What is payment gateway?

Have you ever wondered about the inner workings of payment aggregators, aka PAs? Curious about the different types of PAs out there and need a real-life example to make sense of it all? Well, you're in luck! This guide's got all your answers.

You know what's interesting? Many articles online don't quite hit the bullseye when explaining payment aggregators – what they are, how they work, and what makes them different from payment gateways. But no worries, this blog is here to give you the lowdown on payment aggregators in a straightforward way, clearing up any confusion along the way.

Payment Aggregator Meaning

Payment aggregators, which you might also hear referred to as merchant aggregators, are like the matchmakers of the payment world. They make it possible for businesses to accept customer payments on their websites or apps.

Payment aggregators (or PAs, for short) are the bridge between businesses and the folks who process payments (acquirers). They set you up with a sub-merchant account and then handle getting paid on your behalf. Finally, they bundle up all those payments and send them your way in batches. This last part is known as the settlement. It's like having a trusted buddy take care of your cash flow.

Payment Aggregators

A payment Aggregator License requires a net worth capital of Rs. 15 crores which must be increased to Rs. 25 crores within 3 years of its incorporation. To obtain payment aggregator license, the entity must be incorporated as per the Companies Act, 2013/1956

Types of Payment Aggregators:

A payment aggregator can be a bank or a non-bank company. But here's the deal: since payment aggregators deal with money, they need the thumbs-up from the Reserve Bank of India (RBI).

Now, here's where it gets interesting. Only non-bank payment aggregators, the ones that aren't banks, need special permission from the RBI. Why, you ask? Handling money is considered just part of the everyday banking stuff for the bank-based payment aggregators.

Payment Aggregator Example - Think of It Like This:

Imagine you're a merchant wanting to offer all kinds of payment options in one convenient place. Payment aggregators, also known as merchant aggregators, are like the tech-savvy platform that helps you do just that. It's like having a menu with loads of payment choices for your customers, all neatly organized. Simple.

To make this even more straightforward, let's switch to a different example

Imagine you're in the business of making delicious cakes and pastries. You've been thinking about expanding your sweet treats to new locations, say, in Paris and Tokyo.

Now, baking those delectable delights involves a lot of ingredients, recipes, and, of course, ovens. But is it setting up a brand-new bakery in every city? That's a recipe for stress.

So, here's the clever move: Instead of building new bakeries everywhere, you decide to partner with existing bakeries in these new cities. They've got the ovens, the space, and the baking expertise. You can focus on creating mouthwatering cakes and pastries without worrying about setting up and managing new bakeries worldwide.

In this scenario, your bakery business is your core focus, while those partner bakeries are a bit like third-party payment aggregators for handling the financial side of things. They make it all run smoothly, so you can keep serving up your sweet creations. Sweet and simple.

?Imagine you're a business owner, and you want to offer various payment options like cards, net banking, UPI, wallets, EMI, and Pay Later to your customers. Much like our earlier example with setting up a brand-new bakery in every city, you face a dilemma.

You see, partnering with different banks for each payment method involves a ton of time, complex integration processes, and, not to forget, a hefty capital investment. It's like trying to set up multiple factories from scratch for different cake recipes in your bakery business.

Now, here's where the payment aggregator swoops in to save the day. Think of them as the one-stop shop for all your payment needs. They streamline the whole process, offering you a variety of payment options under one roof.

In simpler terms,

Ditch the Multiple Factories - Trust a Reliable Payment Aggregator!

Now, the burning question is: How exactly do these payment aggregators work their magic? Well, let's break it down:

The Workings of Payment Aggregators

These wizards of payments start by onboarding businesses like yours. Once you're in, they provide you with a sub-merchant account. Essentially, they handle the nitty-gritty of receiving funds on your behalf.

They take care of the cash flow for you, acting as the middle folks between customers and your business. It's like having a trustworthy partner to ensure the money flows smoothly.

Now, how does this differ from payment gateways? Here's the scoop:

Payment Aggregator vs. Payment Gateway

Payment aggregators give your customers a buffet of payment options, eliminating the need for you to deal with the complex integration of different systems. It's like having a variety of baking tools readily available in your bakery kitchen.

On the flip side, payment gateways focus solely on the technical aspects of online payment processing. They ensure the secure transfer of payment details and information between customers and the bank. It's like having the right technology to bake your cakes to perfection.

But there's a bit more to the story:

Regulations, Capital, and Safety Checks

When it comes to the rules of the game, non-bank payment aggregators need special authorization from the Reserve Bank of India (RBI). They've got to follow the Know Your Customer (KYC), Anti-Money Laundering (AML), and (CFT) guidelines to keep things safe.

On the other side of the coin, payment gateways are often seen as technology providers for banks and non-banks. They have their own set of security procedures to make sure everything stays secure.

Bringing It All Together

In a nutshell, businesses can opt for a payment aggregator, a payment gateway, or even a combination of both to suit their online payment needs. It's all about understanding the role each plays and choosing the right ingredient for your success in the world of online payments.