Payment gateway (Paystack): you are the merchant of record. You collect payment, issue invoices, handle VAT, manage chargebacks, comply with local payment regulations. The gateway is infrastructure. Merchant of Record (Paddle, Lemon Squeezy): the MoR is the merchant of record. They collect payment on your behalf, handle VAT in 40+ countries, manage chargebacks and refunds, and pay you the net revenue. You bear less compliance burden; they take a larger cut (~5%). When to use MoR: SaaS selling globally that cannot afford a multi-jurisdiction VAT compliance team. When to use Paystack (gateway): African-market products where VAT complexity is manageable and you want control over the payment experience.
| Responsibility | Payment Gateway (Paystack) | Merchant of Record (Paddle, Lemon Squeezy) |
|---|---|---|
| Who is the merchant? | You — your business name appears on the customer's statement | The MoR — "Paddle.com" or "Lemon Squeezy" appears on statement |
| VAT/GST collection | You — must register and remit VAT in each jurisdiction where required | MoR — handles VAT in 40+ countries automatically |
| Chargebacks | You — you dispute and absorb chargeback losses | MoR — handles disputes on your behalf |
| Customer receipts | You — must issue compliant invoices (especially for B2B) | MoR — issues receipts/invoices automatically |
| Compliance | You — PSD2 (EU), CCPA (California), local regulations | MoR — handles most regulatory compliance |
| Fee | ~1.5-2.5% per transaction | ~5% per transaction |
| Africa market coverage | Yes — Nigeria, Ghana, Kenya, etc. | No — most MoRs do not support African payment methods |
| Control over checkout | High — customize everything | Low — use MoR's hosted checkout |
The practical rule: if your customers are primarily in Nigeria, Ghana, or Kenya, use Paystack. If you are selling a global SaaS to European and US customers and need multi-jurisdiction VAT handled automatically, consider an MoR.
See choosing a payment gateway: engineering decision framework for the full selection criteria.
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