Why In News?

RNFI Services has received in-principle approval from the Reserve Bank of India to operate as a Payment Aggregator-Physical, allowing the firm to expand into offline and in-store merchant payments.

What is a Payment Aggregator?

A Payment Aggregator (PA) is a third-party service provider that helps merchants accept and settle customer payments without needing a direct merchant account with a bank

Payment Aggregator vs Payment Gateway

  • Payment Aggregator (PA): An interface that handles the actual funds, pooling and settling money between the customer's bank and the merchant.

  • Payment Gateway (PG): A technology infrastructure or software that securely routes transaction data and authorizes the payment, without directly holding or handling the funds. 

Unified Checkout Integration: Consolidates multiple payment channels—including credit cards, debit cards, UPI, digital wallets, and internet banking—into a single application programming interface (API) for merchants.

Handling and Pooling of Transaction Monies: Unlike pure software payment gateways, non-bank PAs handle customer funds directly by temporarily pooling payments received from consumers before settling them to merchants.

Enforcing Structured Settlement Timelines: Disburses transaction funds to merchant bank accounts within strict regulatory windows (such as T+2 or T+3 business days), ensuring steady business liquidity.

Statutory Governance under Payment Law: Regulated directly by the Reserve Bank of India under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (PSS Act).

What are the Major Types of Payment Aggregators?

Payment Aggregators for Online Transactions (PA-O): Intermediaries facilitating payment collection for e-commerce websites, mobile apps, software platforms, and online service checkouts.

Payment Aggregators for Physical Transactions (PA-P): Entities facilitating point-of-sale in-person transactions across brick-and-mortar retail stores using deployed PoS terminals, soundboxes, and merchant QR codes.

Cross-Border Payment Aggregators (PA-CB): Entities authorized by the RBI to process import and export digital payments for cross-border trade in eligible goods and digital services.

Bank vs Non-Bank Payment Aggregators: Commercial banks offer PA services as part of their routine banking operations, whereas non-bank entities must obtain explicit regulatory authorisation from the RBI.

Specialized B2B Merchant-Facing Services: Aggregators offering tailored invoicing solutions, marketplace split payouts, vendor reconciliations, and recurring subscription billing engines.

What are the Major Regulatory Requirements?

Mandatory Two-Stage RBI Authorisation: Entities must secure an In-Principle Approval to demonstrate technical and financial readiness before being granted a permanent Certificate of Authorisation (CoA).

Strict Net-Worth Capital Adequacy Norms: Non-bank PAs must attain a minimum net worth of ₹15 crore at application, which must be scaled to and maintained at ₹25 crore within a mandated timeframe.

Mandatory Escrow Account Mechanism: All customer funds collected must be deposited directly into a designated Escrow Account with a scheduled commercial bank, strictly ring-fenced from the aggregator’s operational finances.

Comprehensive Merchant Due Diligence (KYC): PAs are legally required to verify merchant credentials, business registration, tax identifiers, and beneficial ownership before integrating payment solutions.

Cybersecurity Baseline Standards: Requires compliance with ISO/IEC 27001, continuous vulnerability scanning, independent annual security audits, and real-time transaction encryption as detailed by RBI.

Fit and Proper Criteria for Promoters: Promoters, directors, and key management personnel must undergo background checks to confirm their financial integrity, professional history, and lack of convictions.

Institutional Grievance Redressal Architecture: Requires the appointment of a dedicated Nodal Grievance Officer and formal integration with the RBI’s Integrated Ombudsman Scheme.

Source: ECONOMICTIMES

PRACTICE QUESTION

Q.  With reference to 'Payment Aggregators' (PAs) in India, consider the following statements:

1. Non-bank entities require mandatory authorisation from the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.

2. Unlike Payment Gateways, Payment Aggregators handle and pool customer funds before settling them to merchants.

3. Payment Aggregators are permitted to store customer card credentials, including CVV numbers, on their internal databases for recurring transactions.

4. Funds collected by a non-bank Payment Aggregator must be maintained in an escrow account with a scheduled commercial bank.

Which of the statements given above are correct?

A) 1, 2, and 4 only

B) 1 and 3 only

C) 2, 3, and 4 only

D) 1, 2, 3, and 4

Answer: A

Explanation:

Statement 1 is correct: Non-bank payment aggregators must get formal authorization from the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.  

Statement 2 is correct: Payment aggregators receive and pool customer funds before final settlement to merchants, whereas payment gateways only provide the technology infrastructure without handling the actual money.  

Statement 3 is incorrect: Payment aggregators are not permitted to store customer card credentials or CVV numbers on their internal databases. Only card issuers and card networks (in specific tokenized formats) can store sensitive customer data.

Statement 4 is correct: Non-bank payment aggregators must keep all collected customer funds in an escrow account managed with a scheduled commercial bank.