Context:
Prosus-backed fintech firm PayU Payments Pvt. Ltd. has received final authorisation from the Reserve Bank of India (RBI) to function as an online payment aggregator, marking a major regulatory milestone after over a year since securing in-principle approval.
Key Highlights
- Final RBI Nod: PayU is now officially authorised under the Payment and Settlement Systems Act, 2007.
- Industry Status: Joins over 50 RBI-approved payment aggregators, including Razorpay, BillDesk, Cashfree Payments, and CCAvenue.
What is a Payment Aggregator?
A Payment Aggregator (PA) is a third-party service provider that enables merchants to accept digital payments through multiple methods such as UPI, credit/debit cards, e-wallets, bank transfers, and EMIs. They are licensed by the Reserve Bank of India (RBI) and manage the entire payment process on behalf of merchants via a nodal account.
How Payment Aggregators Work: A Step-by-Step Process
- Merchant Onboarding
- Merchants register with a PA who opens a sub-account (linked to the PA’s nodal account).
- Customer Payment Initiation
- The customer selects a payment method and enters details at checkout.
- Payment data is tokenized and encrypted.
- Transaction Processing
- PA forwards the request to the customer’s issuing bank via card networks or UPI rails.
- Fraud checks are performed by card networks and the PA.
- Bank Verification
- Customer’s bank verifies fund availability and authenticity.
- Approval/Denial
- Response is routed back through the same channel to the PA and merchant.
- Fund Collection
- Upon approval, funds are moved to the PA’s nodal account.
- Settlement
- PA settles funds to the merchant’s account (daily, same-day, or instantly).
Types of Payment Aggregators in India
- Bank Payment Aggregators
- Operated by banks (e.g., HDFC, ICICI)
- Do not require RBI registration
- Higher setup and integration costs
- Less suited for small businesses
- Third-Party Payment Aggregators
- Non-banks like Razorpay, Mobikwik, Airpay
- Require RBI approval
- Easier integration, lower cost
- Offer analytics, sub-merchant onboarding, and APIs
Key Features & Benefits of Payment Aggregators
- Seamless Onboarding & Sub-Merchant Management
- Onboard multiple sub-merchants (e.g., AMCs, sellers) using APIs or dashboards.
- Secure Payment Infrastructure
- No sensitive data storage
- PCI-DSS & ISO compliant
- Card tokenization and encryption
- Fraud Detection & Compliance
- Use of machine learning to detect fraud patterns
- Compliance with RBI and PCI-DSS standards
- Multiple Payment Options
- UPI, cards, NetBanking, BNPL, e-mandates, EMIs, wallets
- Fast Settlements
- Instant or same-day settlements
- Useful during weekends, holidays
- Smooth Checkout Experience
- Reduces cart abandonment
- Supports mobile-friendly and one-click payment flows
- Dedicated Customer Support
- 24×7 support for payment status, refunds, disputes, and technical queries
Payment Aggregator vs Payment Gateway: Key Differences
| Parameter | Payment Aggregator (PA) | Payment Gateway (PG) |
|---|---|---|
| Function | Handles funds and settlements | Facilitates data encryption and transaction routing |
| License Requirement | Must be RBI-authorised (non-bank entities) | No RBI license needed |
| MID Requirement | PA provides its own Merchant ID (MID) | Requires merchant to have its own MID |
| Examples | Razorpay, Mobikwik, Airpay | Razorpay, CC Avenue, PayU |
What is a Payment Aggregator License and How to Get One?
A Payment Aggregator License is issued by the Reserve Bank of India (RBI) to entities that facilitate online payments on behalf of businesses. These entities enable merchants to accept digital payments through various methods like cards, UPI, and net banking, without the need for a separate payment infrastructure.
Eligibility Criteria:
To obtain this license, a firm must fulfill the following requirements:
- Maintain a net worth of INR 15 crore by March 31, 2021
- Maintain a net worth of INR 25 crore by March 31, 2023
Application Requirements:
The application submitted to RBI must include:
- Proof of financial stability
- Details of business experience in handling payment processing
- Technical capabilities to securely manage transactions
Compliance Obligations:
Payment aggregators are required to:
- Ensure clear agreements with merchants and customers
- Address complaints, refunds, failed transactions, and dispute resolution effectively
This license ensures that only qualified and responsible entities are permitted to handle digital payments in India, fostering secure and efficient payment ecosystems.
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