A payment gateway is a financial service that reads payment cards (like debit card, credit card, net-banking and payment through your e-wallet, etc.), payment gateways refer to software and servers that transfer transaction info to acquiring banks and responses from issuing banks. Essentially, payment gateways facilitate communication within banks.
Important RBI Notifications March 17, 2020:
Existing Non-Bank entities offering Payment Aggregation Services shall apply for authorization on or before 30th June, 2021 and during the process they can do it until the decision from Reserve Bank of India is communicated. So if the communication is positive, they can continue else they need to windup this business. Application can be made only after the Net worth of INR 15 Crore is there for existing player. On the other hand, they have mandate to reach at INR 25 Crore net worth by the end of 3rd Financial Year i.e. 31st March, 2023. Thereafter net-worth of INR 25 Crore shall be maintained at all times thereafter.
A payment gateway performs as an intermediary between the payments receivers and facilitates the transaction via the customer's bank account. Such a facility collects the information from the buyer bank and supplies this information to the receiving bank.
What is Payment Aggregator?
As per Reserve Bank of India definition entity that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create separate payment integration system of their own. It facilitates merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period.
Payment Aggregator Operation Model:
It handles the funds on behalf of user, platform and merchant via designated Bank Account i.e. Nodal/Escrow Account. Therefore it required the authorization from Reserve Bank of India under the Payment and Settlement System Act, 2007.
Users do shopping in digital platform. Now users need to make payment. Payment mode can be Wallet, Bank-Net Banking, Debit or Credit Card etc.
Platform is marketplace of various service provider, seller, financial services etc. They are defined as Merchant. Merchant are on-board by Platform on their agreed terms and conditions.
It involves user, platform, merchant and Bank to complete any payment transaction. User once do purchase or use the services listed on platform, required to pay which is landed in the entity doing payment aggregation business. User make payment form available/listed Bank or Wallet or any acceptable payments mode i.e. POS, Card, UPI, QR to Platform of Aggregator. It has to manage the payment receipt from user and bifurcate the amount into commission and actual to be reimburse to Merchant then after release the payment to merchant. It has step on step process to ignite and close the transaction.
Now on wards, whomsoever be participant here as payment aggregation business need to take license/registration from Reserve Bank of India unlike earlier. The timeline is 30th June, 2021 where the existing non-entity has to apply for registration of whose Net Worth should be INR 15 Crore. New applicant should have INR 15 Crore Net Worth to apply for registration to Reserve Bank of India. Once authorization granted can do this business, with target to reach INR 25 Crore Net Worth by the end of 3rd Financial Year.
What is Payment Gateway?
As per Reserve Bank of India definition entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds.
Payment instrument that are processed at cloud required safe, secure and fraud-free platform to connect with credentials of Bank/Wallet/Debit or Credit Card to process the transaction, and it requires user interface which is in fact Payment Gateway in India.
For example: Digital Wallet where user can Load the Money. Money transfer from Bank Account to Wallet, and the path provider is Payment Gateway. Similarly, user make payment to platform from its wallet, the path used by it is Payment Gateway. So technology framework or say infrastructure i.e. user interface to transmit the Debit and Credit function digitally without handling the funds is Payment Gateway.