Explained- All you need to know about payment aggregator license
13 / 05 / 2024
The payment experience is a key part of any brand’s customer journey, which drastically impacts consumer satisfaction levels. With control over payment processes with an in-house team, companies can ensure smoother transactions, faster refunds, and tailored user experiences. This is where the advantages of being a payment aggregator begin.
With control over payment processes with an in-house team, companies can ensure smoother transactions, faster refunds, and tailored user experiences. This is where the advantages of being a payment aggregator begin.
What are payment aggregator companies?
Payment Aggregator firms are entities that enable e-commerce sites and online merchants to accept various instruments from customers to complete their payment obligations without the need for the merchants to create their systems. Payment Aggregators get payments from customers, pool and transfer them to the merchants.
How did the payment aggregator licensing regime start?
Earlier payment gateway companies were working in partnership with banks and were not regulated. Since digital payments have been growing exponentially over the last decade, RBI decided that it was time to bring these entities handling large sums of customer money under its direct regulation
What is the requirement to become a payment aggregator firm?
A firm applying for a PA license should have had a net worth of INR 15 crore at the end of March 31, 2021, and INR 25 crore at the end of March 31, 2023. According to the RBI, the agreements between payment aggregators, merchants, acquiring banks, and all other stakeholders shall delineate the roles and responsibilities of the involved parties in sorting/ handling complaints, refunds, failed transactions, return policy, customer grievance redressal (including turnaround time for resolving queries), dispute resolution mechanism and reconciliation, among other things.
Why did RBI bring payment gateway companies under its regulation?
Apart from the growth and importance of these entities, the idea is to monitor the companies that handle or move large volumes of money. By licensing these firms and bringing them under its direct control, the RBI can oversee any suspected money laundering activities and high-value suspicious transactions. It gives the RBI direct access to details on such transactions.
The RBI and Enforcement Directorate have also had issues with payment gateway firms facilitating crypto and betting transactions. The regulator also had issues with several payment gateway companies that were not diligent with the KYC of merchants. While Payment Gateways worked with banks, the final responsibility was with the banks, which often said that they could not check the KYC of merchants done by Payment Gateways. Now with the PA license, the responsibility falls clearly on the PA firms.
Why FinTech’s are making a beeline for payment aggregator licenses?
Any payment firm or company handling and movement of large volumes of money will have to pay the payment gateway firms payment processing charges. Payment gateways or processing firms charge somewhere between 0.5 percent to 2 percent depending on the volume. Having a payment aggregator license helps these firms to save a few hundred crore to a thousand crore every year, which more than compensates for the expenses that these companies incur to run and maintain a PA license besides the compliance and data security adherence cost.
Why do some large merchants want to be payment aggregator firms?
Depending upon the number of parties that merchants deal with, the move will make sense for them. For instance, a prominent food delivery platform does a gross order value of INR 13,000 crore in a quarter. Even a 0.5 per cent commission to a payment aggregator firm would be INR 65 crore in a quarter and INR 260 crore in a financial year at the current turnover. Thus it makes sense to have an in-house payment processing division rather than outsourcing it. Technology and the requisite talent have also become easier to develop, run and maintain over the last few years.
Recently RBI granted authorisation to Worldline ePayments India Private Limited to operate as an online payment aggregator. The authorisation from RBI is a testimony of Worldline’s commitment to the Indian market affirming our focus on compliance and highlighting the significance of a well-regulated payments landscape
