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PAYMENT AGGREGATORS (PAs)


The Reserve Bank of India (RBI) has formalised guidelines for regulating the activities of Payment Aggregators (PAs) keeping in mind the important functions of these intermediaries in the online payments’ space.


PAYMENT AGGREGATORS (PAs)


WHAT IS A PAYMENT AGGREGATOR (PA)?


payment aggregator (also called a merchant aggregator) is a service provider through which mobile payments and e-commerce merchants can process payment transactions. An aggregator will allow a merchant to accept card payments and bank transfers without having to set up a merchant account with a bank or credit card association. 

This is basically an easy and cheap way of accepting payments that can help a small business get off the ground quicker. There are no waiting days or months to start transacting. One of the sole purposes of a payment aggregator is to provide a streamlined payment solution that’s a shortcut from traditional payment methods. 


An aggregator is what facilitates payment from the consumer via credit cards, bank transfers, or stored value accounts. Each brand differs in the payment aggregation approach, services delivered, and processing fees associated with transacting. It’s up to the merchant to do their research before committing to any payment aggregator. 



WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF A PAYMENT AGGREGATOR?


The key benefits of a Payment Aggregator are as follows:

  • COST-EFFECTIVE: The payment aggregator model is a cost-effective and efficient approach for a large volume of smaller transactions. This is why they work well for a marketplace. It provides a boost for e-wallet and credit or debit card processing with minimal fees or fixed costs.
  • APPLICATION PROCESS: It’s a lot simpler than opening your own merchant account. It offers a quick entry into the world of small business. There is no need to formally submit documents or sit down with a bank. A business can start processing credit card payments almost immediately.
  • INSTANT ACCESS: A payment aggregator is quick and easy to set up. All it takes is signing up to process an e-Commerce payment. It creates opportunities for additional talent to enter the market and it gives consumers more options to buy.

Disadvantages of Payment Aggregators includes:

  • ACCOUNT HOLDS: A payment gateway that allows for instant processing means a higher risk for chargebacks. Aggregators can be slightly paranoid about account holds. Even the smallest hint of irregular activity can lock your account. This extreme caution could keep a business from making a sale if the timing is wrong.
  • DELAYED FUNDS: It’s ultimately up to the aggregator how long they keep your funds. They have their own monthly fees to pay so if they need to float your money, they will. Most merchants are paid within 1-3 business days from the transaction, but it’s not something set in stone. They can choose to release funds in a timely manner or some can hold your money up to 30 days. This is not a common practice, however, because most don’t want to lose customers. 
  • LOWER LIMITS: Aggregators are usually charged based on gross processing volume. That means they pass on limits to merchants. If you use this method, your processing limits will be lower than going with a separate merchant account


WHAT ARE THE RECENT GUIDELINES OF THE RESERVE BANK OF INDIA REGARDING PAYMENT AGGREGATORS?


  • Payment gateways will be considered as technology providers or outsourcing partners of banks or non-banks, as the case may be.
  • A Payment Aggregator should be a company incorporated in India under the Companies Act, 1956 / 2013.
  • Non-bank entities offering payment aggregator services will have to apply for authorisation on or before June 30, 2021.
  • E-commerce marketplaces, according to the guidelines, providing payment aggregator services will have to be separated from the marketplace business and they will have to apply for authorisation on or before June 30, 2021.
    • The biggest examples of this- PhonePe, a Flipkart company, and Paytm’s payment aggregator business are already separate entities from the marketplace models.
  • It has also specified financial requirements for aggregators- payment aggregators existing today will have to achieve a net worth of Rs 15 crore by March 31, 2021 and a net worth of Rs 25 crore by the end of third financial year, which means on  or before March 31, 2023.
  • The net-worth of Rs 25 crore shall be maintained at all times thereafter.

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