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Understanding Payment Gateway vs Payment Aggregator

Recognizing the difference between a payment gateway and a payment aggregator is highly crucial for merchants who are looking for a reliable payment option. Truth be told, both these terms are completely different, and assuming them as one is like comparing apples to oranges. This blog explores the key differences between payment gateways and payment aggregators, and how and why your business can reap the benefits of a reliable white-label payment gateway solution to grow over time.

Let us explore insights about payment gateways and payment aggregators, and what are the key points of differences between them.

  • Payment Aggregator (An Interface): Payment Aggregators, also known as merchant aggregators, refer to payment solution providers offering different payment options via a single account for businesses. In other words, it refers to a stack of payment gateway providers.
  • Payment Gateway (An Intermediary): A payment gateway can be best described as an intermediary (or bridge) between a business and its customers involving financial institutions, such as a bank, for fund transfers. The customer gets redirected to the payment gateway page during the checkout process. Then, the customer submits the payment details (debit/credit cards, e-wallets, internet banking, UPI, etc.) to execute a successful transaction and place the order.

Payment Gateway vs Payment Aggregator

A payment gateway is entrusted with the task of transferring customer payment data from an app or a website to the payment processor. On the other hand, a payment aggregator is entrusted with the task of simplifying the otherwise complicated payment process by facilitating the consolidation of multiple merchant accounts into a single account to make it simpler and easier for businesses to accept payments without getting overwhelmed by individual setups. In short, the payment aggregator handles funds while the payment gateway provides technology.

A payment gateway is a software that processes transactions while a payment aggregator is a platform aggregating different payment modes and playing a crucial role in the movement of funds.

In the case of a payment gateway, merchants have to integrate with acquiring banks who in turn will offer the payment gateway for processing transactions. In the case of a payment aggregator, merchants can seamlessly integrate with payment aggregators who in turn work with different wallets, acquiring banks, etc.

The success rate of a payment gateway depends on its technical capabilities. If the acquiring bank of a payment gateway is solely dependent on a single payment gateway, the risk is higher especially if the payment gateway is not performing at optimal level. On the other hand, payment aggregators tend to work with different acquiring banks that in turn work with different payment gateways. With routing logic, payment aggregators are better positioned to deliver a better success rate than payment gateways if the payment gateways of acquiring banks have issues.

Payment gateways can process only a certain type of mode (e.g., cards) while payment aggregators can process different types of payment modes depending on the integration with wallets, banks, etc.

Payment aggregators can offer a payment gateway, but a payment gateway cannot offer a payment aggregator.

A payment gateway is only for card-not-present transactions that take place in-app, online, or over the phone. On the other hand, payment aggregators are financial organizations that provide payment solutions to merchants who accept payments in person, over the phone, or online.

Merchants must integrate with a merchant aggregator if they want to integrate with a payment gateway. A payment aggregator can allow merchants to integrate with multiple payment gateways.

Payment aggregators provide high scalability, lower costs, and simplified onboarding while payment gateways provide efficient control over the payment process through enhanced security and customization options.

The ownership of payment gateways usually lies with merchants, vendors, public/private banks, and payment aggregators while the ownership of payment aggregators usually lies with FinTech players.

Coming to the similarities

Payment gateways usually charge a transaction fee per transaction, it can be a percentage-based transaction fee or a fixed transaction fee, based on the merchant use case. On the other hand, payment aggregators may charge a fixed or percentage-based fee per transaction.

Both payment gateways and aggregators focus on prioritizing the security of customer data and implementing robust encryption and fraud prevention measures.

Both payment gateways and payment aggregators offer built-in, robust security and fraud prevention measures. Also, both support subscription-based and recurring billing services. Furthermore, both payment gateways and payment aggregators can support international transactions, and cross-border payments, including currency conversion and compliance with international regulations.

When choosing the right payment solution for your customers between payment gateways and payment aggregators, you should carefully assess the specific requirements of your business. Thereafter, you need to evaluate the pros and cons of payment aggregators and payment gateways to make an informed decision.

Benefits of a Payment Aggregator

Payment aggregators enter into partnerships with net-banking banks, wallets, acquiring banks, BNPLs, etc. to consolidate multiple payment modes so businesses can offer multiple payment options to their customers and accept their payments across multiple payment channels. 

Generally, payment aggregators offer a smoother onboarding process because of the automation of the process. This allows merchants to go live in a seamless and faster manner. They also provide better scalability when it comes to load management as they can easily and quickly switch between payment gateways of multiple banks if the payment gateway of one bank goes down because of high load or technical glitches. 

Furthermore, payment aggregators provide intuitive, out-of-the-box, and user-friendly interfaces that make it easier for businesses to monitor and manage their payment transactions. Also, merchants receive consolidated analytics and reporting tools from payment aggregators so they can easily gain invaluable insights into the sales performance over time. Lastly, payment aggregators allow businesses to offload much of their administrative and technical burdens of payment processing. This is simply because payment aggregators take complete care of ongoing system updates, security measures, PCI DSS compliance, and more so businesses can focus on the core activities of their business.

Want to start your own payment gateway business or need help with a white-label payment gateway solution? Contact us now at ITIO Innovex.