There are fine differences between Payment Gateways and Payment Aggregators. If you have an online business or looking to start one, it is imperative to know what is different and also similar between the two.
What is a Payment Gateway?
A Payment Gateway is an e-commerce software application, a software that allows online transactions to take place. It is a pass-through mechanism through which cards, net banking and e-wallet payments are done. Payment gateways offer a means to accept online payments.
What is a Payment Aggregator?
Payment Aggregator is the inclusion of all these payment gateways. Payment aggregators are service providers through which e-commerce merchants process payments. They allow merchants to accept bank transfers without setting up a merchant account that is associated with a bank.
With payment gateway aggregators, one merchant account is used to represent a number of merchants opposed to the traditional model which disburses a merchant account to each merchant.
Examples of Payment Gateway and Payment Aggregator:
A payment aggregator can offer a payment gateway, but a payment gateway cannot offer a payment aggregator.
A few examples of payment gateway aggregators are Citrus, Billdesk, Instamojo, CCAvenue and PayUMoney. These companies offer payment gateway services to different merchants for a specific rate. These payment gateway service providers take money from customers on behalf of the merchant transfer the money to the merchant account after a stipulated time period, normally 3 days, depending on the payment aggregators policies.
Payment gateways in India primarily include banks. These include both public and private banks such as HDFC, AXIS, ICICI and more.
Payment gateways vs. Payment aggregators:
Both payment gateways and payment aggregators are inclusive. A payment aggregator need not act as a payment gateway, but a payment gateway will need an aggregator.
Options: Payment Gateways in India allow the merchants to deal in a specific payment option put on the portal, whereas Payment aggregators offer multiple options for payment, from bank transfers, credit/debit cards, e-wallet transactions, and recently UPI.
Small Businesses: Payment gateways use payment aggregators to be able to cater to small businesses. This is due to the fact that small businesses generally find the transaction fees provided by payment gateways too high and complex.
Intermediary & Interface: Payment Gateways play the role of an intermediary with merchants and customers who want to pay for any goods or services they are purchasing from the site. A payment aggregator is more an interface through which said intermediaries accept payments and make settlements.
Ownership: Payment gateways in India are owned by Payment aggregators(financial service providers) who act as a processing unit for implementing online payments. Payment gateways are merchants and vendors who cannot
License: Payment gateways require RBI authorization before they set up business. But a payment aggregator requires a payment aggregator license and obtain necessary certification from the Payment Card Industry (Data Security Standard/ PCI DSS).
How do Payment Gateways and Payment aggregators help Small Businesses?
A blessing for small businesses: Payment gateways can quickly access small businesses once they integrate with payment aggregators. Payment aggregators are cost-effective for micro-transactions The payment aggregator model tends to provide a platform for online transaction processing, with minimal or no startup fees and fixed costs.
How do payment gateways and payment aggregators work together?
It is a common misunderstanding that payment gateways alone are enough to process payments. This would work for a brick and mortar store (a POS machine for example) but not online. Online, a payment gateway is just the technological side of the transaction. It mostly takes care of the data in the payment messages.
The payment gateway has a bank working behind the scenes to issue merchant accounts. When there are too many merchants applying for merchant accounts, willing to process payments, the authorizing banks will have to organize both the underwriting and fund transfer process for multiple merchants, which could become too much. This is where payment aggregators came in. Payment aggregators went through the underwriting process with the acquiring bank and processed payments for many smaller sub-merchants
“A payment aggregator might offer a payment gateway, but a payment gateway cannot offer a payment aggregator.” In a nutshell, they’re different. – Jordan Hale, Fr. Hea of Marketing, Helcim
In the debate of Payment aggregator vs. payment gateway, you cannot choose one or the other. While you must have (the gateway), the other is a payment processing choice.
If you are in a debacle, as to decide which payment gateway aggregator to pick, do not worry. Instamojo has been in the game long enough to process your payments seamlessly, and help you set up payment links, online stores and track all your transactions in one place.