Navigating the Payment Industry Alphabet - M is for "Merchant"

This is a good one: M is for "merchant"!

A Merchant is any business or individual that accepts payments for goods or services. In the payments ecosystem, merchants are the starting point of the transaction flow as they initiate the payment process when a customer makes a purchase. It may seem simple and straightforward, however the concept can be tricky when looking at complex business models.

Per Visa's Rules, an entity that deposits a transaction, receives settlement from, or contracts with an Acquirer is classified as a Merchant if ALL of the following apply:
* The entity represents itself as selling the goods or services to the cardholder.
* The entity uses its name primarily to identify its merchant outlet to the Cardholder.
* The entity provides recourse to the cardholder in the event of a dispute.
Otherwise, the entity is classified as a Digital Wallet Operator (DWO), a Marketplace, or a Payment Facilitator.

When looking at a business to determine how they should be classified, it is essential that you firmly establish theses three key elements.

Some folks in the industry talk about the term "Merchant of Record (MoR)". Essentially, this is a business offering services as a merchant. I've been running this series from my own perspective, however this topics warrants a reference to the following article from Paddle (https://lnkd.in/g6AFGWRA), and the corresponding press release from the FTC regarding the MoR model (https://lnkd.in/gWneBcDG)

From a compliance and risk standpoint, merchants are categorized and monitored based on:
* Industry type (e.g., retail, travel, digital goods)
* Risk level (e.g., standard vs. high-risk)
* Transaction volume and behavior
* Geographic location and regulatory environment

When a merchant is onboarded, Acquirers or ISOs must perform due diligence to ensure:
* The business is legitimate
* The merchant complies with PCI DSS and other security standards
* There are no red flags for fraud, money laundering, or reputational risk

🔍 Key takeaway: Merchants may be the face of the transaction, but behind the scenes, they are re part of a complex web of compliance, risk, and responsibility.