About Payment Aggregator (PA):
- A PA (also known as a merchant aggregator) is a third-party service provider that allows merchants to accept payment from customers by integrating it into their websites or apps.
- It facilitates different types of payment transactions, including cash/cheque, online payments through multiple payment sources, or offline touchpoints.
- It allows merchants to accept bank transfers without setting up a bank-based merchant account. It means a merchant need not have a merchant account directly with the bank.
- A PA in India is incorporated under the Companies Act 2013.
- A PA can be a bank or a non-bank entity.
- Since a PA handles funds, it requires a license from the RBI.
- Only non-bank payment aggregators require unique authorization from RBI as ‘handling funds’ is considered a part of the normal banking relationships for bank PAs.
- Examples: Amazon (Pay) India, Google India, Razorpay, Pine Labs, etc.
What is a Payment Gateway?
- It is a software service that connects your bank account to the platform where you need to transfer your money.
- It authorizes you to conduct an online transaction through different payment modes like net banking, credit card, debit card, UPI, or other online wallets.
- A Payment gateway plays the role of a third party that securely transfers your money from the bank account to the merchant’s payment portal.
Payment Aggregator v/s Payment gateway:
- A payment gateway is a software that allows online transactions to take place, while a payment aggregator is the inclusion of all these payment gateways.
- While a payment gateway is an intermediary, the payment aggregator is the interface where the payment gateway processes the transactions.
- Most payment aggregators own payment gateways to offer various exclusive services to their merchant customers.
Q1) What is a merchant account?
A merchant account is a type of business bank account that allows a business to accept and process electronic payment card transactions. Merchant accounts require a business to partner with a merchant acquiring bank who facilitates all communications in an electronic payment transaction.