How is Payment Gateway different from Payment Aggregators?

Are you running an online business or planning to start one? You should have financial solutions for your online business to accept payments for the services or goods you will provide. The payment gateway is definitely something you will need, Meanwhile many merchants prefer payment aggregators because they provide a wide range of services and is beneficial in context to fees charged for those services.

What is a Payment Gateway?

Payment Gateway is online software which makes handles online payments with multiple payment modes like Credit/Debit card, Netbanking and more, It acts as an intermediate between a customer and merchant, the customer makes payments for certain goods offered by the merchant through the payment gateway.

Related Post: Points to consider for payment gateway integration in Mobile Application.

What is Payment Aggregators?

Payment Aggregators are basically service provider which allows the merchant to accept payments through multiple modes likes credit/debit cards, Netbanking and more without having a need for a merchant account. The term ‘aggregators’ denotes merchants are grouped together to opt for a merchant account which is controlled by a payment system on behalf of them, whereas a merchant account, on the other hand, is owned and controlled by the merchant themselves. In other words, Payment Aggregators allows the merchant to collects the amount without setting up a merchant account that is connected with a bank.

How Payment Gateway and Payment Aggregator work together?

It a misconception that payment gateway is the alone involved in an online transaction, Payment gateway handles only the data involved in the transaction and there are banks that work behind the scenes to issue merchant account. There can be too many merchants applying for a merchant account and willing to process payments. In such a situation, the bank has to handle both the underwriting process as well as the transaction of multiple merchants which becomes difficult. This is when a payment aggregator is needed; Payment Aggregators goes through the underwriting process with acquiring bank and processes payments for many merchants. Well, Payment Aggregator can offer a Payment Gateway but Payment Gateway cannot offer Payment Aggregator. PayU, Instamojo are some of the payment gateway aggregators that provide payment gateway services to the different merchant at a specific rate. Payment gateway service provider charges fees to the customer on behalf of the merchant and then transfers the money to the merchant account within a stipulated time period according to the payment aggregators, normally it is 3 days.

Payment Gateway vs. Payment Aggregators

Payment Gateway and Payment Aggregators both are different but interlinked, which means, payment aggregators need not act as a payment gateway but payment gateway does need aggregators.

  • Payment Options: Payment gateway in India allows the merchant to accept the payment through available options that are integrated into the portal, whereas Payment Aggregators allows the merchant to collect payment with multiple options like bank transfer, e-wallet, and latest is UPI.
  • Small Business: Payment gateways use Payment aggregators when it comes to small business because small business finds the transaction fees charges by single payment gateway high and aggregators are beneficial in context to cost for services.

Related Post: Technology trends impacting small businesses.

  • Intermediates & Interface: Payment gateway acts as an intermediate between customer and merchant, the customer makes payment through a payment gateway for the certain goods/services provided by the merchant. Aggregators act as an interface for the intermediates(Payment gateway) to accept payments and make settlements.
  • Ownership: Payment gateways are owned by Payment Aggregators who cater payment processing for online businesses.
  • License: Payment aggregators require payment aggregator license and security certificate like PCI DSS from Payment card industry. Payment Gateway requires RBI authorization for setting up a business.

How are Payment Gateway and Payment Aggregator beneficial for Small Business?

Payment Aggregators are preferred by the small business as they are cost-effective for microtransactions, payment gateway integration becomes easy for small businesses when catered by aggregators. Payment Aggregators tends to become a payment processing platform for small businesses because of their minimal or no startup cost and fixed rates.

Benefits of Payment Aggregator over Payment Gateway.

  • Ease of Application: Applying for a merchant account is a time consuming process which involves lengthy application and underwriting process, it includes a credit check, PCI compliance check and also close inspection of your business model. Whereas with Payment Aggregators there is a minimal requirement and compliance checks.
  • Faster Approvals: For Payment Aggregators, approvals takes few days making it suitable for a small business where time is a constraint.
  • Get paid instantly: Once the application processing is done, the merchant can start accepting payments through multiple payment modes like Credit/Debit card, Netbanking and more.
  • Simple Fee structure: Payment Aggregators are beneficial for small businesses making microtransactions as the cost per transaction is minimal with aggregators. So it is easier for the merchant to shell out for processing fees.