Friday, December 13th, 2019
A payment aggregator, or merchant aggregator, is a service provider that allows online retailers to process transactions for the sales they make.
Aggregators enable a retailer to take credit card & debit card payments (aka plastic payments) and transfers to the bank without the need to create a merchant account with a banking institution or card union.
These six points describe in detail what a payment aggregator does;
- A payment aggregator uses a single merchant account to collect payments from a group of retailers and then distributes to the various business bank accounts, which eliminates the need to create your own merchant account.
- The aggregator simplifies the taking of payment from shoppers or clients through plastic payments or transfers to bank accounts.
- The retailer receives their payments from the aggregator in 1 to 3 business days.
- In essence, the payment collector stores the shopper’s card details to enable quick and hassle-free purchases or keeps finances in an account to enable forthcoming purchases.
- Aggregating companies like PayPal, Amazon Payments and Google Checkout, have different payment collection strategies, fees, and offerings to retailers.
- Retailers are advised to look into the costs and pros of each vendor to find an affordable and efficient way to collect customer payments.
A payment aggregator worries about processing transactions on your behalf so that you can concentrate on other business affairs.
The Pros of Using a Payment Aggregator
So what are some advantages of partnering with a payment collector?
- Easy application: a hassle-free application process where you only have to present a few credentials and get started on taking payments
- Effective and economical for small-value transactions: improves card and mobile wallet payment processing without charges like set-up fees or fixed costs. Instead, it charges a variable merchant fee for every transaction that goes through.
- Instantaneous approval: start processing transactions in 3 to 7 business days.
- Immediate access: start collecting payments soon after signup.
The Downsides of Using a Payment Aggregator
Are there any downsides to using a payment collector?
- Frequent freezing of accounts: because payment collectors face a high risk of later reverse charges, they take stringent measures (like temporary suspension) when they suspect weird activity by the retailer or card owner.
- Sky-high fees: because collectors take most of the risk, they charge a higher fee to compensate their efforts and protect their bottom line.
- Low processing caps: Collectors base their charges on gross processing volume. That is to say, you get a low processing cap than when using your own merchant account.
- Payments may delay: Payment Aggregators decide when to disburse the funds. Most times funds take 1-2 business days, but they could last longer.
Before partnering with a service, make sure you understand all terms and conditions, plus fee structures. Security is also a concern because you want to collect payments through a secure aggregator to protect customer data.
An aggregator is an excellent approach for startups looking to begin taking payments without a hassle. It can also hold the fort for an established business.
Merchants are advised to conduct detailed researches before they partner with any service provider to avoid unfair terms and exorbitant fees.