A failed payment at checkout can quietly erode trust and drive customers away, making payment gateway charges an important consideration for Indian startups. While these fees typically sit between 1.5% and 3.5% per transaction, they support more than simple processing.
They help with secure payments and fraud prevention. Customers can choose from many payment methods. For new businesses, it’s important to think about whether these costs help build trust. They also need to consider if it reduces abandoned carts and keeps them competitive when customers expect easy checkout.
What Are Payment Gateway Charges Made Up Of?
Payment gateway charges include several parts that Indian startups will see on their dashboards and invoices:
- MDR (Merchant Discount Rate): This is the core fee, charged as a percentage per transaction, often ranging from 1.5% to 3% on Pine Labs platforms.
- TDR (Transaction Discount Rate): Generally used in the same way as MDR, this also covers the processing cost.
- Other Charges: Other costs can include interchange fees paid to card-issuing banks, platform fees that cover software, support, and maintenance, and settlement charges, which may appear as per-transaction fees or batch settlement costs.
Startups should also account for hidden costs such as fees for refunds, chargebacks, integration, and dispute resolution. Pine Labs invoices list MDR, per-transaction fees, annual maintenance costs, and setup fees. The dashboard provides a view of transaction volumes, the rates used, gateway fees, and settlement information.
Below is an example of how these charges might appear for a ₹1,000 transaction on a typical payment gateway dashboard:
| Charge Component | Typical Fee | Amount | Description |
| MDR/TDR | 1.5%–3% | ₹15–₹30 | Covers processing and core gateway services |
| Interchange Fee | 1.4%–2.6% (cards) | ₹14–₹26 | Paid to issuing banks; varies by card type |
| Platform Fee | Flat ₹2–₹5 per txn | ₹2–₹5 | Charged by the gateway provider for platform use |
| Settlement Charges | ~₹2 per txn | ₹2 | For batch processing or T+1 settlements |
| Refund/Chargeback Fee | ₹15–₹50 per incident | ₹15–₹50 | On refund or dispute cases |
| Integration/Setup Cost | One-time ₹5,000–₹50,000 | Amortized | Spread over time, often listed separately |
Why Indian Startups Still Opt for Gateways Despite the Charges
Despite the fees involved, payment gateways offer clear advantages that make them essential tools for Indian startups. Here’s why businesses use payment gateways:
- Instant Onboarding: They can set up quickly. KYC and integration steps are simple.
- UPI, Cards, Wallets Support: One platform handles UPI, cards, wallets, EMI, and BNPL. Customers have different ways to pay.
- Fewer Payment Problems: Secure systems reduce errors. This helps customers feel confident.
- Faster Settlements: Payments can settle in real-time or the next day. This helps with cash flow.
- Easier Management: APIs, plugins, and dashboards help with reconciliation, reports, and disputes.
Pine Labs’ Online Offerings
- Instant Onboarding and Simple Integration
- Unified UPI, Cards, Wallets, EMI, and BNPL Support
- Secure, PCI-Compliant Gateway with Fraud Protection
- Real-Time or Next-Day (T+1) Settlements
- APIs, Plugins, and Detailed Dashboards to Simplify Operations
Comparing Payment Gateways to Offline Collections
For many startups, relying on manual bank transfers brings a set of clear challenges:
- Delayed Confirmation and Reconciliation: Transfers can take hours or even days to appear while matching payments to orders manually is both slow and prone to mistakes. Automated systems help by aligning records in real time, cutting down on errors, and saving time.
- No Support for Recurring Billing: Manual payments simply don’t work for subscriptions or regular charges. There is no facility for scheduled debits, mandates, or automatic renewals.
- Limited Customer Experience: Without a payment gateway, customers miss out on conveniences like instant refunds, OTP-based authorizations, and seamless UPI flows. This added friction often leads to abandoned purchases.
Payment gateways address these issues by automating every step:
- Payments clear immediately via UPI, cards, and wallets.
- Reconciliation is automatic, so there’s less manual work behind the scenes.
- Recurring payments and subscriptions are handled by the system.
- Checkouts are quick and safe, with instant refunds and OTPs to build trust and bring customers back.
The differences between offline collections and using a payment gateway become even clearer when you look at them side by side:
| Feature | Offline Collections | Online via Gateway |
| Transaction Speed | Takes hours or days to reflect in the merchant’s bank or dashboard. | Confirmed in seconds via UPI, cards, or wallets. |
| Reconciliation | Manual matching of transactions with orders. | Automated reconciliation aligns settlements with records instantly |
| Recurring Billing | Not feasible; no auto-debit or scheduled mandates. | Natively supports subscriptions, recurring billing, and mandates. |
| Customer Experience | No instant refunds, OTP security, or seamless flows. | Offers instant refunds, OTP authentication, and UPI/on-page checkout ease |
| Operational Overhead | Heavy manual effort: data entry, reconciliation, and follow-ups. | APIs, plugins, and dashboards automate reporting and dispute handling. |
How to Minimise Payment Gateway Charges Without Losing Convenience
Indian startups can manage payment gateway costs effectively without giving up customer convenience. Here are some practical tips:
Negotiate MDR Based on Category, Volume, and Mix
Providers often have tiered pricing for higher transaction volumes or specific business categories. By discussing your monthly volumes and preferred payment methods, you can secure better MDR rates.
Choose UPI Over Cards for Lower Fees
UPI payments usually attract little or no MDR, especially for transactions under ₹2,000, while credit card fees can be as high as 1.5–3%. Prioritising UPI can lead to significant savings.
Avoid Instant Settlements Unless Necessary
Instant (T+0) settlements often come with added fees. Unless cash flow needs are urgent, opting for standard T+1 or T+2 settlements can reduce overall costs.
Use One Gateway for All Methods
Using a single provider for cards, UPI, wallets, EMI, and BNPL helps avoid multiple setup fees and simplifies reconciliation and reporting.
Select a Platform with Transparent Pricing
Choose providers who clearly disclose MDR, setup charges, and other fees. At Pine Labs, for example, we offer upfront, tiered pricing and transparent breakdowns to help businesses plan better.
When to Absorb Charges vs. Pass Them to Customers
Deciding whether to absorb payment gateway charges or pass them on depends on the size of the business and its margins. Even small percentage fees can add up and affect profits at scale.
- Low-margin businesses like discount stores or budget service providers may need to add a convenience fee to keep their profits.
- Higher-margin businesses such as D2C brands, edtech companies, and SaaS providers often pay these fees themselves to offer a better experience.
- A mix of both can work well. For example, free UPI payments, which usually have lower fees, combined with a small charge for card payments, help control costs without driving customers away.
Most importantly, the fees need to be clear to customers. Any extra charge must show up at checkout to meet the rules. Being open about these fees helps keep customer trust and avoids surprises.
Final Thoughts: Think Long-Term About Cost, Not Just Charges
Payment gateway charges may look like just another cost, but they often provide more value through automation, better customer trust, and easier payment processes. Indian startups should look past the fee and focus on whether the gateway helps the business grow in the long run.
Pine Labs provides fast onboarding, secure payments, fewer lost sales, and straightforward reporting, all important for growing your business.
If you need a simple and reliable way to handle payments that help your business grow, Pine Labs has a clear and all-in-one solution.
Contact us today to see how we can support your startup’s payment needs.