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By ActivityPay
When you signed up for your booking software, you probably focused on features—availability calendars, automated emails, online waivers. But buried in that contract was likely a term that determines who actually controls the money flowing through your adventure business: "merchant of record."
Most tour operators don't realize they're dealing with a merchant of record arrangement until something goes wrong. A chargeback dispute where you have no say. Revenue held for 90 days without explanation. Sudden policy changes that restrict how you can handle deposits. The realization hits hardest when you discover that the company processing payments for your rafting trips or zipline tours isn't just facilitating transactions—they legally own the customer relationship for every booking.
Understanding merchant of record status matters because it determines whether you control your payment processes or someone else does. Let's break down what this actually means for your operation.
The merchant of record is the legal entity that accepts payment from your customers. When someone books a kayaking tour through your website, whoever is listed as the merchant of record is technically selling that experience—not you.
Here's what happens in each scenario:
Your booking platform collects payment from customers, holds the funds, then transfers money to your bank account on their schedule. The customer's credit card statement shows the booking software's name, not your rafting company. If there's a chargeback, the booking software handles it—and decides the outcome. You're essentially receiving payouts from the platform rather than direct customer payments.
This is common with all-in-one booking systems that promise "built-in payment processing." It sounds convenient until you realize the implications.
Payments flow directly to your merchant account. Your business name appears on customer statements. You control chargeback responses, refund policies, and payment timing. Your booking software simply facilitates the transaction, but you own the financial relationship with your customers.
This requires setting up your own payment processing, but it means you're running an independent business rather than operating through someone else's financial infrastructure.
The merchant of record arrangement affects your business in ways that aren't obvious during the sales pitch. Here's what changes when someone else holds that status:
When the booking platform is the merchant of record, they own the complete payment data. You might see that "John Smith paid $500," but you don't have access to the credit card details, billing addresses, or payment patterns that help you understand your customer base. Want to analyze which credit card types your international customers prefer? That data belongs to the platform, not you.
This matters for marketing decisions, fraud detection, and building customer profiles that help you create targeted promotions for returning guests.
A guest disputes a charge for your multi-day hiking tour. Since the booking software is the merchant of record, they handle the chargeback response. They might not understand why your cancellation policy exists or what evidence proves the customer received the service they paid for. They're managing hundreds of chargebacks across different industries—your specific rafting trip documentation isn't their priority.
The result: you lose chargebacks you should have won, and you have no input in the process. The booking software decides which documentation to submit and how to argue your case.
Seasonal adventure businesses need flexible cash flow. You might want deposits immediately to cover guide wages, but hold final payments until after the experience for easier refund management if weather forces cancellations. When someone else is the merchant of record, they determine payout schedules. Their standard "weekly deposits" might not align with your operational needs during peak season when you're managing 40 bookings per week.
Some platforms hold reserves—keeping a percentage of your revenue for 90 to 180 days "just in case" of chargebacks or refunds. That's your working capital locked up during the season when you need it most.
Realized your current setup isn't working? If your booking software is the merchant of record, switching means changing your entire payment infrastructure. You can't just swap payment processors like you would with independent systems. The booking platform and payment processing are legally intertwined.
This is the lock-in that operators discover too late. That "free" built-in payment processing comes with the cost of losing business flexibility.
Before committing to any booking software or payment arrangement, ask these specific questions:
"Who is the merchant of record for customer payments?" If they say "we handle everything for you" or "it's all integrated," that usually means they're the merchant of record. Ask directly: "Will my business name or your company name appear on customer credit card statements?"
"Who owns the merchant account processing my transactions?" There's a difference between a payment processor that serves your merchant account versus a platform that processes payments through their master merchant account with you as a sub-merchant. The latter means they're the merchant of record.
"If I leave your platform, what happens to my payment processing?" If the answer is "you'll need to set up new payment processing," they're the merchant of record and your payment system lives inside their ecosystem.
"How are chargebacks handled, and can I submit my own evidence?" Merchant of record platforms often handle disputes on your behalf—which sounds helpful until you realize you have no control over the response strategy or evidence submission.
"What's the exact payout schedule, and can I customize it?" If payouts are fixed—"every Friday" or "twice monthly"—with no flexibility, you're operating on someone else's financial timeline.
There are legitimate scenarios where having your booking software as merchant of record works for your operation—usually when you're smaller or just starting out.
If you're running under $250,000 in annual bookings, the convenience might outweigh the control issues. You avoid payment processing setup, don't need to understand integration requirements, and have one vendor to contact for both booking and payment questions.
If you're testing a new tour offering or operating seasonally with just a few months of bookings per year, the simplified approach lets you focus on operations rather than payment infrastructure.
But as you grow past $500,000 in revenue, the tradeoffs start costing real money. Limited chargeback defense leads to lost revenue. Inflexible payout schedules create cash flow gaps. The inability to optimize payment processing costs means you're leaving thousands on the table annually.
If you're currently in a merchant of record arrangement that's limiting your business, transitioning takes planning but isn't impossible.
Start by mapping what you'd need to separate payments from booking software. Most adventure businesses find they need to get payments to work with their booking system through proper integration—essentially connecting your own payment processing to the booking platform rather than using the platform's built-in payments.
Look for booking software that supports external payment processing. Platforms built for tour operators increasingly offer this flexibility, recognizing that growing businesses want control over their financial infrastructure.
The transition typically involves setting up your own merchant account, integrating it with your booking system, and migrating customer payment data. It takes 4-6 weeks on average, but the result is payment independence—you control processing costs, chargeback responses, payout timing, and customer data.
The difference between operating through someone else's merchant of record status versus controlling your own isn't just technical—it's the difference between running a dependent operation and building a scalable adventure business. Understanding this distinction before signing contracts means you're making informed decisions about how much control you're willing to trade for convenience. And if you're already locked in, knowing what to look for in your next payment setup ensures you're building the financial infrastructure your growing business actually needs.
When your booking software is the merchant of record, they legally own the customer payment relationship—collecting funds, controlling chargebacks, and paying you on their schedule. When you're the merchant of record, payments flow directly to your merchant account, your business name appears on statements, and you control refunds, chargebacks, and payout timing.
Check whose name appears on your customers' credit card statements—if it's the booking platform's name rather than your business name, they're the merchant of record. You can also ask directly: 'Who owns the merchant account processing my transactions?' and 'What happens to payment processing if I leave your platform?'
You lose control over chargeback defense, access to complete customer payment data, flexibility in payout schedules, and the ability to switch providers easily. Many platforms also hold revenue reserves (sometimes 90-180 days) and dictate refund policies, which can create cash flow problems for seasonal businesses.
This arrangement works best for smaller operations under $250,000 in annual bookings or businesses just starting out who want simplified setup. However, once you exceed $500,000 in revenue, the loss of control over chargebacks, payment optimization, and cash flow typically starts costing significant money.
Yes, but it requires planning and typically takes 4-6 weeks. You'll need to set up your own merchant account, find booking software that supports external payment processing, and integrate the two systems—but the result is payment independence and full control over your financial infrastructure.