Payments in the online space are facilitated by a number of intermediaries like the payment gateways and payment aggregators. These intermediaries act as the conduit between merchant & customer who is willing to pay for the services availed or the goods purchased. In online payments all the debit and credit transactions are routed through credit card, debit card, bank account, wallet, Unified Payments Interface (UPI), etc. The mechanism of e-commerce involves the seller (merchant), customer (buyer), customer’s bank / wallet account, acquiring bank, the bank having the nodal account, IT and communication hardware / software, middleware, security systems, payment gateways and payment aggregators. Additional players like card networks, NPCI (National Payments Corporation of India), banks offering net-banking services, banks / non-banks issuing wallets, etc. are also part of the payment chain depending upon mode of payment.
A Payment Gateway is an e-Commerce application service provider that allows the merchant to accept online payments. The role of payment gateway is crucial for online payments to the merchants from the customers for the services availed or the goods purchased. All the debit and credit card transactions are routed through payment gateways. When a merchant or service provider wants to integrate a Payment Gate to his business, he may choose one of the payment gateways among PayUMoney, Bill Desk, CCAvenue, EBS, DirecPay, MobiKwik,PayPal and a few others. These Payment Gateways charge Transfer Development Right (TDR) to the merchant besides set-up fees and Annual Maintenance Charges. The TDR payable is percentage of every transaction made, which will be between 3% and 7% depending upon payment gateways chosen by the merchant and guaranteed turnover routed through gateways. For higher turnover routed through charges will be normally lower.
Whereas the payment aggregator is the interface for multiples of payment gateways which the payments are being accepted and moved further for settlement and clearance. Generally merchants and vendors are Payment Gateways who avails the service provided by Payment Aggregator to get the highly secured transaction service. In the other words a payment Aggregator covers a payment gateway in its domain whereas it’s not essential that an aggregator act as a specific gateway. The smaller payment gateways normally do not act as payment aggregators as it involves an enormous amount of investment. PayTM, Freecharge, Citus Pay, PayU, CC Avenue, Paypal, Instamojo, Atom Technologies and Razorpay are among the numerous companies offering both gateway and aggregator services in India.
In India, entities take up the responsibility to act as Gateways needs to get authorization from RBI before getting started. As banks are already regulated entities of RBI, the Payment Gateway services provided by them need not require a separate authorisation as these activities form part of regular banking business. They shall, however, comply with other prescriptions regarding time-lines, customer grievance redressal mechanism, etc. Nevertheless, where the banks act as Payment Aggregator they have to obtain authorisation under PSSA. Further, an Aggregator needs necessary certification by Payment Card Industry – Data Security Standard (PCI DSS).
