What is a Payment Aggregator?

A payment aggregator is a third-party service provider that enables customers to make and businesses to accept payments online. Payment aggregators enable their clients to accept various payment methods such as debit cards, credit cards, cardless EMIs, UPI, bank transfers, e-wallets, and e-mandates. Similarly, they also enable disbursing payments to various stakeholders, such as partners, employees, suppliers, and authorities.

To enable various payment methods on your own, your business would have to partner with various banks and non-banking financial companies (NBFCs). But, in India, there are 34 nationalized banks and 9,680 NBFCs. Not every business has the ability to partner with such a huge number of institutions, so payment aggregators essentially act as a middleman between individual businesses and financial institutions.

Another benefit of relying on payment aggregators is that you do not need to undertake the technological burden of designing and building a checkout page that meshes well with the various payment methods.

Key Features of Online Payment Aggregators

The payment journey is a key part of the online purchase experience for customers. This makes a payment aggregator an invaluable tool for businesses, enabling them to create a seamless payment journey for their customers. Payment aggregators offer several benefits, addressing critical aspects like the secure processing of payment data and fraud detection and prevention. Payment aggregators also enable end-users to access multiple payment methods and enjoy a seamless checkout experience. Let us learn about these and many other key features in detail:

1. Seamless Onboarding, Integration and Sub-Merchant Account

In e-commerce, services are sometimes provided in collaboration between businesses. Suppose a wealth management portal hosts several asset management companies (AMCs). To enable the end user to make investments, the portal will have to provide the facility to make payments to the AMCs. If a portal partners with a payment aggregator, it will be called a merchant and can create sub-merchant accounts for AMCs. This will enable the portal to manage payments on behalf of the AMCs.

An AMC account with the payment aggregator, which is the sub-merchant account, will be a current account. AMCs will be able to make transactions and access their account details using their own set of API keys and a separate dashboard.

If you partner with a payment aggregator, you can add sub-merchants by adding their name and email or by sharing a referral link from your dashboard. Partners can also onboard sub-merchants through APIs. Sub-merchants can complete the KYC process through the partner’s dashboard itself.

2. Secure Payment Processing

Payment-related information is highly sensitive and handling it requires the utmost care. Compromising this data can have severe consequences for your business. To ensure information security, payment aggregators:

  • Invest in the highest quality infrastructure

  • Do not store any sensitive information

  • Encrypt sensitive data to combat unauthorised access

  • Tokenise digital card numbers to prevent leakage

  • Raise their security to meet compliance requirements set by organisations like the PCI Council and ISO

3. Fraud Detection and Prevention

If a business or an individual gets scammed into sharing their account information and passwords, they can lose their money. To combat this, the below-given payment aggregator guidelines are followed:

  1. Payment aggregators study the payment histories of their clients, as well as previously detected fraudulent transactions

  2. They find patterns in client transactions and common features of fraudulent transactions via machine learning

  3. They save and handle all data relating to cards in compliance with PCI-DSS guidelines and RBI regulations

4. Multiple Payment Options

Having a limited number of payment options will create a hurdle in the journey of a customer making a payment. When you integrate with a payment aggregator, you can accept payments via payment methods such as debit cards, credit cards, NetBanking, UPI, credit or debit card EMIs, e-wallets, cardless EMIs, bank transfers, e-mandates, Buy Now Pay Later (BNPL) services, and more.

5. Fast Settlements

Delays in payments are annoying for customers, can cause cash flow crunches, and lead to losing customers due to temporary deficiencies in working capital. To tackle this issue, payment aggregators offer instant settlements for a fee even during non-banking hours, weekends, and bank holidays. The money will be transferred to your business within seconds. You can also choose same-day settlements for a lower fee and still manage your cash flow effectively.

6. Seamless Checkout Experience

It is important to have a seamless checkout page without complicated steps to ensure that customers don’t drop out in the middle of transactions. However, various authentication modes and numerous payment methods, policies, and regulations make this a challenging task. A payment aggregator’s main function is to ensure quick payments and it can make the investments necessary to create a seamless checkout experience.

7. Customer Support

Payment aggregators invest heavily in customer support teams that are adept at understanding and handling various types of grievances and roadblocks experienced by customers. Some end-users might need to track payment status or review payments made in the past. A merchant might need to report fraud, raise disputes, or might need some technical assistance such as how to generate API keys. All such queries are handled by experienced and skilled professionals with patience and agility.

How Do Payment Aggregators Work?

Payment aggregators act as middlemen between customers, businesses, and financial institutions to facilitate online payments via various payment methods on the same website or app. They enable your business to receive money from a huge number of customers and disburse money to your suppliers, employees, and other stakeholders.

Let us understand how payment aggregators help businesses accept online payments.

Step 1: Merchants are onboarded

Before any transactions are processed, you have to open a merchant account with a payment aggregator. Payment aggregators have a nodal account with a bank where all the transactions of their customers are processed. The bank that provides the nodal account has no visibility of why money is going in or out of the nodal account, they will just see the volume of money flowing.

Step 2: Customers head to payment windows

When a customer heads to a payment window, they select a payment method and input their payment details. This information is tokenised by the payment aggregator. The payment aggregator will also perform a fraud check at this stage.

Step 3: Payment aggregator processes the transaction in the background

The payment aggregator sends the transaction information to the bank it has its nodal account with. The bank then sends the customer information to the card company via a payment processor.

Step 4: Fraud check

At this stage, the card company conducts a fraud check based on the customer’s past spending behavior. Some card companies may also analyze databases of collections of card user transaction data to find patterns of fraud. Once the fraud check is complete, the transaction information is sent to the bank of the customer.

Step 5: The customer’s bank processes the payment request

Once the customer’s bank receives the transaction information, it verifies whether the customer has enough funds for the transaction and whether the customer’s details are accurate. The status of the transaction, which is either approved or denied, is sent back through the same channel the transaction information came from, i.e. from the customer’s bank to the card network, then to the payment aggregator’s bank, then to the payment aggregator, then to the business/merchant. The merchant then finally passes on the status to the customer.

Step 6: Payment aggregator’s bank requests the funds

Once the transaction is approved, the payment aggregator’s bank will request the funds from the customer’s bank. The funds will be stored in the previously mentioned nodal account.

Step 7: Payment aggregator settles the funds

At the end of the day, the payment aggregator will make a lump sum settlement of all payments it receives during the day on behalf of your business. Some payment aggregators might offer instant settlement services as well.

Types of Payment Aggregators in India

Bank Payment Aggregators

A bank payment aggregator facilitates online payments from different payment methods. Since it is operated by a bank, it does not require further authorisation from the Reserve Bank of India (RBI).

Bank payment aggregators tend to have higher costs for setting up. They might require you to invest time and money in integration. While the costs and effort of integration could be undertaken by huge corporations, small businesses, and startups might find this difficult. These aggregators might not provide services like analytics.

Third-Party Payment Aggregators

Third-party payment aggregators are non-bank payment aggregators and they require authorisation from the RBI to operate. Third-party payment aggregators take on the technological and operational burdens involved in managing payments from different payment methods. They tend to be cheaper than bank payment aggregators because of lower maintenance costs and annual management fees. They tend to be easier to integrate, which makes them suitable for small businesses. Third-party payment aggregators provide various services like adding sub-merchants and providing analytics dashboards.

Payment Aggregator vs Payment Gateway: Key Differences

According to the RBI, both payment aggregators and gateways facilitate online payments, but only payment aggregators handle funds. Payment gateways are termed as technology infrastructure providers for online payments. Hence, RBI guidelines for payment aggregators are stricter.

Payment Aggregator

Payment Gateway


A third-party provider that offers a unified platform for processing multiple payment methods A communication software that acts as an intermediary between customer and merchant banks

Primary Focus

Payment acceptance and service delivery Data security and transaction verification


Collects customer data and processes transactions through its own MID Transmits encrypted payment data and verifies transactions

Relationship with Bank

Provides you with its own MID and bank account Requires you to have your own MID and bank account


Razorpay, Mobikwik, Airpay Razorpay, PayU, CC Avenue

Read more about: Payment Aggregator Vs Payment Gateway


In the digital age, managing cash flow requires various considerations. In addition to the technological burden, there is a need to enable payments in forms preferred by clients and stakeholders. Payment aggregators take on these burdens and provide various valuable services. They provide data analytics services, sub-merchant accounts, instant settlements, and fraud detection and prevention to streamline the payment process for businesses.

Frequently Asked Questions (FAQs)

1. How do payment aggregators make money?

Supported payment gateway aggregators make money by charging monthly fees, as well as fees for services like instant settlement.

2. What is the risk of payment aggregation?

Payment aggregation entities need to deal with risks like cyber-attacks and fraudulent transactions.

3. What are the payment aggregators for UPI?

Nearly all payment aggregators accept UPI.

4. What are the payment aggregators in India?

There are 32 payment aggregators with in-principle authorisation from the RBI, 18 whose applications are being processed, and 4 whose application was rejected.

5. Which is the best payment gateway in India?

There are multiple merchant payment gateways in India, with a few popular ones being Razorpay, PhonePe, Paytm, etc.

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