Introduction

In the digital economy of today, payment aggregators have become one of the prime facilitators of commerce, making it easier for businesses to receive, process, and manage payments. Whether it's online marketplaces and SaaS platforms, gig economy startups, or retail point-of-sale providers, these facilitators conduct millions of transactions daily. But as transaction volumes expand and regulatory oversight tightens, the dangers increase—fraud, data breaches, disputes, and payment failures among them.

This is where escrow services enter the picture, providing a strong but frequently underappreciated solution that adds a layer of security, trust, and compliance to the very center of payment aggregation. Historically, escrow accounts were largely linked to real estate, mergers and acquisitions, and cross-border deals of a large size. But in 2025 and forward, their function has grown much broader—particularly in the field of fintech.

This blog delves into how escrow services are revolutionizing payment aggregation, why they are becoming a necessity, and how pioneers like Castler are leading the way with new solutions specifically designed for this fast-changing environment.

Learning about the Role of Payment Aggregators

Payment aggregators (merchant aggregators) are financial intermediaries that allow merchants to accept digital payments without establishing a separate merchant account with every payment processor. Instead, the aggregator receives payments from customers on behalf of a number of different merchants, processes them, and redistributes the funds to the various parties.

However, the model also creates issues:

• Funds can be held temporarily before settlement to the merchant.

• Disputes can be triggered in case a customer asks for refund or chargeback.

• Regulators need unambiguous audit trails and risk management structures.

This is where escrow accounts introduce operational clarity, impartiality, and trust.

What is an Escrow Account in the Context of Payment Aggregation?

An escrow account is a third-party account where money is held temporarily until certain contractual conditions are fulfilled. In payment aggregation, escrow ensures that end customer funds collected are safely held prior to release to merchants or service providers.

This is especially critical when:

• There is a necessity to safeguard buyers in a marketplace.

• The aggregator is handling large volumes of transactions and settlements.

• The model involves deferred payments or milestones (e.g., gig economy, rentals, subscriptions).

Through the escrow service, payment aggregators guarantee that neither party—neither the merchant nor the platform—has access to the funds before the time. It provides a secure middle ground that minimizes financial risk for everyone.

Why Escrow is Becoming a Regulatory Necessity

The Reserve Bank of India (RBI), the regulator of payment systems in India, has increasingly been concerned with consumer protection and operational risk in the fintech space. In a number of circulars, the RBI has required payment intermediaries, such as aggregators and gateways, to keep customer funds in nodal or escrow accounts under certain guidelines.

For example:

• Funds should be settled to the end merchant within T+1 or T+2 working days.

• The escrow account should be operated in conjunction with a partner bank.

• There should be clear reconciliation and KYC procedures.

These compliance measures are not best practices—they are enforceable regulations. Non-compliance can lead to fines, license withdrawal, or reputational harm.

Against this regulatory landscape, escrow services are no longer a nicety; they are a prerequisite to conducting business as a compliant payment aggregator.

Refer to the RBI’s Guidelines on Regulation of Payment Aggregators and Payment Gateways for more details.

Trust as a Competitive Advantage

Today’s merchants are increasingly savvy. They want assurance that their payouts will be handled promptly and fairly. At the same time, end customers demand refund policies and resolution mechanisms that are seamless and secure.

An escrow-backed payment system provides a competitive edge by:

• Enhancing platform credibility and transparency.

• Reducing chargeback and dispute rates.

• Maintaining consistent fund flow in multi-party ecosystems (such as marketplaces).

It also becomes simpler for platforms to scale globally by proving to investors and partners that their financial processes are strong and auditable.

Escrow vs. Nodal Traditional Accounts

Whereas both escrow and nodal accounts are employed to deal with third-party funds, escrow accounts come with multiple benefits:

• Neutral Governance: Escrow has a third-party trustee or platform (such as Castler) that manages the fund flows, limiting the access risk of unilateral.

• Adaptive Conditions: Escrow facilitates conditional releases on delivery, verification, or agreement milestones.

• Multi-Party Settlements: Funds can be divided and paid out to various stakeholders (vendors, sellers, logistics) according to pre-agreed rules.

• Audit-Readiness: Escrow platforms offer sophisticated reporting, compliance reports, and fraud screening beyond the potential of conventional nodal accounts.

Real-World Use Cases

Let's look at how payment aggregators are applying escrow in real life:

1. Marketplace Settlements

Online marketplaces with thousands of sellers can utilize escrow to hold customer payments and release it only after verified sellers are paid after product delivery or returns.

2. Subscription and SaaS Platforms

Software vendors can keep money in escrow until a user has finished a trial period or hit a usage limit. This reduces refund risk and guarantees SLA compliance.

3. Gig Economy and On-Demand Services

Platforms such as ride-sharing apps or freelance marketplaces can pay service providers from escrow only after task completion or customer approval.

4. Lending Aggregators and BNPL Models

In co-lending or "Buy Now, Pay Later" transactions, escrow facilitates lawful fund disbursal among lenders, merchants, and borrowers in an auditable and compliant way.

Castler: The Payment Aggregator's Escrow Partner

Leading the charge in this revolution is Castler—India's most reputed escrow account management platform and the trusted escrow partner for fintechs, startups, and enterprises alike.

Castler consolidates regulated banking partners, SEBI-approved trustees, and API-first infrastructure to provide end-to-end digital escrow solutions for payment aggregators.

This is how Castler delivers value:

Integrated Digital Workflows

From approval of use cases and KYC to signing of agreements and account configuration, Castler automates the complete escrow process. Castler seamlessly integrates with top-tier banks and ERP systems, eliminating manual overhead.

Multi-Bank and Multi-Trustee Capabilities

Castler is coupled with 12+ banks and 6 SEBI-approved trustees for flexibility and scalability. Aggregators can configure fund flows and automate settlements across various banking partners.

Real-Time Monitoring and Control

The platform offers a single dashboard for monitoring credits, debits, refunds, and escrow status in real time. Smart alerts and audit logs provide complete visibility.

Compliance-First Architecture

RBI-compliant and ISO-standards-built, Castler features role-based access, digital document vaults, and detailed reporting—ensuring smooth passing of audits and due diligence.

Speed to Market

Through pre-configured use cases and rapid onboarding, Castler allows aggregators to establish compliant escrow accounts within days instead of weeks.

Conclusion

In the age of hyper-growth, stricter regulation, and online-first business models, payment aggregators have to do more than merely process transactions—they have to instill trust. Escrow accounts, originally a niche offering, have today become a strategic enabler for establishing that trust.

They lock up funds safely, release them evenly, and report them honestly. But what is even more critical is that they act as a strategic enabler that empowers platforms to grow confidently, meeting both regulator and customer needs.

For any payment aggregator seeking to bolster its financial processes and gain customer trust, embracing an escrow-first strategy is not only intelligent—it's imperative. And with platforms such as Castler at the forefront, it's never been simpler or more streamlined to do so.

Secure your transactions. Build trust. Choose Castler.