Payment Aggregator 101
Payment aggregation is also known by the term merchant aggregation. This business model allows a third-party provider of payments, also known as the ‘payment aggregator’, to sign up merchants under its merchant identification number (MID) in order for them all to be processed through one master account. Examples include Google Pay, Amazon Pay, PayTM etc. A merchant account can be used to represent multiple merchants, as opposed to the traditional model that distributes a merchant account to every merchant. Sub-merchants are merchants that process transactions under an aggregator.
A payment aggregator is a service that empowers merchants. It allows them to accept credit card payments and make money transfers online without having to open a merchant account with a bank.
What happens when you make an online transaction?
Usually, three parties are involved in an online transaction –
- Payment aggregator
Let’s suppose that a customer wishes to recharge his phone online. The customer can either visit the official site of the service provider or he can recharge using a third-party application.
The dashboard basically consists of a list of various mobile phone service providers, from which the customer can choose his provider, select the amount and proceed to the payment.
Customers can choose from any one of the many online payment options, such as credit cards, debit cards, net banking, wallets, etc. The payment aggregator gives the customer a dashboard that includes a variety of payment options and banks. The customer selects the appropriate option and proceeds to make the payment.
This all happens in fractions of seconds. The customer actually pays the aggregator, and the merchant pays the aggregator. To receive online payments, the payment aggregator platform needs a payment gateway. The payment processor receives encrypted data from the gateway. The payment processor then sends a request for verification to the customer’s bank that they have sufficient credit to cover your order. The bank will respond with either a yes or no, depending on your account balance. Finally, the bank sends you a message via the app confirming that the transaction was successful.
Why would you need a payment aggregator?
A payment aggregator can help you expand your merchant business by accepting credit card and online payments quickly and easily. Merchants can accept bank transfers and credit cards online without the need to open merchant accounts with banks or card associations. A payment aggregator platform can hold the consumer’s card details, which allows for quicker purchases and money to be held in an account for future purchases. OnionPay, an Indian payment aggregator platform solution
Difference between Payment Gateways and Payment Aggregators
Both payment gateways as well as payment aggregators can be inclusive. While a payment aggregator does not have to act as a gateway for payments, a payment gateway will require an aggregator.
- Options: Payment gateways allow merchants to trade in a particular payment option. Payment aggregators, on the other hand, provide multiple payment options, including bank transfers, credit/debit card transactions, and most recently UPI.
- Small Businesses: Payment gateways make use of payment aggregators in order to serve small businesses. Because small businesses find transaction fees charged by payment gateways excessively complex and expensive, this is why they use payment aggregators.
- Intermediary and Interface: Payment gateways act as an intermediary between merchants, customers, and those who wish to pay for goods or services purchased from the site. A payment aggregator acts as an interface to allow intermediaries to accept payments and settle transactions.
- License: Payment Gateways need RBI approval before they can set up a business. A payment aggregator on the other hand must have a license from the Payment Card Industry (Data Security Standard/ PCI DSS) and be certified.
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