Merchant of Record or payment processor? How to choose how to get paid online

When you start selling something online, the first question is usually “Stripe or PayPal?”.

That is the second question. The first one is: who is the seller?

You can be the seller, and use a payment processor to move the money. Or you can let another company be the seller, and it resells your product to your customers. That company is called a Merchant of Record, or MoR.

This one decision changes your fees, your tax work, your invoices, your refund policy and who a customer’s bank sees on the card statement. Most comparisons skip it and jump to fee tables. Let’s not.

The short version:

• You sell software, courses, or digital products to people in many countries, and you are a small team: use a Merchant of Record. Creem, Paddle, Polar, Lemon Squeezy.
• You sell services, physical goods, run a marketplace, or need full control over checkout and billing: stay the merchant and use a payment processor. Stripe, or a local one like Mollie.
• You sell mostly in one country and already have an accountant handling sales tax: a processor is cheaper, and the extra work is small.
• Whatever you pick, plan how you would leave before you sign up.

The rest of the post explains why.

What a payment processor does

A payment processor takes a card number, talks to the card networks and banks, and puts money in your account. Stripe, PayPal, Braintree, Adyen, Mollie, Square.

That is all it does. Your company is the seller. The customer bought from you. The receipt has your name. The tax is your problem. The refund is your decision. The chargeback is your fight.

Stripe gives you excellent tools for each of those things. Tax calculation, invoices, a dispute dashboard, subscription billing. But tools are not responsibility. If you sell a €50 course to someone in Germany, you owe German VAT, and Stripe Tax can calculate it and even help you file. The legal duty to register, file and pay stays with you.

What a Merchant of Record does

A Merchant of Record buys your product and resells it to the customer. Legally, the customer bought from Creem, or Paddle, or Polar. Not from you.

That flips the responsibilities:

• Tax. The MoR calculates, collects, files and pays sales tax and VAT in every country it sells to. You never register anywhere.
• Invoices. The MoR issues them, in its name.
• Refunds and disputes. The MoR handles the customer, the bank, and the evidence.
• Compliance. PCI, local consumer law, fraud checks. Theirs.
• Payout. You get one payment from the MoR, after their fee, on their schedule.

You keep building the product and writing the sales page. They run the shop.

The fees buy different things. A processor sells you money movement. An MoR sells you money movement plus a legal and administrative layer. That is why an MoR costs more per transaction, and why comparing 2.9% to 5% on its own is meaningless.

What you still handle when you stay the merchant

Let me be concrete about what “you are the seller” means, because this is what people underestimate.

• The customer contract. Terms of service, refund policy, what happens when they cancel.
• Tax registration. In the EU, VAT on digital goods is due in the customer’s country from the first sale. In the US, sales tax kicks in per state once you cross thresholds.
• Tax evidence. Two pieces of proof of the customer’s location for each sale, kept for years.
• Filing and paying. Quarterly or monthly, per jurisdiction.
• Invoices that meet each country’s rules.
• Fraud settings, dispute responses, deadlines.
• Refund decisions and the support inbox that comes with them.
• Reconciliation. Matching what the processor paid out against what you sold.
• Records, for the audit that may never come.

Automation helps with all of this. Stripe Tax, Quaderno, an accountant. But automation does not transfer liability. If a filing is wrong, the letter comes to you.

Direct payments give you control. They also leave a larger operating surface attached to your company. Whether that is worth it depends on how much of that surface you already have covered.

What the fees actually look like

Here are the public headline rates I found at the end of July 2026. They change, and several providers have custom pricing above a certain volume. Check before you decide.

Merchant of Record:

Payment processors, you remain the merchant:

The headline rate is not your cost. Let’s do the math on a realistic case.

You sell a $40 product, 250 sales a month, $10,000 in revenue. Half your customers are outside the US.

With Stripe: 2.9% of $10,000 is $290. 250 transactions times $0.30 is $75. International cards add 1.5% on half the revenue, $75. Currency conversion adds 1% on that half, $50. Total around $490 a month, 4.9%. Then add Stripe Tax at 0.5% or a flat fee, and your accountant’s time for filings.

With Paddle: 5% of $10,000 is $500. 250 times $0.50 is $125. Total $625 a month, 6.25%. Nothing else. No tax tool, no filings, no invoices to generate.

The difference is about $135 a month. The question becomes: is your time handling VAT registrations, quarterly filings, invoices and disputes worth more than $135 a month? For me, selling to people in 100 countries, the answer has always been yes. For someone selling to one country with an accountant already on retainer, probably not.

Two things I want you to notice. First, the international and conversion fees close most of the gap. A processor is cheap for domestic sales and much less cheap for global ones. Second, do not invent a dollar value for legal, accounting or staffing work to make the spreadsheet come out your way. Put your real numbers in.

I go deeper into where each cent goes in How an online payment actually works: authorization, capture, settlement and payout.

Who can use a Merchant of Record

Not everyone. This is the filter that ends the discussion for many businesses.

MoRs resell digital products: software, SaaS, courses, ebooks, templates, digital downloads. Most of them refuse:

• Services. Consulting, design work, coaching sessions.
• Physical goods.
• Marketplaces where you sell other people’s products.
• Regulated categories.

Each MoR also has a list of countries it accepts sellers from, and applies risk review before you can sell. Stripe Managed Payments is still in preview and available in a handful of countries.

If your product is not digital, the decision is made. You are the merchant. Pick a processor.

Choosing a Merchant of Record

If you passed the filter, here is how I would tell them apart.

Creem is the one I would try first if I were starting today. Full disclosure: Creem sponsors this site. The numbers below come from its public docs, checked in September 2026.

It has the lowest public rate in the group, 3.9% + $0.40, charged on the tax-inclusive total. It is built for indie SaaS, AI tools and digital products. License keys, affiliates and revenue splits are built in, and the last two add a 2% fee when you use them. Payouts go out on the 1st and the 15th, after a risk hold of 7 to 12 days, and each bank payout costs $7 or 1%, whichever is higher. Put that payout fee in your spreadsheet before you compare it with Paddle. It is also a young company, so the track record is shorter than Paddle’s.

Paddle is the mature option. Years of SaaS customers, enterprise support, invoicing for B2B buyers. The fee is at the top of the range. I sell my courses through Paddle and have for years.

Polar is built for developers. Usage-based billing, seat pricing, license keys, GitHub benefits, an open-source codebase and a clean API. Payouts go through Stripe Connect. I used it for StackPlan’s subscription, and wrote about the integration in How I added Polar payments to an Astro app.

Lemon Squeezy targets creators and small SaaS. Same 5% + $0.50. Stripe bought it in 2024, and Stripe Managed Payments grew out of that.

Dodo Payments is another new, cheaper option at about 4%. Read the payout holds and country list before you commit.

Stripe Managed Payments lets you stay on Stripe’s tools and add the MoR layer for 3.5% more. Attractive if you are already deep in Stripe. Still a preview, still restricted.

Gumroad is for creators selling downloads to an audience. Its 10% + $0.50 comes on top of card processing, so a direct sale costs about 12.9% + $0.80, and a sale through its Discover marketplace costs a flat 30%. Fine for a $10 ebook, painful for a $500 course.

Choosing a payment processor

If you stay the merchant:

Stripe is the default for a reason. The API, the docs, the dashboard, subscriptions, tax, invoicing, Connect for marketplaces. If you write code, start here.

PayPal is what many buyers want to see at checkout. Its API is worse. Many businesses offer both: Stripe as the primary stack, PayPal as a wallet button.

Mollie if you sell in Europe and want iDEAL, Bancontact, SEPA and local methods with local pricing. Sellers must be in the EEA, UK or Switzerland.

Braintree, Adyen, Airwallex, Square: fine products with specific reasons to pick them. Adyen for enterprise volume with interchange-plus pricing. Square if you also sell in person. Airwallex if you hold money in many currencies.

Plan your exit before you enter

Payment providers are sticky. Your customers’ cards are stored with them. Your subscriptions renew there. Moving is the hardest migration in a software business.

Before you sign up, check:

• Can you export customers, subscriptions and invoices? Ask for a sample export.
• Can card tokens be transferred to another provider? Stripe does this. Many MoRs don’t, because the customer’s card was saved with them as the seller.
• Do you keep your own customer IDs in your database, so you are not dependent on theirs?

And understand this: a customer export is not a subscription migration. A subscription is a renewal date, a price that may be grandfathered, a discount, a trial state, a payment method. Moving it means recreating it on the new provider and cancelling it on the old one, without double charging or losing a renewal. Invoices and history usually stay on the old provider.

If you ever need to migrate, run both webhook handlers at once, make them idempotent, and reconcile before you shut the old one down.

How I get paid

My courses and the bootcamp sell through Paddle. I have customers all over the world. I never had to register for VAT outside Italy, never filed a US sales tax return, and never argued with a bank about a chargeback. Paddle takes 5% plus 50 cents for that. I consider it the cheapest employee I have.

StackPlan uses Polar for its monthly plan. I chose it because the developer experience is good, the pricing is the same as Paddle, and I wanted usage-based billing available for later. It is also an MoR, so the same tax story applies.

Where I would go direct: if I sold consulting, or a physical product, or if my sales were 90% in Italy. In that case Stripe with an accountant already doing my Italian filings would cost me less and give me more control over the checkout.

The decision

Ask yourself in this order:

1. Is the product digital? If not, you are the merchant. Pick a processor.
2. Do you sell to many countries? If yes, an MoR removes the tax work that scales with country count.
3. Do you already have tax and accounting covered? If yes, a processor’s lower fee is real savings. If not, the MoR’s fee is buying you that coverage.
4. Do you need custom checkout, marketplaces, or payment methods an MoR doesn’t offer? Processor.
5. Run your own numbers, including international and currency fees. Then check the exit.

I put the provider profiles, the comparisons and a calculator that does the math above with your numbers on paymentprocessor.dev. Every claim on it links to a dated first-party source. It is free.

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