Payment Gateway vs Payment Aggregator?
In today's digital era, where online transactions reign supreme, understanding payment gateways and payment aggregators is paramount in the digital world for Product heads.
To better understand how a payment gateway or payment aggregator operates, let's examine the entities connected to it:
Acquiring Bank: This bank handles customer payments from debit cards, credit cards, and UPI on behalf of the merchant. It sends payment details to the issuing bank through networks and collects payments.
Issuing Bank: This bank is responsible for issuing credit/debit cards or Virtual Payment Addresses (VPAs) for UPI payments on behalf of networks. It approves and transfers funds from the customer to the acquiring bank.
Networks: These middlemen connect the merchant's acquiring bank with the customer's issuing bank to check payment details and the availability of funds/credit in the customer's account.
Now that you understood the common terminologies, lets try understand what is payment gateway and aggregator.
Payment Gateway:
Payment gateway is a service provider that enables merchants to accept payments from their customers on their websites or apps through an acquiring bank. While payment gateways are often associated with card transactions, they also play a crucial role in facilitating transactions through emerging payment methods like UPI.
When a customer initiates a payment on a merchant's website, the acquiring bank transmits payment information to the payment gateway. The payment gateway then processes the transaction and hits the payment information to the issuing bank through network. It's important to note that a payment gateway transfers payment information and does not handle fund transfers directly, leaving that responsibility to the acquiring and issuing banks.
A card payment gateway can process only card transactions. A UPI gateway can only process UPI payments. Basically, payment gateway is the limited option to make a payment in any online website. Usually, a merchant collaborates with multiple payment gateways through acquiring banks to increase the chances of success rates.
Notable Payment Gateways are Master Card Payment Gateways, Razorpay, CCAvenue, BillDesk, PayTM Gateway.
Payment Aggregator:
The payment aggregator serves as a platform provider that aggregates various payment modes, including cards, UPI, net banking and wallets, onto a single platform. By partnering with acquiring banks and other processing entities, payment aggregators offer merchants a stack of multiple payment methods for their customers onto a single platform.
Payment aggregators pool funds from multiple merchants into a single account, simplifying settlements and reconciliation processes. This model is particularly beneficial for small and medium-sized businesses that may not have the resources or infrastructure to manage individual merchant accounts.
Payment Aggregator can process various payment modes at a given time and also gets involved in the fund movement and settlements. Payment Aggregator pools the funds and settles to a merchant in T+2 or T+1 depends upon the PA. If you could remember an option to pay through UPI, Cards, EMI, Net Banking or Wallets, or through Buy Now and Pay Later - Providing these many options can be done only by Payment Aggregators.
Notable Payment Aggregators are JusPay, Razorpay, Zoho, Zomato. As I said earlier, payment aggregators will pool the money and transfer it to merchants with netted value.
Last bit.
A payment gateway is a subset of a payment aggregator. While a payment gateway securely transfers customer payment data from websites or apps to payment processors, a payment aggregator simplifies the payment process by consolidating multiple merchant accounts into a single account. Payment Aggregator can offer Payment Gateway as a service but the vice-versa cannot be done. While both serve as intermediaries, payment aggregators offer a more comprehensive solution by providing a unified platform for accepting payments without individual setups.
You can see full lists of India’s Payment Aggregator in this link
Follow and do subscribe for more content!