Payment Gateways II: Credit Card Payment Aggregation

The purpose of this article is to familiarize the key merchant services industry players (particularly, large-size merchants, wholesale resellers and PSPs) with payment aggregation as an advanced feature to be considered during payment gateway selection. If this is the first time you are reading “Payment Gateways II” series, please, start with the Introduction as it will improve your understanding of the current post.

Payment aggregation concept

Payment aggregation as a concept exists in two aspects covered below.

Straight aggregation

Historically payment aggregation was used to give payment processing capabilities to those businesses, which wouldn’t be able to go through merchant services underwriting otherwise. A central company (PSP) would get underwritten, have its own agreement with a processor and use the same MID to process (aggregate) payments of its smaller customers that wouldn’t go through individual underwriting and have their individual merchant accounts. The PSP would process all their payments and aggregate them through the central account, remit respective funds withdrawing its own fees.
Over time the credit card companies insisted on discontinuing this practice for the most part, as it was used for covering various illegal operations, such as drug sales, money laundering etc. As a consequence, the concept of a sub-merchant was introduced.

Sub-merchant funding

Under this concept each merchant goes through some form of underwriting, but the entire financial liability and risk is on the PSP and its entire portfolio. Instead of using one single MID for all merchants, each merchant is assigned its own MID, but this MID is linked to the portfolio of the PSP. Usually the PSP portfolio has much better processing rates than any member of the portfolio could have gotten on its own. PSP takes care of funding of merchant fees and statements.

Let us look at particular functions and important features of payment aggregation model to be considered during payment selection.

Important aspects of payment aggregation model

Support for aggregation and remittance is an important enterprise feature, primarily targeted at PSPs. To facilitate efficient, transparent and flexible functioning of the payment aggregation model, resellers need to be able to perform a wide range of tasks. Particularly, a reseller, using payment aggregation model, needs to be able to do the following:

  • allow it to easily set up a merchant
  • process transactions on behalf of its multiple customers\sub-merchants
  • manage their accounts
  • use merchant-specific pricing
  • remit processing revenue back to merchants
  • withdraw merchant fees (transparently for the merchant)
  • generate statements (at the end of the month or on per-deposit basis)
  • share residual revenue with channel partners

To simplify each of these tasks, resellers need special tools. But not all processors/payment gateways are able to provide all the necessary tools to resellers. For instance, some are only able to back out their own fees, and some can not accommodate per merchant pricing.

In addition to the issues mentioned, several other considerations should be made. To learn about respective issues that PSPs should bear mind, please, consult the resources covering PCI compliance and credit card chargebacks on our web-site.

To illustrate the importance of payment aggregation support, let us consider a practical example.


A PSP is offered a deal with a processor, allowing transaction processing at very good rates. At the same time the deal envisions full responsibility for underwriting, merchant statements, merchant fees etc, so the PSP needs the technology to execute remittances, generate merchant statements and take out the fees. Consequently, cooperation with a payment gateway supporting respective functionality allows the PSP to accept the offered contract with the payment processor without any additional efforts targeted at support of the aforementioned functions.


If a PSP is using a cost plus pricing model, with a variable pricing for each merchant, and, potentially, variable commission structure, it definitely needs a software platform capable of accommodating these features.