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Merchants mix up gateway, aggregator, processor and acquiring bank, so they cannot tell who holds their money or why a credit carries a third party's name.
The gateway carries data, the processor and acquiring bank move money between banks, and the aggregator collects funds into an escrow account and settles them to the merchant.
Note the legal entity that settles to you, its escrow bank, your settlement cycle and the narration name that appears on your bank credit.
Each settlement credit is linked to the aggregator that paid it, and the merchant knows which party to ask about a missing or short credit.
A payment gateway carries the customer’s card, UPI or net-banking details securely from your checkout to the banks. A payment processor routes the transaction between the banks and card networks. A payment aggregator is the RBI-authorised business that collects customers’ money for many merchants, holds it in an escrow account and then pays you. In India a single provider is often all three, which is why the terms blur.
What does each party actually do?
| Role | What it does | Holds your money? | Name on your bank credit? |
|---|---|---|---|
| Payment gateway | Checkout page or link; encrypts and passes payment details | No | No |
| Payment processor | Routes the transaction between banks and card networks, returns approved or declined | No | No |
| Acquiring bank | Bank on the merchant side that receives card or UPI funds from the network | Briefly, before passing to the aggregator’s escrow | Rarely, unless you have a direct bank tie-up |
| Payment aggregator | Signs you up as a merchant, collects funds for many merchants, settles to you | Yes, in an escrow account at a bank | Yes, usually |
The RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways dated 17 March 2020 draw the line clearly. A gateway is treated as a technology provider that does not handle funds. An aggregator handles funds and must be authorised. Non-bank aggregators also had to meet a net-worth requirement of ₹15 crore at application and ₹25 crore by the end of the third financial year.
Why does my settlement credit carry the aggregator’s name and not my customer’s?
Because the customer never paid you directly. They paid the aggregator. The aggregator then pooled that payment with others and sent you one settlement. Your bank only sees the last step, so the narration shows something like “NEFT/RAZORPAY SOFTWARE” or “PAYU PAYMENTS” with a settlement UTR.
This matters for your books. You cannot match a customer’s ₹5,000 to a bank line on its own. You match the aggregator’s settlement report to the bank credit, then the report’s rows to your invoices.
What does “RBI-authorised payment aggregator” change for a small merchant?
Three practical things:
- Your money is ring-fenced. It sits in an escrow account with a scheduled commercial bank, not in the aggregator’s operating account.
- Settlement follows rules. RBI’s directions set outer limits on how long an aggregator may take to settle to merchants. Your agreement then sets your actual cycle, often T+1 or T+2.
- The aggregator must check you. Expect KYC on your business, bank account verification and sometimes a website check before you go live.
What it does not change: fees. Your fee is a commercial term in your agreement.
Worked example: one ₹5,000 sale followed end to end
Arjun pays ₹5,000 by card on your website on Monday. Your agreement charges an illustrative 2 percent fee plus 18 percent GST on the fee, settled T+1.
- Customer’s bank (the card issuer) approves and blocks ₹5,000 on Arjun’s card.
- Gateway and processor pass the approval back to your checkout in a few seconds. Your order shows “paid”.
- Card network and acquiring bank clear the transaction. The ₹5,000 reaches the aggregator’s escrow account.
- Aggregator calculates the fee: 2 percent of ₹5,000 is ₹100; GST of 18 percent on ₹100 is ₹18. Total deduction ₹118.
- Your bank shows a credit on Tuesday. If this was your only sale, the credit is ₹5,000 − ₹118 = ₹4,882, under the aggregator’s name.
On a normal day with 40 sales averaging ₹1,250, gross is ₹50,000 and the Tuesday credit is one number: ₹50,000 minus ₹1,000 of fees and ₹180 of GST, or ₹48,820.
Which one do I call when a credit is short or missing?
The aggregator, because it is the party that settles to you. The gateway or processor layer is usually inside the same company, and the acquiring bank rarely deals with small merchants directly.
What to read next
- Next in this series: what is a nodal (escrow) account and who holds your money before settlement?
- How the escrow account’s movements are checked: nodal and escrow account reconciliation
- Terms you will meet in settlement reports: platform settlement glossary
- When this becomes daily work: payment gateway reconciliation
Payment-gateway settlement reconciliation is on the TransactIG roadmap.