The Reserve Bank of India (RBI) has granted PhonePe, a leading fintech company specializing in online payments, a significant advantage. The RBI has approved PhonePe to operate as an online payment aggregator. This decision is expected to significantly increase PhonePe’s footprint in the digital payment sector.
The approval, which arrived just before the Diwali festival, allows PhonePe to offer expanded services to merchants. This includes the ability to collect and settle payments for various businesses, including small shops and larger enterprises. Prior to this approval, PhonePe was limited to offering online payment solutions.
The online payment aggregator authorization, which was given last Friday, will enable PhonePe to broaden its merchant network, with a specific focus on small and medium-sized businesses (SMEs). Yuvraj Singh Shekhawat, the Chief Business Officer (CBO) of PhonePe’s merchant business, explained that this aggregator status allows PhonePe to provide improved services, especially to SMEs that may have been underserved in the past.
This strategic move will also allow PhonePe to enhance its payment gateway, enabling faster merchant onboarding, easier integration for developers, and improved payment success rates. PhonePe, founded in 2016, has grown to become one of India’s largest fintech companies, with over 650 million registered users, a network of 45 million merchants, and handling over 360 million daily transactions. PhonePe’s portfolio encompasses payments, lending, insurance distribution, wealth products, hyperlocal e-commerce (PinCode), and the Indus Appstore.
**Online Payment Aggregator Explained**
An online payment aggregator offers a crucial service, allowing businesses (merchants) to easily accept online payments.
1. **Merchant Onboarding:** A business (such as an online store) registers with a payment aggregator, providing necessary information and undergoing verification.
2. **Payment Gateway Integration:** The aggregator integrates a payment gateway into the merchant’s platform, providing a secure system for processing transactions.
3. **Multiple Payment Options:** The aggregator supports various payment methods, including credit/debit cards, UPI, net banking, and digital wallets such as PhonePe and Google Pay, allowing customers flexibility.
4. **Payment Processing:** When a customer makes a payment, the aggregator processes the transaction, coordinating with banks, card networks, and other financial institutions. Successful payments are confirmed, and rejected payments include an explanation.