Who we serve › No local entity
No local entity? Merchant of record, local entity, or an acquirer that boards the structure.
TL;DR. Card acquiring is local by rule: a merchant is located where its principal place of business is, and an acquirer can only board merchants in its own area. A company with no eligible entity in a market is not a merchant there, whatever its traffic. Three routes exist. An acquirer that will board the group structure as it stands, which gives you your own account and exists more often than operators think. A real local entity, with the substance the schemes describe. Or a merchant of record, which lends you its entity, carries your risk, and prices it. MOR solves an entity problem; it is never the cheap option, and when it is sold as one the number is hidden somewhere else.
Who this is for. Operators processing $100K+ a month who need domestic processing in a market (most often the US or the EU) where the group has no eligible local company, or who are being sold an MOR setup and want to know what they are buying.
Where a merchant is, by the schemes' test.
Principal place of business
For card-not-present, the merchant's location is the country of its principal place of business: a permanent location where business is conducted and the people accountable for the sale work.
Taxes and governing law
The merchant assesses sales taxes on the transactions there, and the location's law governs the contract with the customer. The location must be consistent across authorisation, clearing, refunds and disputes.
What does not count
A PO box, a mail-forwarding address, the location of servers, a URL, a payments or customer-service function. And acquirers must confirm a legal presence within their own jurisdiction and that outlet locations are not misrepresented; a Europe-based acquirer boards Europe-based merchants.
Summarised from Visa's published guidance on merchant location, its Acceptance Risk Standards, and processors' scheme-compliance notes; the rulebooks and your acquirer's agreement govern. Entity and tax structuring advice is for your counsel.
Your own account, your own entity, or someone else's.
Structure-tolerant acquirer
An acquirer that underwrites the group as it stands: offshore parent, local trading entity, whatever the real structure is. Your own merchant account, your own terms, merchant-account cost. Exists for more structures and categories than operators assume; the work is knowing which. Try this first.
Local entity
A real company in the market with the substance the schemes describe: premises, accountable staff, taxes, contracts under local law, often a licence of its own. Slow and not cheap, but it is yours. Right when the market is core and permanent.
Merchant of record
A provider whose entity contracts with your customers, appears on the statement, receives settlement, owes the taxes and carries the disputes, and pays you for what you supply through it. Live fast, no restructuring, at a percentage that prices your risk on its books, usually with a reserve.
Four patterns we see when there is no local entity.
01
MOR bought as the cheap option.
A percentage that looks like acquiring, and the risk premium hidden in FX, settlement timing or the reserve. Then the MOR's own acquirer looks at the traffic. MOR is worth its price when you need it; it is not a way to pay less than a merchant account.
02
The MOR its acquirer does not know about.
The MOR is underwritten for one thing and processing another, or its acquirer does not know you exist. That is submitting transactions for goods fulfilled by another merchant, which Visa's standards prohibit, and when it is found the MOR's accounts close with your volume on them. Ask what the MOR's acquirer underwrote it for.
03
The brass-plate entity.
A local company with a registered address and nothing else, presented as the merchant. It fails the schemes' location test at underwriting or after, and the account built on it goes with it. If the market deserves an entity, give it substance.
04
Nobody asked the acquirers.
The operator went to MOR because the first two acquirers said no to the structure. A ~$500M/yr operator with a complex offshore group, which no domestic acquirer would initially touch, is processing domestically today on its own account through a provider that could board the structure. The third acquirer is the one that matters.
Acquirer first. Entity if it is worth it. MOR when it is the answer.
Diagnose
The real group structure: entities, UBOs, where business is actually conducted, where taxes are paid, what the customer contract says. The market, the category and the volume. Which acquirers underwrite this structure in this category, from our placements, not from a list.
Improve
Apply to the structure-tolerant acquirers first, with a file that reconciles the structure on one page. Where none fits and the market is core, scope the entity with your counsel. Where MOR is the answer, choose one whose acquirer has underwritten your category, and read the FX, settlement and reserve terms as the price.
Prove
Go live on bounded volume. Measure approval, cost per transaction including FX, settlement timing, dispute handling and reserve against what the alternative would have cost. Keep the route open to your own account as the structure matures.
The structure file.
The same file opens the door at a structure-tolerant acquirer and at a serious MOR.
- Structure chart: every entity, where incorporated, where it actually operates, UBOs
- Where the business is conducted: premises, accountable staff, taxes paid, by entity
- The customer contract: which entity sells, under which law, what appears on the statement
- Licences, if the category needs them, and which entity holds each
- Target markets by volume, and current processing history in each
- Six months of volume, chargeback and fraud ratios by month and by country
- Any current MOR or acquiring agreement: pricing, FX, settlement, reserve, exclusions
Why can't our offshore company just get a local merchant account?
Because the card schemes tie a merchant to a location, and tie acquirers to a licensed area. For card-not-present transactions Visa defines the merchant location as the country of the principal place of business: a permanent location where the business is conducted and the people accountable for the sale work, where it assesses sales taxes, and whose law governs the contract with the customer. A PO box, a mail-forwarding address, servers, a URL or a customer-service function do not count. Visa's acceptance risk standards require acquirers to confirm at underwriting that merchant locations are not misrepresented and that the merchant maintains a legal presence within the acquirer's country of jurisdiction, so a merchant with no eligible entity in the market has no merchant in the acquirer's sense.
What is a merchant of record?
A company that is the merchant for the transaction: it contracts with the customer, appears on the statement, receives settlement, owes the taxes and carries the disputes, and pays you for the goods or services you supplied through it. A merchant-of-record provider lends you its entity, its acquiring and its compliance in a market where you have none. The customer is buying from the MOR, legally, and the MOR is reselling what you deliver. That is the whole mechanism, and everything about MOR follows from it.
What does MOR cost, and why is it never the cheap option?
The MOR carries your chargebacks, your tax exposure, your regulatory exposure and your scheme-programme exposure on its own merchant accounts, and prices all of it into a percentage of volume on top of the acquiring cost, usually with a reserve. It is worth paying when the alternative is no processing in the market at all; we have used it to give an operator domestic processing without restructuring its group. It is not a way to pay less than a merchant account would cost. Anyone selling MOR on price has hidden the number somewhere: in FX, in settlement timing, in the reserve, or in what happens when the MOR's own acquirer looks at the traffic.
What are the alternatives to MOR?
Two. A local entity: a real company in the market with the substance Visa's location criteria describe, which takes time, cost and often a licence of its own, but gives you your own merchant account and your own terms. Or an acquirer that will board the group structure as it stands, which exists more often than operators assume: a ~$500M/yr operator with a complex offshore group, which no domestic acquirer would initially touch, is processing domestically today through a provider we found that could board the structure. The work is knowing which acquirers underwrite which structures; that is most of what we do.
Where is the line between MOR and transaction laundering?
Visa's acceptance risk standards prohibit a merchant from submitting transactions for goods or services fulfilled by another merchant, and call transactions knowingly intended to hide their true source and nature transaction laundering; acquirers must underwrite and monitor for it, including checking that merchants sell only what they declared. A legitimate MOR is the merchant: it contracts with the customer, is on the statement, takes the dispute, owes the tax, and is underwritten by its acquirer for exactly the goods or services you supply through it, in the category they belong to. An MOR whose acquirer thinks it sells something else, or does not know you exist, is a front, and when the acquirer finds out the MOR's accounts close with your volume on them. Ask the MOR what its acquirer has underwritten it for; if the answer is vague, so is your continuity.
Does a local entity have to be a real business?
Yes, by the schemes' own test: a permanent location where business is conducted and accountable staff work, taxes assessed in that jurisdiction, contracts governed by its law. A brass-plate company with a local address satisfies none of it and is discovered at underwriting or, worse, after. If the market is worth the entity, build it properly; if it is not, MOR or a structure-tolerant acquirer is the honest alternative.
Which route for which situation?
Roughly: a structure-tolerant acquirer first, because it gives you your own account at merchant-account cost if one exists for your structure and category. A local entity when the market is core and permanent and the substance is real. MOR when you need to be live in a market before an entity is possible, when the market is secondary, or when the category makes a local entity impractical. Many operators run two of the three, for different markets.
How is Milestone paid for this?
By the acquirer, PSP or MOR you end up using, as a commission on volume. No fee to you for the review. We place with whichever of ~30 providers fits your structure and markets, so we have no reason to push MOR over an acquirer that would board you directly.
Sweepstakes
The US market where the no-entity question comes up most.
Marketplaces
Who is the merchant of record when there are many sellers.
Cross-border retail
Local acquiring across many markets under one stack.
Send us the structure chart.
Entities, where they operate, the market you need and the category. We tell you within one business day whether an acquirer will board it as it stands, and if not, which of the other two routes fits. No fee for the review.