Understanding Payment Aggregators: Types and Features

With increased online transactions, businesses must partner with third-party providers to support online payment processing. A common type of provider is the payment aggregator, which simplifies the process of accepting and processing payments.

However, they do not always provide a comprehensive solution for all payment processing aspects. Therefore, it is important to understand what they are, how they work, and their features to find one that best suits your unique business requirements.

What Are Payment Aggregators?

Payment aggregators are third-party service providers that enable buyers and sellers to make and accept payments. Customers can use various methods to complete the transaction, including credit or debit cards, digital wallets, UPI, cardless EMIs, bank transfers, and more.

In India, payment aggregators must obtain a license from the RBI to acquire merchants and to provide them with the infrastructure to accept and disburse payments. They also relieve merchants of the need to design and develop a checkout page that supports multiple payment methods, requiring minimal capital investment.

How Do Payment Aggregators Work?

The primary aim of payment aggregators is to streamline the process of accepting payments, making it faster and easier. The steps involved include: 

1. Onboarding and verification

Businesses must sign up with a payment aggregator and provide the required information. They must also agree to the terms or conditions set by the service provider. Once the account is created,  the business’s identity is verified, and risk assessments are conducted. This step is a security measure to ensure compliance with regulations and assess possible fraud risks. 

2. Quick integration

After approval, the business is provided with various options, like APIs and plugins. This lets the business integrate its apps and websites with the payment aggregator’s platform. This step also allows customers to experience a seamless checkout process, while ensuring that multiple payment methods are supported. 

3. Efficient handling of transactions 

When a customer initiates a payment, the payment aggregator collects payment details securely. These details are routed to the relevant payment processor or bank, which then authorises the transaction. Once approved, the funds are then transferred from the buyer’s account to the merchant’s.

4. Settling funds

Payment aggregators are also responsible for settling funds and ensuring that transactions are promptly transferred between accounts. 

5. Reporting

Certain payment aggregators may also offer additional services such as reporting tools, business analytics, insights into transaction history and sales performance, and more. 

6. Additional services

Some payment aggregators may offer additional services, such as managing subscriptions, recurrent billing, customer support, fraud detection, and more. 

It is important to note that payment aggregators and UPI  are different. UPI (Unified Payments Interface) is a real-time payment system that facilitates transactions directly between banks via mobile apps. On the other hand, payment aggregators are providers that consolidate payments from many different sources for sellers, simplifying the process of accepting multiple payment methods.

How are Payment Aggregators Different from Payment Gateways?

Category	Payment Aggregators	Payment Gateways
Meaning	A third-party service that provides a streamlined platform to process multiple payment methods.	A software that facilitates transactions between the customers and merchants.
Role	Handles the entire payment process.	Focuses on transmitting payment data from the customer to the seller securely.
Authentication protocols	Usually has its authentication protocols depending on the provider.	Relies on the authentication methods of card networks and payment providers.
Governance structure	Are professionally managed and must meet criteria set by the RBI.	They are not subject to any specific RBI guidelines.
Services provided	Provides end-to-end services for payment process.	It is a bridge between the bank of the seller and the buyer.

Read more: Understanding the Difference between Payment Aggregators & Payment Gateways

Types of Payment Aggregators 

1. Bank Payment Aggregators 

Existing banks operate these payment aggregators and, therefore, do not require any further RBI authorisation. 

2. Third-Party Payment Aggregators 

These are operated by third parties. Since they are not run by existing banks, they require RBI authorization.

Read more: Understanding Payment Gateways: How They Work and Their Benefits

Features of Payment Aggregators 

The significant features of payment aggregators include: 

• Seamless Onboarding and Management of Sub-Merchants 

• Secure Payment 

• Fraud Detection and Prevention

• Accepts Multiple Payment Types

• Instant Settlements (even on non-banking hours and holidays)

• User-Friendly Checkout Process

Wrapping Up

Payment aggregators are valuable assets to businesses that operate online or accept online payments. They streamline the process, increase security, and even provide additional features to help businesses grow. They also improve customer experiences and ensure user satisfaction. It is a good idea to consider payment aggregators for your business, especially in an age where online transactions have become the new normal. However, it is crucial to research which payment aggregators have the features you require for your business.