Context:
RBI approves ISG to operate as payment aggregator.
Payment Aggregator (PA):
- Also known as a merchant aggregator
- A 3rd party service provider that enables merchants to accept payments from customers by integrating it into their websites or apps.
- Features and Functions –
- PAs provide a comprehensive stack of multiple payment methods to merchants, ensuring that customers can pay using their preferred mode of payment.
- Payment Methods – PAs allow their clients to accept various payment methods such as debit cards, credit cards, card-less EMIs, UPI, bank transfers, e-wallets, and e-mandates.
- Fund Settlement – PAs handle fund settlement by moving money from banks and other issuing entities to the merchants.
- Disbursement – PAs also enable disbursing payments to various stakeholders, such as partners, employees, suppliers, and authorities.
- Bank Transfers – PAs allow merchants to accept bank transfers without needing to set up a bank-based merchant account, meaning a merchant does not need to have a direct merchant account with the bank.
- Incorporation – In India, a PA is incorporated under the Companies Act 2013 and can be either a bank or a non-bank entity.
- Licensing – Since PAs handle funds, they require a license from the Reserve Bank of India (RBI).
- Only non-bank PAs need unique authorization from the RBI, as ‘handling funds’ is considered part of the normal banking relationships for bank PAs.
- Examples – Amazon (Pay) India, Google India, Razorpay, and Pine Labs.
Payment Gateway:
- A software service that connects your bank account to the platform where you need to transfer your money.
- It authorizes one to conduct online transactions through different payment modes like net banking, credit card, debit card, UPI, or other online wallets.
- Acts as a 3rd party that securely transfers one’s money from the bank account to the merchant’s payment portal.
Payment Aggregator vs. Payment Gateway
- Function: A Payment Gateway is a software that facilitates online transactions, while a Payment Aggregator includes all these payment gateways.
- Intermediary vs. Interface: While a Payment Gateway serves as an intermediary, the Payment Aggregator is the interface where the Payment Gateway processes the transactions.
- Ownership: Most Payment Aggregators own Payment Gateways to offer various exclusive services to their merchant customers.
Read more about Payments Infrastructure Development Fund (PIDF) Scheme
Source: TH
Previous Year Question
Which one of the following links all the ATMs in India?
[UPSC Civil Service Exam – 2018 Prelims]
(a) Indian Banks’ Association
(b) National Securities Depository Limited
(c) National Payments Corporation of India
(d) Reserve Bank of India
Answer: (c)