Quick answer:
Sometimes referred to as a “merchant aggregator” a payment service aggregator is simply a large, third-party payment processor. Unlike your standard merchant account, an aggregator allows companies to combine multiple payment methods and options into one environment.
As a form of payment service provider, payment service aggregators can accept transactions and process them for you when you’re building your business online. However, with a payment aggregator, you’re not limited to one form of payment. Instead, you can accept everything from credit card payments to bank transfers.
Through an account with a payment aggregator, you can take almost any form of payment without having to create a host of accounts with every debit card, UPI, bank, and net-banking solution. The aggregator simply acts as an intermediary to manage all transactions.
As an example, PayPal allows users to accept a range of payment options from a single master account. You can take payments from someone’s bank account, from their existing online wallet, and so on. Using a payment service aggregator is one of the cheapest and simplest methods for a small business to operate with a variety of customers.
How Does a Payment Service Aggregator Work?
To understand how a payment service aggregator works, you’ll first need a basic understanding of how payments in the digital world happen. Every card, bank, and other payment has a specific payment gateway linked with it. A merchant needs to connect with each payment processor to accept every payment and use their gateways.
Manually, making sure you had all the technology in place to accept various kinds of transactions would take a lot of time, effort, and multiple accounts. A payment service aggregator bypasses this complexity by using an existing Merchant Identification Number (MID) to form and negotiate contracts with various payment processors.
Over time, aggregators can collect a number of connections to various gateways. This means the merchants signed up with the aggregator don’t have to use their own MID to connect with the payment options. Instead, you’re simply classed as a “sub-merchant” under the MID umbrella of the aggregator. When you accept a payment, the aggregator processes the transaction and sends it to the chosen processor. Once everything is completed, the transaction is simply moved back into the sub-merchant’s account.
The Benefits of Using A Payment Service Aggregator
Payment aggregators have blown up in the digital landscape for a number of reasons. While there are various pitfalls to avoid, there are a number of additional benefits too. For smaller businesses, a payment aggregator will give you an easy way to get started online with minimal start-up fees. A payment service aggregator is also more convenient than a merchant account.
Some of the most significant benefits of using a payment service aggregator include:
- Instant access: You can easily connect with a payment aggregator by creating an account for their services. It’s pretty simple to integrate your business with solutions like Payment, Stripe, and Square, and there’s no need to go to any banks or submit paperwork. Compared to opening a merchant account, the process is extremely straightforward. Usually, you’ll be accepted for one of these accounts instantly.
- Quick approval: The majority of payment aggregator applications only take a few days to be approved. This means you can set up and start operating your business in no time. You can accept all kinds of payments, which improves your chances of attracting customers.
- Security: Payment service aggregators are regulated under the payment and settlement systems act, which means they need to have specific licenses, and be compliant with PCI-DSS. These regulations help to keep you as safe as possible online.
- Flexible contracts: Usually, the contracts associated with payment aggregators are more flexible, so you don’t have to worry as much about being trapped into expensive, long-term fees. There’s even a more predictable pricing structure for most payment service aggregators, so you can predict exactly what you’re going to be paying.
- Excellent price point: Using a payment service aggregator means you’ll have relatively low processing fees to deal with and minimal fixed costs. Many aggregators don’t need long-term contracts either, which reduces your obligations. You can easily try new aggregators when necessary to save your company money.
The Disadvantages of Using A Payment Service Aggregator
For most smaller businesses in search of an easy way to get started and begin selling online, payment service aggregators are generally an ideal solution. However, This offering won’t be right for all situations. For instance, as your sales and sales volume begin to increase, the fees associated with using an aggregator can begin to rise significantly. When you’re planning on scaling your company quickly, you might be better-off with a merchant account.
Some of the downsides of using a payment service aggregator include:
- Account holds: Because there are immediate payment processing options with a payment service aggregator, it’s possible to get into trouble with chargebacks. The high security of aggregators means this could lead to an account hold.
- Slow payments: There aren’t specific “set times” when aggregators have to handle your funds. Most of the time, you can expect to see an online payment within a couple of days. However, accepting payments can take longer depending on things like the acquiring bank and the payment service aggregator’s processes.
- Volume limits: When you’re selling products and services online, you’ll generally want to accept as many visa, mastercard, and other credit card payments as possible from as many customers as possible. However, that isn’t always possible with a payment service aggregator. With this fintech provider, fees can go up as your payment volumes do.
The high costs associated with accepting payments from a large volume of people is usually why companies will switch to other financial services outside of a payment aggregator when their transaction levels increase. You may find another payment solution allows you to keep more of your money in your bank account.
Is a Payment Service Aggregator Right for You?
As you begin to launch your company online, you’ll notice there are a number of payment systems online to help you process payments from across the web. For smaller companies looking to get started quickly, with lower transaction volumes, the aggregator model has a lot to offer.
With a payment service aggregator, you can streamline the application process involved with getting your business set up online. Business owners skip the stress of setting up a merchant account, and you can focus on making your business model a success, rather than maintaining your solution for digital payments and credit card processing.
Of course, the payment service aggregator option won’t be the most cost-effective solution for every company. If you’re confident handling merchant services on your own, you can expand your payment management options beyond the basic e-wallet. Though you may spend more time negotiating contracts and prices, it’s generally cheaper in the long run if your online transactions begin to increase.
If you’re hoping for a high number of online sales, a merchant account, even with a monthly fee, should allow you to maintain more of your profit.
