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The definitional question

Merchant of Record vs PayFac: which do you actually need?

Most explainers of this question are written by Merchant-of-Record vendors, so the answer always lands on "MoR." Here's the version with the actual trade-offs on the table. One question decides it: who should legally own your sales - you, or your payment provider?

The two models in one table

Merchant of Record (Paddle, Lemon Squeezy, Dodo, FastSpring...)PayFac (paas.build on UniPaaS rails)
Legal sellerThe provider - your customer buys from themYou - your name on the statement
Tax (VAT/GST/sales tax)Handled and remitted for youYours, with tooling and guides
Your fundsTheir account, their risk policy (holds/suspensions are their call)Your merchant account; funds safeguarded under FCA rules
Customer relationshipIntermediated - the transaction record is theirsYours - data, receipts, retention
Typical price shape5% + $0.50 (effective 10.6% on a $9 sub)3.9% flat - same rate at every ticket size
OnboardingUnderwriting review - days, with rejections for thin track recordsProgressive KYB - live the same session, capped until verified
Paying YOUR users (marketplace/community)Structurally impossible - one merchant onlyNative - splits, onboarding, payouts
Best whenGlobal tax is your #1 problemSpeed, ownership and platform payments are

The decision sentences

Say the sentence that matches you:
  1. "I never want to think about VAT, anywhere, at any fee." → MoR. Genuinely. See the honest MoR comparison.
  2. "I want to charge customers this week, under my brand, without forming a company." → PayFac with progressive KYB. That's paas.build: live the same session, 3.9% flat, UK/EU/US.
  3. "My product's users need to get paid too." → PayFac, structurally. An MoR is a single-merchant construct; it cannot split money between your users.
  4. "I got rejected by an MoR for having no track record." → You're not alone - and it's the model, not you.

Why the fee shapes differ (it’s not greed, it’s structure)

An MoR prices in global tax liability, disputes it legally owns, and compliance overhead - hence the % plus a fixed fee. A PayFac prices payment processing and risk-managed onboarding - hence a flat %. Neither is a scam; they're different products. The mistake is buying the expensive one for a problem you don't have: if you sell mostly to one or two regions, tax tooling covers you, and the MoR premium buys you nothing but a smaller payout.
One sentence to keep: MoRs sell tax peace-of-mind. PayFacs sell ownership and speed. Buy the one that matches your actual bottleneck.
FAQ

What is the difference between a merchant of record and a payment facilitator?

An MoR becomes the legal seller of your product - it handles tax and compliance but owns the transaction and the customer relationship. A PayFac onboards you as a sub-merchant: you stay the legal seller with your own merchant account, while the PayFac provides the rails, risk management and payouts.

Is a PayFac cheaper than a merchant of record?

Usually, and dramatically so on small tickets: typical MoR pricing is 5% + $0.50 (effective 10.6% on a $9 subscription) while paas.build charges 3.9% flat at any ticket size. The MoR premium buys tax remittance; if you do not need that, it is pure cost.

Can a merchant of record pay out to my users?

No - structurally. The MoR is the single merchant on every sale, so it cannot split funds between your marketplace sellers or community members. Platform payouts require a PayFac model.

Which is faster to start with - MoR or PayFac?

A progressive-KYB PayFac is fastest: paas.build opens a real capped merchant account the same session, individuals included. MoR underwriting typically takes days and rejects thin track records.

Do I need a company for either model?

On paas.build, no - individuals and sole traders go live the same day. Several MoRs also accept individuals, but still run an upfront review before you can sell.

Go live in one promptMoR vs PayFac →