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In the payment industry, the two common terms are used widely ‘payment aggregators’ and ‘payment merchants’. The e-commerce business looking for payment service providers must have a clear understanding of these terms to step into the world of online transactions. Here in this article, we shared the points that define the difference between a payment aggregator license and a payment gateway license.
A payment aggregator handles funds while the payment gateway only provides the technology. Let’s understand this with an example of an office. The office here is a payment aggregator and the computers and machines that are used to run the office are payment gateway.
It is the technology that makes it all possible. Similarly, a payment gateway is a technology that helps payment aggregators to help merchants accept payments. Check below the other details of PAs and PGs.
The Payment Aggregators are the third parties that allow merchants and e-commerce sites to accept payment from different instruments. It is to complete the payment obligations without creating a separate payment integration system by merchants on their own. The PAs connect merchants with acquires and in the process they receive payments from customers, pool and transfer them to the merchants after some time period.
To set up a payment aggregator business the very first eligibility is to comply with the RBI guidelines and receive “In-principle authorisation to act as a payment aggregator.” The fintech firm must have a net worth of Rs 15 crore by March 2021 and Rs. 25v crore by March 2023 and 25 crore at all times.
The companies that will be granted permission to function as payment aggregators will come directly under the ambit of the RBI. So, the guidelines released by RBI in March 2020 highlight a payment getaway license. It is required by PAs to provide a digital payment acceptance solution to merchants.
A payment gateway is software for payment processing that moves money from customers to merchants. Basically, it is software that accepts payments from customers in different mentors such as net banking, credit cards, debit cards, UPI, online wallets, etc. Also, it creates a safe link for merchants to receive payments without the worry of risk. To create a payment gateway, an authorised license is required from RBI. Below are the essential elements of a payment gateway license.
1. Merchant Agreement: this agreement is made between the business and the Payment Service Provider. All the guidelines and obligations outlined in the agreement will be used as a guide for the participants to include in online transactions.
2. Secure Electronic Transactions (SET): electronic transaction providers such as Visa and Master Card provide secure electronic transactions because secure electronic transactions enable merchants to validate transactions without seeing the information. The result leads to secure payment, and for the verification, the issuer obtains information directly from the cardholder.
Payment Gateways (PGs) and Payment Aggregators (PAs) are intermediaries that play an important role in facilitating payments in the online space. Many people get confused among these two, so below is the difference between PAs and PGs.
The base difference between the two is the role of the intermediary in handling funds. Payment Aggregators are divided into two parts bank and non-bank PAs. So, the banks are provided PA services as a part of their normal banking and they do not require a separate RBI payment gateway license authorization. On the other hand, the non-bank PAs require authorization under the Payment and Settlement Systems Act, 2007 (PSSA).
The Payment Gateways are considered as ‘technology providers’ or ‘outsourcing partners’ of banks or non-banks. In the case of a bank PG, the guidelines issued by the Reserve Bank of India must be followed.
The existing PAs must have a net worth of ₹15 crores by March 31, 2021, and a net worth of ₹25 crores by the end of the third financial year. The net worth of ₹25 crore shall be maintained at all times thereafter.
However, the new payment aggregators must have a minimum net worth of ₹15 crore at the time of application for authorisation. Also, must attain a net worth of ₹25 crore by the end of the third financial year of the grant of authorisation. Similarly, the net worth is the same as for existing PAs.
The promoters of the PAs must satisfy the fit and proper criteria prescribed by the RBI. The directors of the company must submit a declaration in the prescribed format. Once the RBI check the ‘fit and proper’ status of the applicant, the license will be issued. But in case the eligibility is not met or the information provided is incomplete and not in the prescribed format, the license will not be issued.
The Department of Regulations, RBI issues master directions for KYC, Anti-Money Laundering, or Combating Financing of Terrorism. The guidelines are updated from time to time and the provisions of the Prevention of Money Laundering Act, 2002. The Rules framed under the act are also changed from time to time.
Under the Payment Settlement System Act, 2007, the payment gateways are approved and licensed through RBI authorisation. In contrast, the payment aggregator needs an RBI payment gateway license with the payment aggregator license.
Conclusion
To conclude, there are various differences between payment aggregators and payment gateway but the businesses should have both to complete the payment transaction. In the process of payment, the PAs will provide a merchant account to the e-commerce company to settle funds. In contrast, the payment gateway will provide a token or details of the transaction. The PG will safely transfer the funds into your bank account. At Regisrtrationwala, we provide assistance to our clients on Payment Gateway License. So, if you are looking for a Payment Gateway license, reach out to us.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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