Understanding the Payment Aggregator License in India

Service providers through which e-commerce merchants can process their payment transactions are known as payment aggregators, they are also known as merchant aggregators. Aggregators allow merchants to accept credit cards and bank transfers without having to set up a merchant account with a bank.

As per the RBI guidelines Payment Aggregators are entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period.

A payment aggregator, or a merchant aggregator, is a service provider that allows businesses to accept various forms of digital payments without the need to establish their own merchant account with each individual bank or credit card company. This model provides a convenient and efficient way for businesses, particularly small to medium-sized enterprises, to facilitate transactions in the rapidly evolving digital marketplace.

The role of a payment aggregator is essentially that of an intermediary in the payment process. When a customer makes a purchase and chooses to pay via a digital method, such as a credit card, debit card, or digital wallet, the payment is initially collected by the aggregator. The aggregator then transfers the funds to the business, typically deducting a small processing fee for the service.

One of the main advantages of using a payment aggregator is the simplicity it offers. Businesses can accept a wide variety of payment methods through a single channel, which not only reduces administrative efforts but also enhances the customer experience. It also allows smaller businesses, which may not have the transaction volume to justify individual merchant accounts with various banks or credit card companies, to accept a broad range of payment methods.

RBI Guidelines also define the following in reference to obtainment of Payment Aggregator License:

1. Overall Procedure for Application of Payment Wallet License and Payment Aggregator License;

2. Prerequisites for Payment Aggregator License;

3. Fees and other Charges for Payment Aggregator License;

4. Net Worth and Capital Requirements for Payment Aggregator Licence and Payment Gateway;

5. Guidelines for Governance of Payment Aggregators and Payment Gateways;

6. Standards to be Followed against Money Laundering (KYC / AML / CFT) Provisions;

7. Merchant Onboarding Guidelines

8. Guidelines for Settlement and Escrow Account Management

9. Customer Grievance Redressal and Dispute Management Framework

10. Security, Fraud Prevention and Risk Management Framework

11. Security Related Recomendations t Aggregators and Payment Gateways 

12. Meaning and definition of Payment Aggregator;

13. Periodic reports to be submitted by Authorised Payment Aggregators