When it comes to processing online payments, merchants can choose between different payment models, including the aggregation model and the gateway model. Both models have their own benefits and drawbacks, and choosing the right one depends on several factors, such as the merchant's business needs, the payment methods they want to offer, and the payment providers available in their target market.
In this article, we'll explore the key differences between the aggregation and gateway payment models, and which model may be the best fit for your business.
Aggregation Payment Model:
In an aggregation payment model, the merchant signs a contract with an aggregator who has agreements with multiple payment providers. The aggregator aggregates the funds from the providers and transfers them to the merchant in a single payout, typically on a daily or weekly basis.
In an Aggregation Payment Model:
- Easier and quicker setup process: Since the merchant only needs to sign one contract with the aggregator, the setup process is usually faster and simpler than the gateway model.
- Reduced administrative workload: The aggregator handles the settlement and reconciliation processes, reducing the administrative workload for the merchant.
- Access to multiple payment providers: The merchant can offer a wider range of payment methods without having to sign separate contracts with each provider.
Gateway Payment Model:
In a gateway payment model, the merchant signs contracts directly with each payment provider they want to use. The payment providers settle the funds directly with the merchant, and the merchant is responsible for the settlement and reconciliation processes.
In a Gateway Payment Model:
- More control over the payment process: The merchant has more control over the payment process, as they manage the relationships with the payment providers.
- Longer and more complex setup process: The merchant needs to sign separate contracts with each payment provider, which can take longer and require more paperwork.
- Higher administrative workload: The merchant is responsible for managing the settlement and reconciliation processes, which can be time-consuming and require dedicated resources.
Which Payment Model is Best for Me?
The choice between the aggregation and gateway payment models depends on several factors, such as your business size, budget, target market, and payment method preferences. As a general rule, the aggregation model is best for merchants who want to offer multiple payment methods with a simple setup and minimal administrative workload. The gateway model is best for merchants who have their own payment department, want more control over the payment process, and have the resources to manage the settlement and reconciliation processes.
In summary, both the aggregation and gateway payment models have their own advantages and disadvantages, and choosing the right one requires careful consideration of your business needs and goals. By understanding the differences between the two models, you can make an informed decision and select the payment model that best fits your business.