Payment gateway charges in India: what you actually pay, and how to pay less

What is MDR, and why your “2%” isn't 2%

The headline number a gateway quotes you is the Merchant Discount Rate (MDR) — the percentage of each transaction the gateway keeps. The catch is that MDR is not one number. It varies by payment method, and on top of it you pay 18% GST. So a “2%” card rate is really about 2.36% landed. On ₹50 lakh of monthly card volume, that GST alone is roughly ₹18,000 a month you may not have budgeted for.

Charges by payment method

• UPI — effectively 0% MDR for person-to-merchant payments at most gateways, thanks to government zero-MDR policy. This is why your effective rate collapses as your UPI share rises. (Stripe is a notable exception and may charge for UPI.)
• Domestic cards — the big cost centre, typically 1.9%–2%before GST. Small differences here matter most for card-heavy businesses.
• Net banking — usually ~1.9%–2% or a flat per-transaction fee, depending on the bank and gateway.
• Wallets — around 1.95%–2%; Paytm's own wallet funnel can be favourable if your customers use it.
• International cards — the most expensive rail, commonly 3%, and up to ~4.3% + flat fee on Stripe for cross-border. If you sell abroad, this single line can dominate your bill.

The hidden cost: failed-payment leakage

Fees are visible; failed payments are not. Authorisation success rates differ by gateway and by rail — a few percentage points of difference on cards or UPI can be worth more than the entire MDR gap. If 10% of your card transactions fail on one gateway and 7% on another, that 3% of GMV is revenue you simply never captured. PayRouter estimates this “leakage” so you can weigh it against fees, because the cheapest gateway is not always the most profitable one.

Why a single gateway is rarely optimal

Because each rail has a different cheapest-and-best provider, forcing every transaction through one gateway leaves money on the table. Smart routing sends each method where it performs best: UPI through the provider with the highest UPI success rate, domestic cards through the lowest card MDR, international cards through the rail built for cross-border. Larger merchants already do this with multiple gateway integrations; the hard part is knowing the routing rules — which is exactly what PayRouter computes.

How to find your real cost in 60 seconds

1. Take your monthly payment volume and average transaction value.
2. Estimate your payment mix — what share is UPI vs cards vs the rest.
3. Run them through the free PayRouter fee calculator. You'll see every gateway ranked by your effective rate (incl. GST), your estimated leakage, and a per-rail routing plan with the annual savings quantified.

Frequently asked questions

What is the cheapest payment gateway in India?There isn't one — it depends on your mix. The cheapest gateway for a UPI-heavy store can be the priciest for a card-heavy or international seller.

Is GST charged on gateway fees? Yes, 18% on the MDR. Always reason in GST-inclusive terms.

Can I negotiate MDR? Often, at volume. Public rates are the starting point; knowing the competitive landscape (what PayRouter shows) is your leverage in that conversation.