Ask a merchant who is legally selling to their customer and most will look faintly puzzled, because the obvious answer seems to be themselves.
Quite often it is not, and the difference decides who carries chargeback liability, whose name appears on the statement, who owes consumer tax, who owns the customer relationship, and how easily any of it can move elsewhere.
For high-risk businesses this matters more than for anyone else, because the structure tends to change as you grow, and nobody explains what changed.
The three structures, briefly
Under direct acquiring, you hold your own merchant account with an acquiring bank. You are the merchant of record, your name sits on the descriptor, you carry the chargeback liability, and you negotiate your own terms. It gives the best economics and the most control, and it requires underwriting you may not yet be able to pass.
Under a payment facilitator, you are a sub-merchant on the facilitator’s master account. Onboarding is fast because you are being approved under their umbrella rather than independently. The facilitator holds the acquirer relationship, and your ability to keep processing depends partly on the behaviour of everyone else under that umbrella.
Under a merchant of record arrangement, the provider legally becomes the seller. They handle the transaction, the consumer tax, and usually the dispute. You are being paid by them rather than by your customer, which solves market access problems elegantly and costs you margin and direct ownership of the customer.
Why it decides who pays for a chargeback
Under direct acquiring the answer is simple, because it is you, along with the scheme fees and any monitoring consequences that follow.
Under a facilitator, the loss usually still reaches you commercially, but the ratio that matters to the acquirer may be measured across the whole master account. That cuts both ways, since a well-behaved sub-merchant benefits from the pool, and a poorly-behaved one can trigger scrutiny that lands on everybody.
Under a merchant of record, the provider absorbs the dispute directly, which sounds appealing until you notice it is priced into your rate and that repeated disputes will get you offboarded regardless.
The portability problem
With direct acquiring, your merchant history belongs to you, which makes approaching a new acquirer considerably easier because you can show processing history in your own name. As a sub-merchant, that history sits with the facilitator, and you may leave with very little you can present to anyone else.
Under a merchant of record, the customer relationship may be contractually theirs, including the billing relationship on recurring products, which can make migration genuinely painful.
Structure also determines how quickly you can add a second route. Businesses that operate as facilitators or PSPs themselves face a further layer of questions around sponsorship and liability, which is worth understanding before you build anything on top of an arrangement.
PayIT123 connects businesses with acquirers, EMIs and payment service providers, and mapping your options is considerably easier before you are locked into a structure than during a migration.
Working out which one you are
Look at your customer’s bank statement first, since the descriptor usually tells you the answer immediately. If it shows a provider’s name rather than yours, you are probably not the merchant of record.
Then read your contract for the words sub-merchant, merchant of record, or reseller, and check who is named as the contracting party for the sale.
Look at who issues the customer receipt and invoice, who is named in your refund policy, and who responds to a dispute when one arrives. If the provider handles consumer tax for you, that is a strong indicator.
Final thoughts
None of these structures is wrong, and each suits a different stage. What causes damage is not knowing which one you are in, because every assumption you make about liability, ownership and portability flows from it.
Find out before you need to know. Read the descriptor, read the contract, and ask your provider directly what happens to your processing history and your customer relationships if you leave. The answer is far more comfortable to hear now than during a migration you did not choose.
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