To allow your customers to use their credit cards to purchase products and services, you will need to provide the necessary solutions to process payments. These are the areas where you will most likely cross paths with payment service providers (PSPs), payments gateways and acquiring banks.
This is where things can become complicated and sometimes even prohibitively costly, depending on your business situation. Due to the lengthy approval and application process and high risk of cyber fraud, not all businesses can hook up their operations with merchant accounts. This is where the payment aggregator model can be helpful.
Continue reading to learn more about the role of payment aggregators and whether your business might need one.
Did You Know?
Aggregators work like a service supplier, which removes the issuers’ work in making mortgage-backed protection. Also, when mortgage originators in the process of protection become aggregators, they generate special purpose vehicles (SPVs) for completing and facilitating the transaction.
What Is a Payment Aggregator or Merchant Aggregator?
Payment Aggregators are the inclusion that makes it the most comprehensive of Payment Gateways. It provides services that allow online merchants to manage payments. They enable merchants to take all bank transfers without opening an account for the merchant who is connected to the bank.
One of the main differences between a Payment Aggregator and a Payment Gateway can be that it is typically used for online transactions. At the same time, the former digitises offline/offline payment points.
The payment method allows users to transactions that include the recording of cheques, cash, online payment options and offline touchpoints (anywhere in-store, in-field and remote SMS-based transactions). Additionally, it permits merchants to accept any type of payment options without having to set up separate accounts with banks or with each credit card business or payment services provider.
Payment Aggregator Example
Suppose you won a rug shop in India and plan to expand your business to Canada and Mexico. Setting plants in these countries will need space, employees, a lot of raw materials, transportation facilities, etc.
So, the shortcut for you will be to hire rug factories for rent. The outsourced factory will be the third party payment aggregator. You'll certainly need to send and receive payments, and in those countries, your representatives (who run your shop) need to offer the customers online payment services.
In such cases, payment aggregators prove to be handy, as they offer numerous payment options like UPI, wallets, EMI, Pay Later, cards, net banking, etc., under one roof.
How Do Payment Aggregators in India Work?
Now that you know the payment aggregator's meaning, let’s understand how it works. A PA gives you a merchant account, your customer heads to the checkout, and your card company runs a fraud check. If you have a small business, payment aggregators are an excellent choice.
If your business is growing, merchant accounts may be a better choice. In most cases, payments are settled within a few days. However, if you have a high volume of transactions, you may want to consider getting a merchant account. Here's the process:
- The customer initiates the payment transaction simply by clicking on "Buy Now" or the equivalent button on the site.
- The customer is taken to an E-commerce platform where they will be able to make a payment.
- The payment gateway redirects the customer directly to a secure page that authorises the transaction.
- After the payment gateway has approved the transaction, banks check the customer's account to determine if the transaction was successful.
- The payment gateway sends the message to the customer (successful transaction, transaction error).
- If the transaction is successful, the bank will settle the payment with the payment portal.
- The payment gateway will then settle the payment with the merchant. This notifies the customer that the transaction was successful and that the payment process has ended.
Payment Aggregator Provides Merchant Account
Merchant accounts can be extremely costly, but they're not the only way to accept credit card payments. Many e-commerce companies are dependent on their payment aggregator, but they have strict processing volume limits. Payment aggregators in India are flexible, and some can even grow with your business and offer higher processing limits.
Payment aggregators work by channelling your payments through a master account. This gives you a single interface to process payments and manage your payments. A payment aggregator will help you save money while enabling your business to accept payments on the fly.
These services allow you to accept credit cards from any source without the hassle of establishing a separate merchant account.
Customer Heads to Checkout
If you've been pondering how to implement a one-click checkout solution for your store, it's probably not a surprise that you've heard about payment aggregators. The technology allows you to accept payments without redirecting your customers and makes the checkout process hassle-free.
The customer selects a product to purchase and then goes to checkout. The customer enters their payment details on the page page. Customers can choose to pay via cards, net banking, or UPI. They also have the option of EMI and wallets. These payment details are encrypted or tokenised by the payment gateway.
PA's Acquirer Receives Transaction Information
PA's are third-party processing platforms that bridge the gap between merchants and acquirers. These platforms typically provide a sub-merchant account and receive payments for merchants in batches. The aggregator transfers these funds to merchants after a while.
A merchant must first register with the PA's Acquirer to accept a Payment Method. Once an account is set up, a merchant must confirm that the cardholder is of legal age, has a valid address and is employed by a company. Once a merchant has been approved, the PA will transfer the transaction information to the merchant's account. The Acquirer may also provide payment processing services for the merchant's website.
Card Company Runs Fraud Check
Cardholders are protected by the rules and regulations on payment cards. Cardholders are not at risk of fraud when the merchant uses payment aggregators.
Payment aggregators follow information security policies and mitigate cybersecurity risks. They report cybersecurity breaches to DPSS or CERT-In. Payment aggregators use comprehensive security risk assessments to determine potential risks and vulnerabilities. One survey of Cashfree customers shows that 17% want to receive refunds in less than three business days.
Merchants may not realise that their payment aggregators are performing fraud tests until they receive many fraudulent orders. Fraudsters use this testing as a trial run to establish a successful payment history, so they may not flag the transaction as fraudulent until after it has been processed.
Payment aggregators can verify a suspect by blocking orders from the same IP address. Also, be sure to avoid UPI payment frauds that are increasing in India.
Issuer Accepts/Declines the Transaction
When a customer presents a credit card for payment, the merchant must obtain authorisation from the card issuer before allowing the sale to go through. If the cardholder's bank declines the transaction, the merchant will receive a response code that details the reason for the decline.
The most common reasons for a transaction's decline are an incorrect credit card number or expiration date. If the customer fails to provide an accurate credit card number, the merchant can request that the customer use an alternate payment method.
Types of Payment Aggregators in India
After knowing what is a payment aggregator, it's essential to cherish its types as well. When comparing the various types of payment aggregators in India, you'll probably notice that there are some differences between the two. Whether you want a Third Party Payment Aggregator or a Bank Payment Aggregator will depend on your specific needs. Here's a brief overview. Listed below are some of the advantages and disadvantages of each:
Third-Party Payment Aggregator
A Third-Party Payment Aggregator (TPA) in India helps online merchants and e-commerce sites to process payments easily and quickly. These services help merchants accept payment methods such as debit cards, credit cards, net banking and e-wallet. Unlike merchants who must set up separate payment integration systems, a payment aggregator takes care of all of these tasks while offering minimal or no startup fees.
Third-Party Payment Aggregators must have a board-approved policy for onboarding merchants. They should also perform background checks on prospective merchants and ensure the security of their infrastructure.
A company must also ensure customer privacy, which requires it to prohibit storing card details on merchants' servers. Additionally, it should implement a customer grievance redressal framework and designate a nodal officer to handle complaints.
Bank Payment Aggregator
Payment aggregators are more expensive to set up and harder to integrate. Analytics and reporting features are not available. Additionally, they do not offer comprehensive payment options. These are not recommended for small and startup businesses, as they can be costly initially. Bank payment aggregators are used by large companies that wish to collaborate with many service providers.
Features of Online Payment Aggregator
These are the features of a good payment gateway:
- High success rates
- Quick and easy onboarding
- Multiple payment modes
- Security compliant with PCI-DSS
- Competitive pricing options
- Insightful, intuitive dashboard
- No setup fees and no maintenance charges
- Ability to accept recurring payment for subscription products of a business
- A variety of features and products are available that enable businesses to accept payment without the need for a website/app.
- Customers can receive EMIs, discounts and offers from the facility.
You can implement the latest technology and save time while optimising your checkout process with payment aggregators. While some aggregators offer many options, you should consider your requirements before implementing payment orchestration.