What are Payment Gateways?
These are entities that offer technology infrastructure to facilitate online payment transactions without any physical handling of funds. They are online equivalents of card terminals used in brick-and-mortar establishments that offer financial services. In India, only banks take up the responsibility to act as gateways.
Difference Between Payment Aggregator and Payment Gateway
Role
- Payment Gateway: Acts as a transaction intermediary between merchants and customers.
Payment Aggregator: Interface for a transaction that takes place online or offline.
Touchpoints Digitised
Payment Gateway: Online touch points including Website/ App. At the back end it works with the bank for issuing the merchant accounts.
Payment Aggregator: Online and/ or offline touch-points as they have the capability of going through the underwriting process of the acquiring bank.
Payment Options
Payment Gateway: Restricted options.
Payment Aggregator: Multiple options such as UPI, net banking, e-wallets, debit and credit cards, QR codes etc.
Payment Success Rate (PSR)
Payment Gateway: As much as the payment gateway can manage
Payment Aggregator: Significantly higher payment success rate
Ownership
Payment Gateway: Owned by public and private banks, merchants, vendors, and payment aggregators
Payment Aggregator: Owned by Fintech players
Permissions
Payment Gateway: RBI authorisation under the Payment and Settlement Systems Act.
- Payment Aggregator: Certification as per the Payment Card Industry Data Security Standard (PCI-DSS)
Please note: A Payment Aggregator covers a Payment Gateway within its ambit.
Pros and Cons of Payment Gateways
Pros
- Secure transactions.
- Ease of use and reduced transaction time.
- Rapid deployment of services.
- Offers a lot of customizable features such as payment option choices, card features, security features, etc.
Cons
- Customer information may not be secure.
- Technical glitches can take considerable troubleshooting time.
- Trust levels are low by virtue of poor cyber security and low awareness.
Different Means of Integrating Payment Gateways Into One’s Business Model
- Hosted Payment Gateway Integration – where the Payment Gateway redirects the customer to a secure payment page that is hosted by the payment service provider. It acts as a third party and allows the customer to revert back to the merchant’s page to check out after payment.
- Self-hosted Payment Gateway Integration – where the Payment Gateway needs to control the whole checkout experience along with the payment. It will also be vested with the responsibility of security measures and non-interrupted service.
- API or non-hosted payment gateway integration – where the customers are to enter their payment details directly on the checkout page and the merchant processes online payments using APIs.
