PAPG Compliance

The payment aggregator license in India is issued to ease online transactions between customers and merchant legal entities registered under the Companies Act of 2013. The granting of payment aggregator licenses in India streamlines and revolutionizes the payment system for merchant enterprises.

The RBI guidelines oversee payment aggregator license regulations in India, outlining rules for the entire process, qualifications, fees, capital needs, customer complaint handling, security, and fraud prevention framework for obtaining licenses.

Who is Payment Aggregators?

Payment Aggregator, or Merchant Aggregator, is a service that enables payments via mobile devices and helps e-commerce merchants handle payment transactions. An aggregator allows a merchant to receive card payments and bank transfers without the need to open a bank account with a financial institution or a credit card company.

Merchant aggregators offer a convenient and cost-effective method for small businesses to quickly start accepting payments. The main function of a payment aggregator is to offer a simplified payment solution that acts as a quicker alternative to conventional payment methods. Payment gateways are part of payment aggregators, while payment aggregators cannot be part of payment gateways.

According to the latest report, the payment aggregator sector in India, which is currently worth 9.5 trillion INR, is expected to grow by 2.4 times as a result of high-value transactions. A compound annual growth rate of 19% is expected to result in a total of 22.6 trillion INR by the fiscal year 2025.

The payment process is essential for the online shopping experience of buyers. This transforms a payment aggregator into an essential tool for businesses, enabling them to create a seamless payment journey for their customers. Payment aggregators enable customers to access a multitude of payment choices and experience a seamless checkout procedure. Let's delve into the main characteristics thoroughly:

Onboarding, Integration, and Merchant Account

In the realm of e-commerce, businesses sometimes come together to provide services. Consider a financial management platform that caters to multiple asset management firms (AMCs). To enable end users to invest, the platform needs to facilitate making payments to the AMCs.

By partnering with a payment aggregator, you can add sub-merchants by entering their name and email or giving them a referral link from your dashboard. Partners also have the option to onboard sub-merchants using APIs. Sub-merchants can complete the KYC process directly through the partner's dashboard. 

Safety Payment Processing

Ensuring the security of highly sensitive payment information is crucial to avoid negative consequences for your company. Payment aggregators maintain information security by:

• Investing in top-tier infrastructure.
• Avoiding the storage of any sensitive information.
• Using tokenization to safeguard digital card numbers and prevent leaks.

Preventing and Detecting Fraud

When a business or individual unknowingly shares their account information and passwords due to a scam, they are at risk of losing money. To tackle this problem, payment aggregators follow the guidelines outlined below:

• Payment aggregators analyze clients' payment activities and previous instances of fraud.
• They, employ machine learning to spot patterns in client transactions and recognize typical traits of fraudulent transactions.

Payment Options for the Municipality

Insufficient payment options can hinder customers' payment process. By partnering with a payment aggregator, you can enable the acceptance of payments through multiple channels such as credit cards, debit cards, deferred payment options, and installment plans on cards.

Assistance for Customers

Payment aggregators allocate significant resources to expert customer support teams that are adept at resolving various customer issues and challenges. Some users may need to monitor payment statuses or review past payment records.

• It acts as a middleman connecting merchants with customers.
• Processing and finalizing the payment transactions is a simple task.
• Setting up a payment aggregator is simple. Simply register for the process of online payment in e-commerce. It opens up opportunities for additional skills to join the workforce.
• Establishment of a community on one side and traders on the other side.
• The payment aggregator's goal is to present a plan for handling online transactions with minimal or no upfront fees and fixed expenses.
• The application process is simple, helping small businesses operate smoothly.
• It is an efficient and economical procedure for a large number of minor transactions.

Payment aggregators in India must adhere to the regulations set by the Reserve Bank of India to be registered. There are two main categories of payment aggregators:

• Bank Payment Aggregators

In the past, banks exclusively utilized payment aggregators such as Razorpay, PayU, and Billdesk to implement various payment methods. Regardless of the RBI's oversight, banks have the authority to license bank payment aggregators.

• Third-Party Payment Aggregators

Non-bank third-party payment aggregators, such as PayPal, Stripe, and GooglePay, require approval from the Reserve Bank of India to operate.

Some essential documents are needed to obtain a Payment Aggregator Permission to use something legally.

• Provide a Certificate of Incorporation issued by either the ROC or Registrar.

Enterprises;

• DIN (Director Identification Number) and DSC (Director Signature Certificate) are required for directors all the suggested board members;
• Information about the business' bank account.
• Proof of address for the directors' PAN Card.
• The upcoming five years of the company's business strategy.
• Provide any proof of address for the business location.
• The software company provides details on testing code.
• A balance sheet that has been audited for the past two years or since the company was established.

Acquiring a payment aggregator license requires thorough research, compliance readiness, document submission, regulatory scrutiny, ongoing compliance demonstration, and successfully obtaining the license through legal guidance and adapting to evolving regulations for a favorable outcome.

Listed below are specific procedures for acquiring a payment aggregator license

• Registration under the Companies Act, 2013: It is necessary if your company intends to function as a payment aggregator. This incorporation is the initial legal requirement for organizing your business.
• Approval from the RBI under the Payment & Settlement Systems Act: It is essential for organizations engaging in payment aggregator services. This authorization is fundamental for participating in payment aggregator operations.
• Adequacy of Capital: To acquire a payment aggregator license, companies must meet the minimum capital requirement of Rs. 15 crores. It's important to emphasize that the minimum capital needs to be raised to Rs. 25 crores within three years of starting operations. Maintaining financial stability is vital for ensuring the long-term sustainability and reliability of payment aggregator services.
• Anti-Money Laundering Mechanism: Your company must also establish a robust system to combat money laundering activities and other cyber fraud. This should encompass effective policies and procedures to prevent and detect money laundering.

In essence, payment aggregators are mandated to register for KYC and AML to mitigate money laundering fraud within the business's payment structure.

• Appointment of Nodal Officials: Payment aggregators are required to appoint a nodal official who will be accountable for addressing client grievances and establishing a system for managing disputes. This official plays a crucial role in resolving customer concerns and ensuring effective dispute-resolution processes.

Comparison of Payment Aggregator and Payment Gateway

A payment aggregator makes it easier for merchants to accept payments by consolidating multiple merchant accounts and payment methods into one setup, eliminating the need for businesses to manage individual setups for payment acceptance.

A payment gateway is a platform that collects, verifies, and runs security checks on customers' credit card information before sending it to the payment processor. Certain pointers listed below indicate distinctions between payment gateway and payment aggregator.

• When it comes to payment options, a payment aggregator allows for multiple options, while a payment gateway may limit or specify the available payment methods.
• Payment gateways can partner with payment aggregators to offer services to small businesses due to the high and complex transaction fees associated with the gateways.
• In terms of roles, payment aggregators serve as interfaces, while payment gateways function as intermediaries.
• Payment aggregators offer both offline and online touchpoints, while payment gateways primarily focus on online touchpoints such as apps and websites.
• Payment aggregators typically boast significantly higher payment success rates compared to the ability of payment gateways to handle payments.
• Fintech companies typically own payment aggregators, whereas payment gateways can be owned by private and public banks, merchants, vendors, and payment aggregators.

Corpseed is a consulting firm specialized in assisting with business establishment, ensuring compliance with regulations, and providing financial guidance. A part of their expertise lies in assisting companies in obtaining various financial permits, such as Payment Aggregator Licenses in India. Our focus is on ensuring compliance with Payment Aggregator and Payment Gateway services.