News: Zomato, Stripe secure final RBI nod for online payment aggregator


What's in the news?

       Food-delivery platform Zomato and international financial infrastructure provider Stripe are the latest entities to have received final approval from the regulator to operate as online payment aggregators.


Key takeaways:

       With the latest additions, 11 entities have now obtained the regulator’s final nod to operate as online aggregators in the country.

       In December last year, the RBI gave payment gateways Razorpay and Cashfree final approval to operate as payment aggregators, paving the way for them to onboard new merchants, after a year-long embargo.

       Around the same time, payments major Google Pay, expense management platform Enkash and neo-banking startup Open Financial also received the regulator’s nod.


Payment Aggregator (PA):

       A Payment Aggregator (also known as a merchant aggregator) is a third-party service provider that allows merchants to accept payment from customers by integrating it into their websites or apps.

       It bridges the gap between merchants and acquirers.



       A Payment Aggregator in India is incorporated under the Companies Act 2013.

       It can be a bank or a non-bank entity.

       Since a PA handles funds, it requires a license from the RBI.

       Only non-bank payment aggregators require unique authorization from RBI as ‘handling funds’ is considered a part of the normal banking relationships for bank PAs.

       Examples: Amazon (Pay) India, Google India, Razorpay, Pine Labs, etc.


Functions of Payment Aggregators:

       It facilitates different types of payment transactions, including cash/cheque, online payments through multiple payment sources, or offline touchpoints.

       It allows merchants to accept bank transfers without setting up a bank-based merchant account. It means a merchant need not have a merchant account directly with the bank.


Go back to basics:

Payment Gateway:

       It is a software service that connects your bank account to the platform where you need to transfer your money.

       It authorizes you to conduct an online transaction through different payment modes like net banking, credit card, debit card, UPI, or other online wallets.

       A Payment gateway plays the role of a third party that securely transfers your money from the bank account to the merchant’s payment portal.


Difference between Payment Aggregator v/s Payment Gateway:

       A payment gateway is a software that allows online transactions to take place, while a payment aggregator is the inclusion of all these payment gateways.

       A payment gateway is an intermediary, while the payment aggregator is the interface where the payment gateway processes the transactions.

       Most payment aggregators own payment gateways to offer various exclusive services to their merchant customers.