Guide to Payment Gateway Charges in India

27 December, 2023

As the economy is being digitised, the need for secure digital transactions is at an all-time high. Consumers may no longer wish to carry bundles of cash to the merchant’s outlet for availing a service or purchasing a product. To ensure smooth transactions securely, payment gateways charge a small fee from the merchant. These charges are a small portion of every transaction and often called payment gateway fees. As a merchant, keep reading on to get a better understanding of payment gateway charges, how this system works, and more.

Payment Gateways: An Overview

In simple terms, payment gateways are a software/interface that enables secure transactions between two entities—customer and merchant. This technology is used by merchants (private and government organisations alike) to accept payments via Credit Cards, Debit Cards, UPI, E-wallet, etc.

When customers go to a retail store to purchase products or dine out at a restaurant, in most cases, they may make the payment through physical card-reading devices that offer different payment options. The customer shares their card details for making payments while shopping online via websites and applications. A payment gateway makes these transactions possible in a secure manner and quickly.

Understanding Payment Gateway Charges

The cost of facilitating transactions between you and your customer is the payment gateway charge.

Usually, a small percentage of the online payment amount is deducted as payment gateway charge, which may vary depending on the mode of payment used by the customer. Payment gateway charges for UPI payments may be negligible or zero.

There aren’t any free payment gateways in India as all of them charge a small fee for utilising their services. Depending on the service provider you choose, payment gateway charges can be applied on setting up an account and annual maintenance charges in addition to per transaction fee.

Payment gateways operate through websites/apps on the front end and banks at the back end. They also require RBI authorisation under the Payment and Settlement Systems Act to run their operations.

How Do Payment Gateways Work?

Here’s a general breakdown on how a payment gateway works:

1. Tie up with a payment gateway service provider
   Payment gateways work like a middleman and charge a small fee for providing you with a convenient way to receive payments from your customers. If you’re a new merchant, you can consider tying up with a payment service provider and start generating revenue through your online presence. The process typically involves incorporating the provider’s technology into your business’s online check-out process.

2. Customer purchases your goods or services
   Suppose a customer wishes to purchase products from your website. They will select a payment method from the available options. Typically, they can select payment instruments like Debit Card, Credit Card, UPI, NetBanking, wallets, etc.

3. Payment portal directs the customer to the payment gateway’s page
   ​​​​​​​If the customer selects Debit or Credit Card, they’ll be asked to enter their card details, including the number, cardholder’s name, CVV and expiry. The payment gateway will verify whether the card details shared by the customer are valid or not and whether their account has enough balance or not. Once the details are confirmed, a request for money is sent to the customer’s bank account. The transaction may be approved or declined, typically on the basis of the customer's account balance. If approved, the transaction will be settled, and the customer will receive notification of a successful transaction.

Benefits of payment gateway for your business

Here’s why you should consider payment gateway services for your business, soon.

• Security: Payment gateways in India have become a value addition, especially to the retail sector, by greatly reducing the chances of a fraudulent transaction for both the customer and the merchant.

• Multiple payment instruments: You can offer multiple payment options to your customers for an enhanced customer experience.

• Quick processing: When a customer purchases a product from your portal, typically, it would take them only a few minutes to complete the payment. This is because the payment gateway facilitates faster authorisation and settlement of payments.

• Global reach: Some payment gateways may offer multi-currency transactions that allow you to accept payments from international customers.

Summing Up

The scope for digital transactions is increasing with time. As a business, it is imperative that you provide your customers with multiple options to avail of your services, including payment options. As a business owner, you can avail of payment gateway services offered by financial institutions like bank. You can avail of cost-effective payment gateway services with HDFC Bank. For instance, HDFC Bank offers such services in the form of PayZapp For Business or HDFC Bank SmartHub Payment Gateway to receive payments from your customers in a safe, convenient manner.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.