Payment Gateway vs. Payment Aggregator
12 / 07 / 2024
Behind the success of digital payments lie the technological developments that were key to the payment infrastructure. Anyone opting for digital payments would have come across payment gateways and payment aggregators. These are examples of the technologies that have made digital payments so popular in India.
Although they sound similar, payment gateways and payment aggregators serve different purposes in the digital payment ecosystem. Let’s look at their key differences.
Differences by definition
A payment gateway is a payment processing software that acts as an intermediary in the transfer of payment data from the customer’s bank account to the merchant’s account. The payment gateway lies between the merchant website and the financial institution, playing the role of an intermediary. It is the virtual link between the customer, merchant, and financial institution that ensures fast and safe transactions.
A payment aggregator, on the other hand, is a third-party solution provider that integrates multiple payment methods, making it possible for the merchant to accept these different payment methods. It is a broader service suite that provides end-to-end payment service solutions to merchants.
What do they do?
During an online payment, payment gateways ensure the encryption and secure transmission of sensitive information. Encryption protocols like Secure Socket Layer (SSL) or Transport Layer Security (TLS) are used by payment gateways to prevent the unauthorised interception of sensitive customer information. Thus, as a technology, a payment gateway performs the following functions -
- Processes an online payment transaction
- Authorises or rejects transactions by coordinating with the payment processor
- Facilitates settlement of transferred funds from customer account to merchant account
- Eliminates fraud through data encryption measures
- Manages risks as per RBI guidelines
As a merchant, a payment aggregator provides seamless payment acceptance and provides multiple payment options such as internet banking, credit card, debit card, e-wallet, UPI, etc., so that you can provide your customers with all these payment options. While aggregating these payment methods, payment aggregators also handle transaction processing, compliance, settlements, and refunds. Payment aggregators also provide reports, analysis, and customer support. Your coordination with the financial institutions as a merchant is reduced due to the services provided by the payment aggregator.
Key services offered by payment aggregators include:
- Merchant onboarding activities
- Single integration for all payment methods in the merchant’s systems
- Complete transaction processing, starting with payment collection from different payment methods till their deposit in the merchant account
- Addressing refunds, chargebacks and disputes
- Ensuring regulatory and security compliances
- Technical support, analytics, and reporting insights
Here is a comparative analysis of payment gateways and payment aggregators -
Difference | Payment Gateway | Payment Aggregator |
Permission to Operate | Bank payment gateways operate within the guidelines issued by the RBI regarding banks' outsourcing of financial services. RBI has separate guidelines for technology providers that non-bank payment gateways must follow. | The RBI authorises non-bank payment aggregators under the Payment and Settlement Systems Act, 2007. Entities with a payment aggregator licence granted by the RBI are authorised to provide payment aggregation services to merchants. |
| Payment Options | Payment gateways provide limited payment options. | Payment aggregators provide multiple payment options. |
Ownership | Payment gateways are generally owned by banks, and other companies. There are no capitalisation requirements for payment gateways. | Payment aggregators are generally FinTech companies and financial service companies. Payment aggregators must have a net worth of more than ₹25 crore. |
Merchant Onboarding | RBI has no specific guidelines for payment gateways concerning merchant onboarding. | For merchant onboarding, payment aggregators must ensure customer data is not saved in the merchant systems, PCI-DSS and PA-DSS compliances are met, and there is a board-approved policy for merchant onboarding in place. |
Transaction Success | Acquiring banks have multiple payment gateways which can be used by the merchant to route the transactions and maintain the success ratio. | Payment aggregators are connected to multiple acquiring banks, who, in turn, are connected to different payment gateways. This improves the chances of transaction success. |
Choosing One
The differences between a payment gateway and a payment aggregator are crucial for a business when deciding which one to opt for. The single integration feature makes payment aggregators ideal for small businesses as well as large enterprises that are seeking simplicity, speed, and cost-effectiveness in their online transactions. They act as an all-in-one solution for them with an easy set-up procedure while providing more control and a better customer experience.
On the other hand, payment gateways offer wider customisation choices. Integrations with banks and payment processors are made individually made in payment gateways. This can add to the complexity but offers better business control over the payment processes. Large enterprises prefer this control and are generally equipped with the expertise to handle such complexities. Therefore, payment gateways can be a tailor-made solution for large enterprises.
In Conclusion
The Worldline Next Gen Payment Gateway delivers the industry-best transaction success rate coupled with a very easy onboarding process. Worldline is also authorised by the RBI to operate as an online payment aggregator in India and continues to be a top choice for merchants to boost their online business, give it a try>
