PayStory: Aggregator and Direct Model
Hola folks, see you again. So do you watch the Endgame? At this time it becomes a hype everywhere. Everybody talks about the Avengers. But you know, I think of the moment when Hulk wear the infinity gauntlet and instead of restoring everything back to normal before Thanos snap, why not add something like make the world a better place? Or the universe! So they don’t have to deal with another Thanos, Galactus, The Beyonder, The Celestials and other supervillains. Well, Professor Hulk, you are not so smart at all.
Back to the business, let’s talk about payment. We will talk about the merchant model which is commonly used in Indonesia. So if you want to use payment services using a payment gateway, usually the payment gateway offers you 2 type of merchant model that is Aggregator or Direct model. So what is this Aggregator and Direct Model, and what is the best model for you?
Aggregator Model is a model where the money from transactions will go to the payment gateway’s bank account first then the payment gateway will do the settlement to merchant’s bank account.
In this model, there are 2 types of Aggregator: Payment Gateway Aggregator and Bank Aggregator.
In Payment Gateway Aggregator, the account ID that registered in Bank or Payment Partner will be the payment gateway ID. In Bank Aggregator, the account ID that registered is on behalf of the merchant but the bank account is using Payment Gateway’s bank account. Not all Banks or Payment Partner support this kind of model, so you will need to check with your Payment Gateway which payment channel can support this model.
The merchant only needs to have a business agreement with payment gateway only, no need to contact the Bank or Payment Partner. They will see the Payment Gateway that doing the transactions. Payment Gateway will do all the KYC to the merchant. Once the merchant is approved then they can access to all aggregator channel the Payment Gateway has. In Bank Aggregator there will be some document that needs to be submitted to Bank or Payment Partner, but that will be handled by Payment Gateway.
The merchant only needs to have a business agreement with payment gateway only, no need to contact the Bank or Payment Partner.
In term of transaction experience, most of the payment channel give the same experience as the Direct model. But in some channel, there will be a slightly different like in Menu Payment in ATM, the Billing Company name probably will display the Payment Gateway name. Or in the Convenience Store, the payment will be under Payment Gateway name. There is some chance that it can display the merchant name if the Bank or Payment Partner has the ability to identify merchant or by sending some parameter that can be set as the name.
If the customer has billing statement or mutation report, the name that printed for that transaction will follow the name that been set in the beginning, but most likely will be the payment gateway name, not the merchant name.
Because of the money will go to Payment Gateway’s bank account, Payment Gateway will do the reconciliation first then they will calculate any fees from the transactions. So there will be the total transactions money and the total net settlement money which already deducted by fees. The money will be disbursed to the merchant normally in T+3, some possibility can be in T+1 or T+5, depending on the money flow from Bank or Payment Partner.
The benefit of this Aggregator Model is you don’t need to have an agreement with each Bank or Payment Partner, that will cut a lot of time and effort. The process can be faster and once you get approved you will have access to any aggregator payment channel, so you can start selling immediately. You don’t need to worry about dispute transactions because the Payment Gateway already does the reconciliation. You will have a clean report because they also calculate the fees and list all transaction that matches the settlement money. This is good for a personal and small-medium enterprise that doesn’t have a company entity but need access to online payment or for anyone who wants to start the online payment right away.
The process can be faster and once you get approved you will have access to any aggregator payment channel, so you can start selling immediately.
Direct Model is a model where the money from transactions will go directly to the merchant’s bank account.
The merchant needs to have an agreement with the Bank or Payment Partner to become their merchant. This normally takes time for them to process it. Merchant will have space to negotiate the fees or other additional requests with them. All Bank and Payment Partner support this kind of model, but you need to contact each Bank or Payment Partner for their payment channel that you want to use. Some line of business needs to submit additional supporting documents in order to be verified by them.
The merchant will have their own account ID with a specific name that will be display in the Bank or Payment Partner system or in their payment statement. Most likely, if the merchant connects to Bank, they need to open a Giro or Saving account on the Bank. All the transactions money will go to Merchant’s Bank account directly, this will make the merchant can have the money faster, it even can happen on the same day or T+0.
The benefit of this Direct Model is you can get your own name state in The Bank or Payment Partner system and in their payment statement. You also can negotiate the fees with them. You will get your money faster and possibly can have a joint marketing campaign with them. Usually enterprise business will choose this model because of a business deal with the Bank or Payment Partner.
Usually enterprise business will choose this model because of a business deal with the Bank or Payment Partner.
So from this information, which one you think that suit you? Or what do you suggest to improve this model? Please leave your comment below.
This article also post on my Linkedin pulse: https://www.linkedin.com/pulse/paystory-aggregator-direct-model-sandi-fajariadi/
