3. How aggregator collect charges?

We know that aggregator has some charges but how it will collect those charges and from whom.

There are three commercial models in practice.

Let’s assume: PG Charge = 1%, GST = 18% (Financial Services), Transaction Amount = 100

1. Upfront Deduction

Aggregator deducts the charges and GST amount before settling transaction amount to merchant.

Customer Pays = 100, aggregator deducts = 1.18 and merchant gets = 98.82

2. Surcharge

Let us say merchant doesn’t want to bear the charges then who will?

The user, aggregator’s charges + GST amount is passed on to the user

Customer pays = 101.18, aggregator keeps = 1.18 and merchant gets = 100

3. Invoicing

Sometimes either merchant or merchant’s business model doesn’t allow to either deduct money upfront or surcharge to user. In such cases, the aggregator will raise invoice to merchant on monthly basis.

Customer Pays: 100, Merchant Gets = 100 and Aggregator will invoice amount = 1.18

Example for invoicing: Mutual Fund Merchant cannot deduct charge upfront (entire amount should go towards NAV), merchant avoids surcharge (users may not bear charges) so merchant will go for invoicing model

Aggregators avoid invoicing model for obvious reasons: (a) It is always pain collecting money (b) there is opportunity cost (aggregator loses interest)

GST Related: Merchant is eligible for TDS deduction. So merchant raise credit note towards 10% of TDS deduction and aggregator pays the same to merchant