for channels to pay you, it means you are on their schedule. This isn’t necessarily a bad thing, but it’s less convenient in cash-flow terms. 

If your channel gives you the option to be your own MoR – some channels don’t allow it, for instance, Airbnb – this can give you more flexibility. For example, if your homeowners aren’t satisfied with the payment schedule, and you’re using a channel’s MoR service, you can’t change it. Being your own Merchant of Record can solve this problem. It enables you to put yourself into a position where you handle the cash-flow and decide on your own terms and accounting preferences what works best.  

Booking and inventory can be another bugbear for property managers. A few OTAs don’t process credit card payments at the time of booking, but your listing is no longer visible on the channel all the same. If the transaction falls through, you could potentially lose that booking without ever having the chance to fill it. 
When you’re the Merchant of Record, you can easily recognise mistakes – such as credit transposition errors – when you receive a booking. You can reach out to the guest and sort it out quickly and efficiently without going through a third party.


Pros of using a channel that is the MoR

If you decide to use a channel that is the MoR, it’s one less thing for you to think about. Many property managers choose to use channel MoRs as it offers simplicity and the choice to spend their in-house resources elsewhere, such as marketing and branding. 

Some channels such as Airbnb don’t offer property managers the choice to be their own Merchant of Record. They take the payment directly from the guest and pass them onto the property manager once the guest has checked in. 

Some property managers prefer this to being their own MoR, as it means they don’t have to worry about: 

  • Data and payment compliance: As the MoR, you are in charge of the payment card security (PCI-DSS) and must stay up-to-date with the data requirements in each location that you sell to. 
  • Currency exchange: You must handle the conversion of payments made in foreign currencies from your customers.
  • Payment failure rates: You will have to deal with payments being mistakenly declined as fraudulent, often causing lost revenue. 
  • Payment processor fees: As MoR, you are responsible for negotiating and managing all credit and debit card fees.
  • Refunds and Disputes: You will be liable to pay for any refunds, chargebacks or payment agreements. 
  • Sales Tax: You will be accountable to tax in the location where your customers are from. 

Setting up and maintaining the infrastructure and admin needed to be your own Merchant of Record can quickly amount to costly investment in more technology and a larger team. Especially as your property management business grows and you receive more customers, more and more issues are likely to arise. By using a channel MoR, you can quickly bypass all the hassle.

Should your Channel Manager be your MoR?  

If you have a multi-channel distribution strategy, it’s highly likely that you already have a mixed MoR approach. While you may be your own MoR for some of the channels you advertise on, you may have taken advantage of some other channels’ MoR services.

It’s important to be aware of a third option: some channel managers offer themselves as an MoR. However, any channel manager that requires all payments to be processed through them warrants scrutiny and due diligence. You should never be too quick to surrender this control. 

A prime example of a channel manager that was also the MoR was LeisureLink. They were a widely used channel manager that ceased operations and discontinued its platform in 2016, leaving dozens of property managers unpaid for completed reservations. 

Rentals United solely manages the transaction flow between the channels and the property manager. We will never require you or sign over control in areas of money, terms, and policies. 

With us, you never have to worry about being forced to give up control of your finances. We advocate for property managers to find the approach that works best for them, and we advise you on how to work with channels in a way that’s optimal for your business.

Are you ready to build a tech-based distribution strategy? Discover how our enterprise-level Channel Manager can get you more bookings.