Estimated read time: 5 minutes, 20 seconds

When you’re using a DIY payment solution like Stripe, making it work for your business falls on your developers. From testing out plugins to setting up new payment methods, maintaining Stripe can be very time-consuming.

What if, instead of spending so much time making your payment stack work for you, your developers could focus on your product?

This is one of the primary reasons why growth expert Fred Linfjärd encourages SaaS companies to consider using a merchant of record instead of a DIY solution.

Fred is a prior customer of FastSpring and now serves as an advisor. I interviewed him live on LinkedIn about four signs that SaaS companies have outgrown Stripe. Below, you’ll find highlights from our conversation.

1. You’re Running into Issues Localizing Payments

“If your strategy for growth includes selling your product in more than, let’s say, two to three currencies or local payment methods, then scaling with a Stripe-type setup can be too slow,” Fred explained. 

A similar sign you’ve outgrown Stripe is if you’re seeing demand for your product in countries that Stripe doesn’t support.

In general, if you’re spending a lot of time localizing payments, then you should consider a platform that does a lot of this automatically.

2. Recurring Disruptions to Service Are Impacting Your Revenue

Perhaps you keep finding yourself in a situation where you are experiencing card declines or interruptions in service related to integrations or technical issues. 

One question to ask yourself in this situation is whether you’re getting the support you need from Stripe to resolve these issues quickly. If you’re not getting the support you need, and these issues continue to occur, it might be time to move on.

One major difference between a DIY solution like Stripe and an MoR solution is support around compliance and risk. When using a DIY solution, all of the responsibility to remain PCI compliant (and similar regulations) falls on the merchant. When you move all of that responsibility to a third party, then you can really focus on your core product. And this leads to our third point.

3. Your Developers Are Too Busy To Focus On Your Product

If you find yourself in a situation where you’re spending a lot of in-house development resources to build and maintain your backend monetization setup with Stripe, this is an issue. It means that you’re moving the focus away from core product work, like improving product market fit and experiences that delight the customer.

This often happens when your setup requires complex integrations that are difficult to maintain.

So if you’re spending so much time on complex projects, bugs, and other tasks that have to do with Stripe and your backend monetization setup, then it’s definitely will be time to consider a new solution.

4. Managing Sales, VAT, and GST Taxes Is a Huge Internal Burden

“Along with development resources, the other big resource that goes into building and maintaining a payment stack is tax management and compliance,” Fred said. 

There’s a lot that goes into making sure the right sales tax or VAT amount is taken out of each order and that you’re properly registered in each state or country you do business in.

In addition, every country has different regulations around the taxation of digital goods, and these regulations are changing all the time. If you’re not keeping up with these changes or maintaining tax compliance is taking a lot of bandwidth, then the MoR model might be really beneficial for you.

Related post: Can SaaS Companies Afford to Ignore Sales Tax and VAT?

There may be other situations — like high transaction fees, difficulty customizing your checkout, and an inability to stay compliant with industry regulations — that are causing you to reconsider your current payment stack.

Here’s why Fred recommends the merchant of record model (and what it is).

What Is a Merchant of Record and Why Is the MoR Model Great for Software Companies?

A merchant of record is the legal entity that sells goods or services to a customer, and a company can outsource this responsibility to an MoR third party, like FastSpring.

“Operationally, it becomes a resell partnership,” Fred explained. “So you have the MoR vendor in the middle where you actually sell your product to the merchant of record, and the MoR vendor then resells it to the end customer.”

Most of this process is invisible. Customers still come to your website to learn about and buy your products. But the MoR will be listed on their receipt.

Fred was working with a photography SaaS company as its ecommerce manager when he discovered FastSpring.

“I basically stumbled upon the FastSpring and the MoR model by coincidence. I saw the opportunity to outsource and free up resources by not dealing with taxes and whatnot, so we could focus on core product and core commercial operations,” Fred explained. 

All of the complications of the selling process — from collecting and remitting taxes to customer service around their purchase — are handled by the MoR.

A merchant of record takes care of:

  • Maintaining a best-in-class branded and localized checkout process.
  • Global compliance, fraud, and risk management.
  • Managing your global VAT, GST, and sales taxes.
  • Customer support around billing questions, digital fulfillment, and more.

As Fred summarized: “It’s the sort of the merchant that takes the responsibility to be PCI compliant and makes sure your taxes are remitted in the right way. So once you move all that responsibility to a third party, you really can focus on your core product and being more efficient and lean.”

Note: Want to understand whether an MoR model would be a good fit for your company? Set up a time to talk to us to learn more.

Ask Your Questions Live

Join us live on LinkedIn on March 8 at 4pm CET for an “Ask Me Anything” about the merchant of record model. RSVP here.

About Frederic (Fred) Linfjärd

Fred is the Director of Growth Marketing at Planday and the former Head of Commercial Innovation at Capture One, where he 4x’d their revenue, leading to an acquisition. Drawing on 10+ years of experience, Fred serves as a growth advisor for a number of SaaS and software companies, using his uniquely tailored background in marketing automation and experimentation to help them scale.