Payment Aggregators in India: Meaning, How They Work & Examples

For most startups, the struggle doesn’t stop at building a great product or raising funds. Even something as simple as accepting payments can quickly turn into a nightmare with clunky payment setups, weeks of bank paperwork, and patchy UPI or card support, killing early conversions and cash flow.

Payment aggregators help you manage these issues by pooling UPI, cards, wallets, and more under one master account. In this article, we’ll look at what payment gateway aggregators are, how they work, their benefits, and challenges to help you pick the right option for your startup.

Payment gateway aggregators are fintech platforms that help you simplify online transactions by pooling payments under one ‘master merchant account’. You can think of them as the middlemen between your startup and multiple banks. They allow you to accept payments through cards, UPI, wallets, and net banking without any individual bank approval. 

This setup allows you to skip the lengthy merchant account process and is ideal if you’re a startup launching e-commerce or apps at a breakneck speed.

Payment aggregators process online payments by acting as intermediaries between you and the banks. They power your startup’s cash flow with a streamlined and reliable payment workflow that allows you to accept multiple payment methods seamlessly. The operations involved in this process are:

• Merchant onboarding: The first step is to sign up with the aggregator of your choice with accurate KYC documents. After a thorough evaluation, you’ll be assigned to their RBI-licensed nodal account. 
• Customer checkout: When the customer makes a purchase and selects a payment method like UPI, credit card, or debit card, the aggregator tokenizes data and runs fraud checks via ML patterns. Once cleared, it routes it to the issuer bank for approval.
• Transaction authorization: Once your receiving bank confirms the amount to be collected, the aggregator handles encryption and deducts the applicable Merchant Discount Rate (MDR) before pooling.
• Settlement and reporting: After a successful settlement, you can track everything from disputes to analytics on the real-time dashboard offered by payment aggregators like Xflow.

Payment aggregators handle the entire payment process from fund collection to settlement using their own master merchant account. On the other hand, payment gateways focus on securely transmitting payment data between the customer and the merchant’s bank accounts. Here’s a table to compare these two using their features:

RBI regulates payment aggregators in India under the Payment and Settlement Systems Act, 2007. It requires all non-bank entities like payment aggregators to secure authorization as PA-Online, PA-Physical or PA-Cross Border with a minimum net worth of ₹15 crores during the time of application (must rise to ₹25 crores by the end of the third financial year). Here are some things to keep in mind: 

• Escrow accounts are mandatory: All your funds go into isolated nodal accounts at scheduled banks. There’s no mixing with the aggregator’s money, and the settlement must be credited to your account within T+5 days. 
• Strict KYC and due diligence: Payment aggregators must perform strict and complete verification with PAN, official documents, and risk scoring.
• Data must stay in India: All transaction information must be stored locally according to 2018 rules, plus yearly CERT-In audits to fend off cyber threats.

Top payment aggregators like Xflow, Razorpay, and PayU power Indian startups with effortless UPI, card, and wallet payment collection under RBI guidelines. Here’s the top 6 payment aggregator list for 2026:

• Xflow: Xflow is perfect for collecting international payments and cross-border transfers. It ensures settlement in 24 hours at zero FX markup, making it suitable for startups that operate globally.
• Razorpay: It offers RBI-approved access to over 100 payment methods, instant settlements, and sub-merchant tools. This makes it an ideal choice for fast-growing SaaS and D2C businesses.
• PayU: PayU charges low fees and offers strong analytics and global support. E-commerce sites prefer it for high-volume transactions.
• Cashfree: It doesn’t charge integration fees and delivers same-day payouts. Its UPI strength suits marketplaces and fintech startups perfectly. 
• Stripe: It offers an API-first design for tech-savvy teams. It’s a good fit for Indian banks to ensure compliance and offers flexible subscription models. 
• PhonePe: This payment aggregator focuses on UPI with quick onboarding. SMBs can tap NPCI's network effortlessly through PhonePe. 

Payment aggregators help startups accept UPI, cards, and wallets without complex bank setups. Here are some core advantages:

• Quick onboarding: Payment aggregators offer online KYC to help you skip weeks of bank paperwork and go live in hours. They are perfect for launching e-commerce or apps quickly.
• Secure handling to protect your business: They perform tokenization, PCI-DSS encryption, and ML fraud detection to block risks and meet RBI standards without any extra effort on your end.
• Support and combine multiple payment methods: Payment aggregators can provide more than 100 payment options like UPI, EMIs, and BNPL in one API to counter card abandonment when online shopping.
• Offer instant settlements: You can get funds on the same day via NEFT, even on weekends, unlike bank delays that hurt small teams. 
• Analytics to track your growth: Payment aggregators come with real-time dashboards to show revenue, disputes, and trends to help you take data-driven business decisions. 
• Scalable for marketplaces: You can add sub-merchants for platforms like freelance sites, with split payments and separate logins.

Although payment aggregators help you speed up payments, they come with risks of settlement delays and regulatory scrutiny that can disrupt cash flow if not managed well. Here are some common challenges you should be aware of:

• Settlement delays: Sometimes high-traffic periods or bank holidays can push T+2 payouts to T+5, leaving small teams waiting for funds during peak sales.
• Fraud and chargebacks: For shared accounts, aggregator-wide issues like 0.5% plus chargeback ratios can trigger RBI flags, potentially freezing your payouts. 
• Co-mingling fund risks: If the aggregator faces financial trouble, pooled nodal accounts could delay access to your money. That’s why you must ensure that the payment aggregator you select is RBI-approved.
• Higher effective fees for long-term: The MDR-based pricing can add up over time, and premium features like instant payouts cost extra. 

Payment aggregators are suitable for startups and small businesses with an annual turnover of less than ₹5 crores. They let you skip the lengthy merchant account setup and start accepting payments in days.

D2C brands, SaaS platforms, and new marketplaces love the simple integration for cards, wallets, and more. And freelancers or teams testing e-commerce apps can save big on costs while real-time analytics help assist business decisions.

Payment aggregators in India are growing aggressively, nurtured by UPI's dominance and RBI's 2025 Master Directions, tightening compliance while pushing innovation. Aggregators are now embedding AI fraud detection, BNPL, and cross-border tools to capture global startups.

We can also expect T+1 settlements to become standard by 2027, and embedded finance to gain greater momentum with in-app instant loans. In this dynamic environment, only those nailing strict KYC and escrow rules will thrive.

Using payment aggregators over traditional payment collecting methods can be a smart move for startups in 2026. With a variety of options to choose from, you must pick the one that helps you scale. 

To handle your startup’s international payments effortlessly, sign up with Xflow today!