27 Apr 2024 Payment Aggregator
THIS ARTICLE COVERS ‘DAILY CURRENT AFFAIRS’ AND THE TOPIC DETAILS OF ”Payment Aggregator”. THIS TOPIC IS RELEVANT IN THE “Economy” SECTION OF THE UPSC CSE EXAM.
Why in the news?
Recently, The Reserve Bank of India (RBI) released draft guidelines to strengthen further regulations on payment aggregators, a move aimed at boosting the payment ecosystem. The draft also covers the physical point-of-sale activities of payment aggregators (PAs).
The RBI said that given the growth in digital transactions and the significant role that PAs play in this space, the current directions on PAs are proposed to be updated and cover, among other things, KYC and due diligence of merchants, operations in Escrow accounts, and intended to strengthen the payment ecosystem. The RBI has invited comments/feedback by May 31.
According to the draft, PAs shall ensure that marketplaces onboarded by them do not collect and settle funds for services not offered through their platform. The draft also said non-banks providing PA-P services should have a minimum net worth of ₹15 crore when submitting an application to the RBI for authorisation and a minimum net worth of ₹25 crore by March 31, 2028. The net worth of ₹ 25 crore shall always be maintained after that.
What is a Payment Aggregator?
A Payment Aggregator is a third-party service that offers merchants a single platform to accept various payment methods, such as credit cards and digital wallets. This simplifies the payment process and expands customer options. Payment aggregators handle the technical aspects of payment processing, including transaction routing, security, fraud detection, and settlement. They may also provide additional reporting, analytics, and customer support services.
Some popular payment aggregators include companies in India like Razorpay, Paytm and PayPal. These companies serve a wide range of businesses, from small online retailers to large multinational corporations, and play a crucial role in facilitating electronic commerce. The key functions of the Payment Aggregator are:
-
- Integration: Merchants integrate the payment aggregator’s services into their website, mobile app, or point-of-sale system. This integration typically involves incorporating payment gateway APIs or plugins the aggregator provides.
- Payment Processing: Payment aggregators facilitate accepting various payment methods, including credit cards, debit cards, digital wallets, bank transfers, and more. They handle the technical aspects of payment processing, such as authorizing transactions, securely transmitting payment data, and settling funds.
- Payment Collection: When customers make a purchase or transaction on the merchant’s platform, they proceed to the checkout or payment page. The payment aggregator securely collects the customer’s payment information, such as credit card details or digital wallet credentials.
- Transaction Routing: Once authorized, the payment aggregator routes the transaction to the respective payment networks or banks associated with the customer’s payment method. This may involve multiple intermediaries, especially for cross-border transactions or transactions involving different payment methods.
- Compliance: Aggregators ensure compliance with regulatory requirements and industry standards governing payment processing. This includes adhering to data protection laws, complying with PCI DSS (Payment Card Industry Data Security Standard) requirements, and following guidelines set by regulatory bodies such as the Reserve Bank of India (RBI) in the case of India.
- Customer Support: Payment aggregators typically offer customer support services to merchants and customers. This may include assistance with technical issues, payment disputes, refunds, and general inquiries related to payment processing.
- Settlement: After the transaction is successfully processed, the payment aggregator initiates the settlement process. They reconcile the transaction, deduct any applicable fees (such as transaction fees or processing fees), and transfer the remaining funds to the merchant’s designated bank account.
Download Yojna daily current affairs eng med 27th April 2024
Prelims Practice question:
Q. Which of the following institutions regulate the online transaction in India?
A. Security Exchange Board of India.
B. Department of Economic Affairs.
C. Reserve Bank of India.
D. State Bank of India.
ANSWER: C
MAINS Practice Question:
Q. “What is a Payment Aggregator, and how does it streamline online transactions for merchants and consumers?”
Q. “What are the key regulations governing payment aggregators in India, and how do they impact the operation and security of online transactions?”
I have the experience to guide and write the content for the UPSC, and PCS Aspirants in preparing for the Civil Service Exam. Currently Working as a content developer in Yojna IAS.
No Comments