Payment or Merchant Aggregators are service providers that facilitate payments by allowing merchants to process transactions through websites or mobile apps. With the help of a payment aggregator, a merchant can accept payments without opening a bank account. Payment aggregators make it easier for small businesses to operate by providing a more affordable and convenient way to make payments.
What is a Payment Aggregator, and how do they work?
A payment aggregator or a merchant aggregator is a third-party service provider that helps businesses accept payments from customers by adding payment functionality to their websites or mobile apps.
The role of a payment aggregator is to connect merchants and acquirers. Payment aggregators collect payments on your behalf and settle the money in instalments after a specific time.
A payment consolidator can become a legally recognised entity in India under the Companies Act of 1956 (as amended in 2013). As a result, they can now act as both a bank and a non-banking organisation. As a payment aggregator is responsible for handling money, a license from the Reserve Bank of India is necessary.
How do Payment Aggregators work?
The payment aggregator onboards the merchant and then provides them with a sub-merchant account. Payment aggregators collect funds on behalf of merchants, which also implies that they receive money from customers through acquiring banks.
Steps involved in the process of how a Payment Aggregator works –
1. The customer proceeds to the checkout page
2. The acquiring bank of the Payment Aggregator receives transaction data
3. Card companies perform fraud checks
4. The transaction is accepted or declined by the customer’s bank or the issuing Bank
5. Issuing Bank> Card Networks> Accepting Bank> Payment Gateway
6. Funding requests from Acquirers
7. Funds are settled in the merchant account by the Payment Aggregator
Essential technical requirements to procure Payment Aggregator License
Standards for data security
Data security standards, like PCI-DSS, PA-DSS, latest encryption standards, protection of transport channels, etc.
Assessment of risk
From a business, compliance, and legal point of view, it should list the threat or vulnerability combinations and any possible effects on the asset’s availability, privacy, or integrity.
Reporting security incidents
Within the allotted time, the entities must notify RBI of any security breaches or thefts of cardholder data. Monthly records of information security incidents, including root cause analysis and preventative measures, shall be sent to the RBI.
What is a Payment Aggregator License?
Payment aggregators are third-party companies that integrate payment functionality into their websites or mobile applications to enable companies to accept payments. They serve as a link between merchants and acquirers.
To protect the welfare of consumers and businesses, the RBI released a payment aggregator framework in March 2020; Payment gateways need a license to acquire merchants and provide them with digital payment acceptance solutions.
To comply with RBI guidelines and receive the ‘In-Principle authorisation’ to act as a payment aggregator, they must have a net worth of Rs 15 crore by March 2021, Rs 25 crore by March 2023, and Rs 25 crore at all times thereafter.
RBI nod for In-Principle Authorisation
What documents are needed to acquire the RBI nod for Payment Aggregator License?
A few crucial documents are needed to obtain a payment aggregator license and receive in-principle authorisation from the RBI.
- Certificate of Incorporation issued by the Registrar of Companies (ROC) or Registrar of Companies
- All proposed directors’ DINs (Director Identification Numbers) and DSC (Director Signature Certificate)
- Company bank account details
- Address confirmation of PAN Card for directors
- Business plan for the next five years
- Address proof of the business location
- The audited balance sheet for the last two years or since the incorporation
Procedure
Companies interested in obtaining a Payment Aggregator License should follow the following steps:
Step 1: Organisations must be incorporated under the 2013 Companies Act.
Step 2: Under the Payment and Settlement Systems Act (PSSA), 2007, permission from the RBI is required.
Step 3: Capital requirement of a net worth of Rs 15 crore by March 2021, Rs 25 crore by March 2023, and Rs 25 crore at all times thereafter.
Step 4: Create an anti-money laundering mechanism.
Step 5: Appoint a nodal officer for client complaints or disputes.
Step 6: Businesses that are banks must obtain authorisation under the PSS Act.
SabPaisa is ‘In-Principle Authorised’ by RBI to operate as a Payment Aggregator. SabPaisa Payment Suite offers products from payment collection to payouts all in one place. SabPaisa is the world’s first API-driven unified payment experience platform. It has multiple payment modes, such as debit cards, credit cards, wallets, UPI, Bharat QR, etc., and one of the highest success rates in the industry.
Conclusion
Merchants can accept payments through a payment aggregator without opening bank accounts. It is convenient and easy for small businesses to make payments through payment aggregators. RBI guidelines must be followed by payment aggregators. It is also essential that businesses collaborate with a payment aggregator licensed by the RBI.
FAQs
1. What is a Payment Aggregator?
Ans: A payment aggregator or a merchant aggregator is a third-party service provider that helps businesses accept payments from customers by adding payment functionality to their websites or mobile apps.
2. What are the essential technical requirements to procure Payment Aggregator License?
Ans: There are a few essential requirements to procure payment aggregator license such as adherence of standards for data security, assessment of risk and reporting security incidents.
3. What is a Payment Aggregator License?
Ans: In March 2020, the RBI released a framework for payment aggregators. Payment gateways require a license to acquire merchants and accept digital payments. A payment aggregator must have a comply with RBI guidelines and receive the ‘In-Principle authorisation.
