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Introduction

In the payment industry, there are two loosely used terms — Payment Aggregator and Payment Gateway. These terms might seem to have similar meanings but in reality, they are totally different. While both the terms refer to platforms providing services relating to payments they still have fundamental distinctions between them. Therefore it becomes necessary for all the e-commerce businesses interested in engaging them to understand the meaning of both the terms and differences between them. In this article, we will learn everything about Payment Aggregator and Payment Gateway and the differences between them.

What is a Payment Aggregator?

Payment Aggregator simply works by facilitating the transaction between the merchants (e-commerce seller) and the customer. It is a third-party service provider which enables the merchant to accept payments through various instruments such as net banking, credit cards, UPI, e-wallets etc without having to maintain individual merchant accounts with banks.

Benefits of Payment Aggregators

The following are few of the benefits of Payment Aggregators:

1. They streamline the payment and onboarding process.
2. They enable the e-commerce business to accept payments through multiple payment methods without having to maintain multiple accounts, allowing them to focus on their core business.
3. They use various security and fraud prevention measures to ensure safe transactions for customers.
4. They collect payments from customers on behalf of the business and then settle the payments afterwards.

RBI Guidelines for Payment Aggregators

1. As per the RBI guidelines, to set up a Payment Aggregator business, the RBI guidelines in this regard should be complied with and in-principle authorisation should be obtained from the Reserve Bank before commencing the business as a Payment Aggregator.
2. There is also a NOF (Net Owned Fund) criteria which needs to be fulfilled and that is Rs 25 Cr, which should be maintained at all times.

What is a Payment Gateway?

Payment Gateway is simply a tech solution, which provides the facility for processing payments between customer and merchant. Similar to Payment Aggregator it can also accept payments through multiple payment methods. It provides a safe and secure gateway to make payments instantly.

Benefits of Payment Gateway

The following are few of the benefits of Payment Gateways:

1. They streamline the transaction between customer and merchant.
2. They provide a safe and secure gateway to make payments
3. They accept payments through multiple payment methods and merchants don’t have to maintain multiple bank accounts to accept payments.
4. Payments collected through the Payment Gateway are settled instantly.

RBI Guidelines for Payment Gateways

To function as a Payment Gateway, obtaining an authorisation letter from RBI is essential, the essential elements to obtain the authorisation are as follows:

1. Merchant Agreements: The agreement between the business and the Payment Gateway is called Merchant Agreements. They contain all the relevant information including the guidelines, conditions, obligations etc which will be considered whenever participants indulge in the online transaction.
2. Secure Electronic Transaction: All the Payment Gateways are required to provide safe and secure electronic transaction services without sharing sensitive payment information of the customer from the merchant or any other third party. Payment Gateways need to put in place efficient security features to safeguard the interests of the customers.

What are the differences between Payment Aggregators and Payment Gateways?

1. Scope of Payment: The major difference between the two is that the Payment Aggregator handles the payments whereas the Payment Gateway only provides a digital gateway to accept the payments. Let’s take an example to understand this clearly. Any factory can be understood as Payment Aggregator and machines used in the factory can be understood as Payment Gateways. Simply put, Payment Gateway facilitates the functioning of the Payment Aggregator. Both are payment intermediaries which facilitate seamless online transactions between the customer and the merchant. 
2. Origin: Payment Gateways are core technology companies whereas Payment Aggregators are pool fund management companies with baseline tech of the Payment Gateways.
3. Operations: Payment Gateways do not hold the payments received from customers or merchants, they settle the payments instantly after deducting their platform fees. Payment Aggregators on the other hand hold all the payments for some time before settling it to the respective merchants.
4. Authorisation: Payment Aggregators are of two types — Banking and Non-Banking. Banking Payment Aggregators simply mean payment settlement services offered by the Banks, they don’t require separate authorisation from the RBI. Whereas Non-Banking ones require specific authorisation from RBI as per the Payment and Settlement Systems Act, 2007. Payment Gateways on the other hand are simply technology providers, which simply provide digital payment systems. Similar to Aggregators, Gateways can either be Banking or Non-Banking.
5. Capital Requirements: All the new Payment Aggregators shall have a minimum net worth of Rs. 15 Cr at the time of making the application for authorisation. Subsequent to the authorisation it shall attain a net worth of Rs. 25 Cr within the next three financial years. Thereafter, the net worth of Rs. 25 Cr shall be maintained at all times. On the other hand, there are no such requirements for the Payment Gateways.

Conclusion

In conclusion, there are numerous differences between Payment Aggregators and Payment Gateways. This needs to be understood by all the businesses in the e-commerce space to decide which service provider needs to be engaged as per their need and requirements. At RegisterKaro we provide end-to-end services relating to the engagement of payment service providers as well as their authorisation with RBI. We provide expert consultation through our seasoned professionals to provide tailored solutions for your business.