In a significant move, the Reserve Bank of India has granted PhonePe, a fintech company offering online payment services, approval to operate as an online payment aggregator. This decision, coming just before Diwali, is expected to strengthen PhonePe’s position in the digital payment sector.
The authorization will allow PhonePe to provide payment collection and settlement services to merchants, including shopkeepers and business owners. Previously, the company was limited to online payment services only.
The online payment aggregator approval, granted last Friday, will enable PhonePe to expand its merchant network, focusing on small and medium-sized businesses (SMEs). According to Yuvraj Singh Shekhawat, Chief Business Officer (CBO) of PhonePe’s merchant business, the aggregator status will allow PhonePe to offer enhanced services to businesses, especially SMEs, that previously may not have had access to optimal payment solutions.
This decision will further enhance PhonePe’s payment gateway capabilities, facilitating quick merchant onboarding, easier integration for developers, and improved payment success rates. Founded in 2016, PhonePe has grown to become one of India’s leading fintech companies, boasting over 650 million registered users, a network of 45 million merchants, and processing over 360 million daily transactions. Its diverse portfolio encompasses payments, lending, insurance distribution, wealth products, hyperlocal e-commerce (PinCode), and the Indus Appstore.
**Understanding Online Payment Aggregators**
Online payment aggregators simplify online transactions for businesses (merchants) by enabling them to accept payments from their customers.
1. **Merchant Onboarding:** Businesses, such as online stores, register with a payment aggregator, which verifies KYC and business details.
2. **Payment Gateway Integration:** The aggregator integrates a payment gateway into the merchant’s website or application, functioning as a digital payment terminal.
3. **Multiple Payment Methods:** The aggregator supports various payment options like credit/debit cards, UPI, net banking, and wallets like PhonePe and Google Pay, allowing customers to choose their preferred method.
4. **Payment Processing:** Upon payment, the aggregator processes the transaction, coordinating with banks, card networks, and financial institutions. Successful transactions are confirmed to the user, and failed transactions include a reason for rejection.