Payment Aggregator

Description

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Context

The payments arm of big technology companies Amazon and Google are among 32 firms that have been given in-principle approval by the Reserve Bank of India (RBI)to operate as online payment aggregators.

What is a Payment Aggregator/Merchant Aggregator?

A payment aggregator (also known as a merchant aggregator) is a third-party service provider that allows merchants to accept payment from customers by integrating it into their websites or apps.
In other terms, a payment aggregator (PA) bridges the gap between merchants and acquirers.
Under the payment aggregator model, merchants can process transactions through the aggregator’s Merchant Identification Number (MID). This means, your business doesn’t require a separate merchant account as the payment aggregator takes care of everything while levying a moderate fee. Thus, the PA receives payments from customers on the behalf of merchants. Finally, it transfers the payments to the merchant in batches after a period of time. This step is known as the settlement. The settlement may be standard i.e. it requires T+ 2 to 4 days. On the other hand, the settlement can be instant which can be as fast as 15 minutes.

Laws and regulations pertaining to Payment Aggregators

A payment aggregator in India is incorporated under the Companies Act, 1956 / 2013. Now, it can be a bank or a non-bank entity.
Since a PA handles funds, it requires a license from the Reserve Bank of India.
However, only non-bank payment aggregators require unique authorization from RBI. This is because ‘handling funds’ is considered a part of the normal banking relationships for bank PAs.

Eligibility

According to RBI rules, a company applying for aggregator authorization must have
A minimum net worth of Rs 15 crore in the first year of application, and
At least Rs 25 crore by the second year.
It also must fulfill the “fit and proper” criteria, and be compliant with global payment security standards.

Payment Gateway vs Payment Aggregator

A payment gateway is a Payment Processing Software. Payment Gateways only deal with online transactions and are equipped with restricted payment options.
Examples of payment gateways include Axis bank, HDFC, Union Bank of India, etc., as in India, most banks act as payment gateways.
The key difference between a Payment Gateway & Aggregator is that while a Payment Gateway only provides the technology, a Payment Aggregator would also receive payments from consumers on the business/merchant’s behalf and then settles the same in their account.

Payment Aggregator vs Payment Gateway

While your business needs both payment services to function properly, here are some of the subtle differences between payment aggregator and payment gateway. Check out the given table to get a clear understanding of the differences.