Definition
Escrow Account (Payments)
A payments escrow account is a regulated holding account where a payment aggregator keeps customer funds separately before settling them to merchants, protecting the money in transit.
Under RBI's payment aggregator framework, a PA must collect customer payments into a dedicated escrow account maintained with a scheduled commercial bank, keeping those funds segregated from its own money until they are settled to merchants.
This safeguards customer and merchant money: the aggregator cannot use these funds for its own purposes, and settlement to merchants must follow prescribed timelines. The arrangement reduces the risk of funds being lost if the aggregator faces trouble.
The escrow requirement is a core consumer- and merchant-protection feature distinguishing regulated aggregators from mere technical gateways that never touch funds.
Related terms
- Payment Aggregator (PA)A payment aggregator is an RBI-authorised entity that lets merchants accept various digital payments without each building their own bank integration, pooling and settling funds to them.
- Payment Gateway (PG)A payment gateway is the technology layer that securely transmits a customer's payment details from a merchant's checkout to the banks and networks that authorise the transaction.
- Prepaid Payment Instrument (PPI)A Prepaid Payment Instrument is an RBI-regulated wallet, card or voucher that is pre-loaded with money and used for payments up to the stored value.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.