Comparing Payment Aggregators vs. Payment Gateways

Businesses today rely on digital payment solutions to process transactions efficiently and securely. However, choosing between payment aggregators and payment gateways can be challenging, especially for businesses new to online payments. While both solutions facilitate electronic transactions, they operate differently, impacting transaction speed, security, costs, and overall user experience. If you’re looking to know more about which option suits your business best, this guide breaks down their differences, advantages, and key considerations.

Understanding Payment Aggregators and Payment Gateways

Before comparing the two, it’s essential to understand what they are and how they work.

What is a Payment Gateway?

A payment gateway is a technology that securely transmits transaction data from a customer to a merchant’s bank (acquiring bank) and the card networks. It authorizes transactions and ensures funds are transferred correctly.

How a Payment Gateway Works:

1. The customer initiates a payment on the merchant’s website or app.
2. The payment gateway encrypts and transmits the payment data.
3. The acquiring bank processes the payment request.
4. The transaction is verified by the issuing bank.
5. The funds are transferred to the merchant’s account if the transaction is approved.

Payment gateways are typically used by businesses that have their own merchant accounts and require a dedicated payment processing system.

What is a Payment Aggregator?

A payment aggregator, also known as a merchant aggregator, allows multiple businesses to accept payments without the need for individual merchant accounts. Instead of setting up a separate merchant account, businesses share a single account managed by the aggregator. This simplifies the onboarding process and reduces the complexities associated with payment processing.

How a Payment Aggregator Works:

1. The merchant signs up with a payment aggregator.
2. Customers make payments through the aggregator’s platform.
3. The aggregator processes and temporarily holds the payments.
4. The funds are then transferred to the merchant after a predefined settlement period.

Payment aggregators are ideal for small businesses, freelancers, and startups that need quick and easy access to payment processing services.

Key Differences Between Payment Aggregators and Payment Gateways

While both solutions help businesses process digital transactions, they differ in several aspects.

Account Setup & Approval Process

• Payment gateways require businesses to open a merchant account, which involves underwriting, background checks, and compliance verification. This process can take several days or weeks.
• Payment aggregators provide a shared merchant account, allowing businesses to start accepting payments almost immediately after signup.

Payment aggregators offer faster onboarding, while payment gateways provide more control and a direct relationship with banks.

Transaction Processing & Settlement Time

• Payment gateways transfer funds directly to the merchant’s bank account, typically within a few business days.
• Payment aggregators batch transactions and settle funds at predetermined intervals, which may take longer.

Payment gateways provide faster access to funds, while aggregators focus on convenience.

Risk & Fraud Management

• Payment gateways require businesses to handle their own fraud prevention and compliance measures.
• Payment aggregators manage fraud detection and compliance, reducing the burden on individual merchants.

Gateways offer more control over security, while aggregators simplify fraud management for businesses without dedicated security teams.

Customization & Branding

• Payment gateways allow businesses to customize the checkout experience, ensuring a seamless and branded payment process.
• Payment aggregators often redirect customers to the aggregator’s payment page, limiting customization options.

Businesses looking for a fully branded and integrated payment solution may prefer gateways, while those seeking a quick and simple setup may opt for aggregators.

Pros and Cons of Payment Gateways and Payment Aggregators

Payment Gateway: Advantages and Disadvantages

Advantages:

• Faster settlement times
• More control over security and compliance
• Fully customizable checkout experience
• Direct relationship with banks

Disadvantages:

• Requires a dedicated merchant account
• Longer approval process and underwriting
• Businesses must manage their own fraud prevention

Payment Aggregator: Advantages and Disadvantages

Advantages:

• Quick and easy setup
• No need for a separate merchant account
• Built-in fraud detection and compliance management
• Ideal for small businesses and startups

Disadvantages:

• Longer settlement periods
• Limited branding and customization options
• Higher per-transaction fees compared to some traditional merchant accounts

Which One is Right for Your Business?

A Payment Gateway is Best If:

• You process high transaction volumes and need lower fees.
• You require a customized and branded checkout experience.
• You want direct control over security and fraud prevention.
• You need faster fund settlements to your bank account.

A Payment Aggregator is Best If:

• You are a small business, freelancer, or startup needing quick setup.
• You do not want to manage PCI compliance or fraud detection.
• You are comfortable with longer settlement periods in exchange for convenience.
• You want to avoid monthly fees and long-term contracts.

Top Payment Gateways and Aggregators

The Future of Payment Aggregators and Payment Gateways

As digital payments evolve, both aggregators and gateways are integrating new technologies to enhance security and efficiency. Some key trends include:

AI-Powered Fraud Prevention

Both solutions are leveraging artificial intelligence to detect fraudulent transactions in real time. AI-driven fraud detection helps identify suspicious activity and prevent unauthorized transactions.

Cryptocurrency Payments

More payment providers are adding support for Bitcoin, Ethereum, and stablecoins. This gives businesses an alternative way to accept digital payments securely and efficiently.

Biometric Authentication

Payment security is being enhanced with fingerprint, facial recognition, and voice authentication technologies. This reduces reliance on passwords and enhances security.

Embedded Payments

Businesses are integrating payment processing directly into their platforms, reducing friction and improving the customer experience. Embedded payments allow seamless transactions without redirecting users to external pages.

Conclusion

Both payment gateways and payment aggregators serve critical roles in online payments, but they cater to different business needs. Payment gateways provide more control, faster settlements, and lower costs for high-volume businesses. Payment aggregators offer convenience, ease of use, and built-in fraud protection, making them ideal for small businesses and startups.

The best choice depends on your business model, transaction volume, and the level of control you need over payment processing. By carefully evaluating your options, you can select the most efficient and cost-effective solution for your business.