Payment Aggregators

Why in news?

• Recently, the Reserve Bank of India (RBI) has given in-principle approval to 32 firms to operate as Online Payment Aggregators (PA), under the Payment and Settlement Systems Act, 2007 (PSS Act).
• The PSS Act, 2007 provides for the regulation and supervision of payment systems in India and designates the RBI as the authority for that purpose and all related matters.

About Payment Aggregators:

• Online payment aggregators are companies that facilitate online payments by acting as intermediaries between the customer and the merchant.
• The RBI introduced Guidelines for Regulating Payment Aggregators and Payment Gateway in 2020.

Functions of Payment Aggregators:

• They typically provide a range of payment options to customers, including credit and debit cards, bank transfers, and e-wallets.
• Payment aggregators collect and process payment information, ensuring that transactions are secure and reliable.
• By using a payment aggregator, businesses can avoid the need to set up and manage their own payment processing systems, which can be complex and expensive.
• Some examples of payment aggregators include PayPal, Stripe, Square, and Amazon Pay.

Payment Aggregator versus Payment Gateway:

• A payment gateway is a software application that connects an online store or merchant to a payment processor, allowing the merchant to accept payment from a customer.
• Payment aggregators, on the other hand, are intermediaries that provide a single platform to connect multiple merchants to different payment processors.
• The main difference between a payment aggregator and payment gateway is that the former handles funds while the latter provides technology.
• Payment aggregators can offer a payment gateway, but vice versa is not true.

RBI's criteria for approving an entity as payment aggregator:

• Under the payment aggregator framework, only firms approved by the RBI can acquire and offer payment services to merchants.
• A company applying for aggregator authorisation must have a minimum net worth of Rs 15 crore in the first year of application, and at least Rs 25 crore by the second year.
• It must also be compliant with global payment security standards.

PRACTICE QUESTION:

Consider the following statements:

1. Payment Aggregators are regulated under Payment and Settlement Systems Act, 2007

2. Payment Aggregators can operate only after obtaining license from RBI

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer