The Role of Payment Aggregators in Online Payments

PAYMENT AGGREGATORS (PA) IN INDIA

Payment Aggregators (PAs) are entities that facilitate online or in-app payments between customers and merchants. They collect payments from customers through various modes — such as debit/credit cards, UPI, wallets, and net-banking — and then settle the total amount to the merchant’s account after deducting their fee.

1. What Does a Payment Aggregator Do?

A PA acts as a bridge between the customer, merchant, and payment system operators (like banks or card networks). When a customer makes a payment on a merchant’s website or app, the PA collects it and ensures that the money reaches the merchant in a secure and timely manner.

2. Who Regulates Payment Aggregators?

The Reserve Bank of India (RBI) regulates PAs under the Payment and Settlement Systems Act, 2007. In March 2020, RBI issued the Guidelines on Regulation of Payment Aggregators and Payment Gateways to bring them under direct supervision.

3. Types of Payment Aggregators

• Bank PAs: Operated by banks themselves (e.g., HDFC Bank’s SmartHub, SBI ePay).
• Non-bank PAs: Independent companies authorised by the RBI to handle payments (e.g., Razorpay, PayU, Cashfree, CCAvenue).

4. Practical Examples

When you order food through Swiggy or Zomato, the payment you make (through UPI or card) goes first to their PA (say Razorpay or PayU) and is later settled with the restaurant.

When you pay on an e-commerce site like Flipkart, the PA handles the payment flow and later transfers the amount to the seller.

5. RBI Requirements for PAs

• Authorisation: Non-bank PAs must be authorised by the RBI.
• Net Worth: ₹25 crore minimum net worth to start operations; ₹15 crore at application stage.
• Escrow Account: PAs must maintain an escrow account with a scheduled commercial bank for holding customer funds before settlement.
• Settlement Timeline: Funds must be settled with merchants within a fixed period (T+1 or T+2).
• Customer Protection: PAs must comply with data storage, KYC, and grievance redressal norms.

6. Benefits of Payment Aggregators

• Simplified onboarding for small merchants without needing multiple bank integrations.
• Increased customer convenience through multiple payment options.
• Enhanced security due to regulated escrow and fraud prevention mechanisms.

7. Examples of RBI-Approved Non-Bank PAs

Razorpay, PayU, Cashfree Payments, BillDesk, CCAvenue, and Paytm Payments Services (conditional approval).

Synopsis

Payment Aggregators enable merchants to accept digital payments through cards, UPI, or net-banking via a single platform. Regulated by the RBI under the Payment and Settlement Systems Act, they ensure funds collected from customers are securely settled to merchants. Examples include Razorpay and PayU. RBI mandates authorisation, escrow accounts, and settlement timelines to ensure transparency, customer protection, and trust in India’s growing digital payment ecosystem.