Payment Bank License

RBI Grants In-Principle approval to 32 existing Payment Aggregators

Payment Aggregators

The rise in internet access, e-commerce websites, mobile applications, and the pandemic that compelled many people to purchase online, even for essentials, are the leading causes of the rise in the use of digital payments. For the first time, the RBI published a comprehensive list of the organisations to which it has granted a license as an online payment aggregator, as well as a list of those organisations whose applications are still pending and those whose applications have been returned. Amazon and Google’s payment divisions are two of the 32 businesses that have received in-principle approval from the Reserve Bank of India to function as online payment aggregators. Moreover, Reliance Payment Solutions, a division of Reliance Jio Infocomm, and Zomato’s payment platform have received approval. The Reserve Bank of India (RBI) issued recommendations to regulate payment aggregators as a result of the accelerated development in the usage of digital payment systems. When the RBI published the Guidelines on Regulation of Payment Aggregators and Payment Gateways (“Guidelines”) in 2020, any entity wishing to offer payment services to merchants in compliance with the Guidelines had to obtain RBI clearance. Although it is acknowledged in the Guidelines that both banks and non-banking companies handle payment services as part of their operations, only non-banking entities are required to obtain RBI permission in order to continue offering online payment aggregator services.

The Reserve Bank of India (RBI) periodically issues guidelines on the regulation of payment gateways and payment aggregators in an effort to protect consumer interests because these entities possess significant amounts of customer data. As a financial security safeguard, the new RBI guidelines prohibit PAs from retaining customer card credentials on their database or server. The RBI has released guidelines for regulating payment aggregators through a number of circulars, which have been updated on occasion at the request of the industry’s stakeholders.

What is a merchant or payment aggregator?

A payment aggregator, often referred to as a merchant aggregator, is a provider of third-party services that enable businesses to accept payments from clients by integrating payment processing into their websites or mobile applications.

An online payment aggregator (PA) acts as a link between merchants and acquirers. You are given a “sub-merchant account” by it. Following that, the PA collects payments from clients on your behalf. Once some time has passed, it finally transfers the funds to you in batches. This action is a process of settlement.

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Guidelines of RBI for Payment Aggregators

According to the guidelines, payment aggregators are organisations that make it easier for customers of e-commerce websites and merchants to submit a variety of payment instruments for the purpose of fulfilling their payment obligations without the need for the merchants to develop their own payment integration system. Merchants and acquirers are connected through payment aggregators. They collect payments from clients, pool them, and then transfer the funds to the merchants after some time. The guidelines emphasise that, in contrast, payment gateways are organisations that merely provide the technological infrastructure to route and facilitate the processing of an online payment transaction, with no involvement in the handling of funds. Payment gateways were only considered “outsourcing partners” or “technology providers” for banks or non-banks. 

According to the guidelines, non-bank payment aggregators must get RBI authorisation in accordance with the Payment and Settlement Systems Act of 2007; this authorisation will be granted based on some of the following criteria:

  • The payment aggregator must be a business registered in India in accordance with the Companies Act, 1956[1] or 2013. The applicant entity’s Memorandum of Association (MOA) must cover the intended activity of acting as a payment aggregator.
  • E-commerce platforms that offer payment aggregator services are not allowed to carry out this business beyond the specified date. If these companies wanted to continue offering payment aggregator services, they had to separate those services from their marketplace operations before submitting an application for authorisation to the RBI.
  • Existing payment aggregators had to reach a net -worth of 15 crores and 25 crores by the end of the 3rd financial year from the date of the guidelines for compliance. After that, a net worth of 25 crore rupees must always be maintained.
  • When applying for authorisation, new payment aggregators must have a minimum net worth of 15 crores and reach a net worth of 25 crores by the end of the 3rd financial year following the authorisation issuance. After that, a net worth of 25 crores must always be maintained.
  • According to the guidelines, online payment aggregators must also follow the prescribed technological requirements.
  • Payment aggregators must develop a board-approved policy for merchant onboarding. Among other merchant-related duties, require aggregators of payment to run mandatory background checks and antecedent checks on the merchants to make sure that they:
  1. Do not have any malicious intent to deceive customers, do not sell fake, counterfeit, or prohibited products, etc.
  2. To comply with the Payment Card Industry – Data Security (PCI-DSS) and Payment Application – Data Security Standard (PA-DSS).
  3. Not allowed to save customer cards and such relevant data.
  • Non-bank payment aggregators must keep the money they have collected in escrow with any designated commercial bank.
  • Payment aggregators are required to have a framework in place for handling customer complaints and grievances with designating a nodal officer to handle the complaints from the customers, as well as a binding dispute resolution mechanism that includes a transaction life cycle, a detailed explanation of the types of disputes, a process for handling them, compliance, the responsibilities of all the parties, documentation, reason codes, and a procedure for appeals.
  • The guidelines also require payment aggregators to implement adequate information, data security infrastructure and systems for fraud prevention and detection, as well as to have an information security policy that has been approved by the board and outlines a procedure for tracking, handling, and following up on cyber security incidents and breaches, the details.
  • The directors of the online payment aggregators must meet RBI’s “fit and proper” requirements. On the other hand, in a payment gateway, the senior management/Board design organisation procedure and give them approval for policies relating to information security. Along with the IT steering committee, the executive management puts into practice the IT strategy of the board.
  • Online payment aggregators must not keep customer card information on their database or the servers to which merchants have access.
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Following the publication of the guidelines, numerous businesses applied to the RBI for a license to operate as payment aggregators. The RBI has been conducting presentations with businesses that have submitted applications for licenses over the previous months. It also examined potential money-laundering issues and the aggregator’s compliance with the RBI’s tokenisation requirements. According to reports, the RBI rejected the application for a payment aggregator licence earlier this year because of its cryptocurrency partnerships and failure to meet the requirements of the guidelines for minimum net worth.

Benefits of Online Payment Aggregators

The following are some advantages of Online Payments Aggregator:

  • It serves as a link between consumers and merchants on opposite ends.
  • Settlement generation on one end and merchants on the other end.
  • Processing and completing payment transactions as a role.
  • It is an economical and practical approach for many smaller transactions.
  • The application procedure is straightforward and simple, which makes it easier for small enterprises to operate.
  • A payment aggregator can be set up quickly and easily. To process an e-Commerce payment, only sign up. It expands the market’s skill pool and gives customers more options when making purchases.
  • The online payment aggregator often makes a proposal for processing online transactions with little or no startup costs and fixed costs.

RBI’s notification regarding approved and non-approved entities as online payment aggregators

Although the central bank has stated that reviewing applications from online payment aggregators is an “ongoing procedure,” it is disclosing the outcome in order to “provide greater transparency”. It stated that the list would be updated every two weeks. After receiving a licence from the RBI, online payment aggregators can add digital merchants and receive payments on their behalf. In March 2020, the central bank introduced a framework for these organisations.

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Only companies the RBI has authorised can purchase and provide payment services to merchants under the payment aggregator framework, placing them directly under the regulator’s control. Famous Indian firms’ application for payment aggregators is still being considered. Some applications were rejected. It indicates that while these businesses can continue to serve as payment aggregators, they can only add new merchants once they have the RBI’s approval.


The entities can do business and provide authorised payment services by receiving an RBI licence. Although the applicant’s path to obtaining an online payment aggregator’s licence may be long and complicated, the advantages enjoyed by users must be balanced. To enhance the fiduciary connection between payment aggregators and their clients, increase operational transparency, and assure users that their hard-earned money is, in fact, in good hands, the central bank’s regulation of online payment aggregators is a crucial step.

Also Read:
How do Payment Aggregator Platforms Work?
What is Payment Aggregator?
Guidelines mandated by RBI on Regulation of Payment Aggregators

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