Payment Aggregator - Meaning, Examples and Importance in India

A payment aggregator is defined as a third-party payment service provider (PSP) that processes transactions for their users’ sub-accounts through a single major merchant account. This model allows businesses to start their e-commerce easily without the inconvenience of handling separate integrations for each payment mode. By registering with a single aggregator, a merchant gains immediate access to multiple channels — credit and debit cards, net banking, UPI, and bank transfers — without the need for separate accounts in different banks or providers. The aggregator acts as a central intermediary, enabling the funds movement through one single account and performing all back-end operations on behalf of the merchant. 

Payment Aggregator Examples

Stripe, Razorpay, PayPal, Square, and India's RazorpayX or Cashfree are modern examples of aggregators. Paykassma is different from these, however, as it is a complete payment gateway that provides merchants with an immediate and secure connection to various methods, advanced risk management, and settlement in real time (T+0).

How Does a Payment Aggregator Work?

In order to facilitate several modes — cards, wallets, or UPI — a firm would need to enter into individual agreements with every payment gateway or acquiring bank. This would be technically inconvenient and time-consuming. Aggregators simplify things by offering pre-integrations with several gateways. Instead of having its own MID, firms are sub-merchants to the parent MID of the aggregator.

Whenever a payment is made by a customer, the aggregator settles the transaction on behalf of the sub-merchant by routing it through its own MID to the appropriate payment processor. Once the funds transfer is confirmed, the aggregator settles the funds into the account of the sub-merchant within a given time period.

Pros and Cons of a Payment Aggregator

Pros

The rising popularity of payment aggregators is no coincidence. Despite certain dangers to which merchants must remain alert, the platforms offer several benefits. To small businesses that want to start accepting payments without lengthy onboarding and excessive initial investment, aggregators are a budget-friendly and easily obtainable way of acquiring a standard merchant account.

Get Fast Access to Information

Getting started with a payment aggregator is typically a fast and hassle-free process. Simply create an account with them and sign any necessary preliminary agreements, and you’re good to go. You don’t need to visit a bank or fill out paperwork, and approval is usually given right away.

Safe and Regulated

From 2022, the Reserve Bank of India (RBI) mandates that all payment aggregators in India be registered and approved under the updated guidelines (RBI/DPSS/2021-22/127). Aggregators need to comply with PCI DSS 4.0, and KYC/AML norms are strictly enforced, with mandatory merchant due diligence.

Predictable Settlements

Using an aggregator allows companies to maintain low fixed operational costs while having open and uniform transaction fees. Most aggregators employ flexible pricing models that do not include long-term contracts, so it is simple for companies to scale or switch providers when necessary. Pay-as-you-go is a feature this provides merchants with, where they can scale costs as payment needs shift — something that cannot typically be done with traditional merchant account arrangements and their fixed terms and monthly fees.

Fees and Pricing Models

Payment aggregators are especially useful in handling high-volume transactions as well as low-ticket transactions. Even entities with sporadic volumes will benefit from streamlined fee arrangements and lower processing charges, allowing for easier budgeting and transaction-related cost forecasting.

Cons

While payment aggregators offer strong advantages for most businesses, they may not be the ideal option for all business models. In certain cases, the use of an aggregator might also come with constraints or risks that overshadow the positives. The scenarios below are when a direct gateway or acquiring bank integration would be a better option than through an aggregator.

Accounts Are Held

While chargebacks remain a risk, newer aggregators now provide AI-driven automated dispute resolution tools and real-time fraud detection. Proactive alerts and dashboard analytics to manage risk more effectively are also being made available to merchants.

Funds Can Be Delayed

Modern aggregators also favor shorter settlement cycles. While some providers still opt for up to T+3 days, others offer real-time settlements (T+0), a revolution for cash flow management in high-frequency businesses like e-commerce, gaming, and on-demand services.

What Are the Risks Associated with Payment Aggregators?

When it comes to online financial transactions, there is always a risk. There are hackers out there, and no system is completely secure. A corporation should be continually aware of this before putting material on the internet. There is no way for an aggregator to guarantee total security.

In these cases, the payment aggregator usually gets the underlying bank’s or payment processor’s chosen processing rate. This implies they take on all risks and are financially responsible for the entire portfolio. As a result, they are liable for any chargebacks or transaction fraud involving a sub-merchant.

That’s fantastic news. Small business owners, in particular, should be aware of this. It’s an extra layer of financial security that allows you to sell to your heart’s content while maintaining complete peace of mind.

Do You Need a Payment Aggregator for Your Business?

Companies need to have a payment aggregator if they want to accept payments across different channels — point of sale terminals, online checkout, mobile apps, and subscription platforms. Aggregators enable seamless acceptance of credit and debit cards, UPI, mobile wallets, bank transfers, Buy Now Pay Later (BNPL), and even cryptocurrencies in some geographies without having to install merchant accounts separately with each payment processor.

Bottom Line

Using an automation-powered B2B payment system can help your team save time and money by simplifying complex procedures, automatically tracking transactions to stay audit compliant, and preventing fraud.