Choosing a payment gateway for a small Indian online store: what the 2% actually buys

Accepting money online in India is far simpler than it was a few years ago. This is what a gateway does, what it costs, and what to compare, written for a business owner rather than a developer.

What a payment gateway does

Your customer chooses UPI, a card, netbanking or a wallet on your checkout page. The gateway handles the payment screen, talks to the bank, confirms success or failure to your site, and settles the money to your bank account on a schedule, minus its fee. You never handle card numbers, which also keeps you outside the hardest compliance requirements.

What it costs

Gateways price per successful transaction. Take Razorpay's published standard plan as the reference point: 2% per successful domestic transaction, with zero setup fee, zero annual maintenance charge and zero refund processing fee. GST applies on top of the fee. Other gateways such as Cashfree and PhonePe Payment Gateway publish their own rate cards, and rates for specific methods (UPI in particular) are often negotiable once you have volume, so check the current page for each before deciding.

On a ₹1,000 order at 2%, the gateway keeps ₹20 plus GST and settles the rest. For most small stores the fee is a rounding error compared with the cost of not accepting UPI at all.

What to compare

• Rates per payment method. The headline rate may not be the UPI rate, and UPI is what most Indian customers use for small orders. Ask for the full card.
• Settlement time. Standard settlement is typically a couple of working days; faster settlement is sometimes offered at a cost. Ask, especially if cash flow is tight.
• KYC and business type. Every gateway needs your PAN, bank account and business proof. Some categories of business (supplements, financial products, certain services) need extra documents or are restricted. Check before building the checkout.
• Refunds and disputes. How refunds are issued, whether they carry a fee, and how chargebacks are handled.
• Developer tools. Good documentation, a test mode, and webhooks (so your site learns about a payment even if the customer closes the tab) make the integration faster and more reliable. This is the thing your developer will care about most.
• Payment links and QR. Useful if you also take orders on WhatsApp or in person; most gateways include them.

What your developer needs to build

An integration is a few days of work on a custom site: the checkout button, a server-side order creation call, verification of the payment signature, a webhook handler so orders are marked paid even when the browser drops, order confirmation emails or WhatsApp messages, and refunds from your admin view. The gateway's test mode lets all of it be exercised with fake cards and UPI before a rupee moves.

Two things to insist on:

1. The gateway account is yours. Registered in your business name, settling to your bank account, with your login. The developer is added as a team member.
2. Webhooks are implemented. A checkout that only trusts the browser's "payment successful" redirect will eventually record an unpaid order as paid, or a paid order as missing.

Do you need a gateway at all?

If you take a handful of orders a week and all of them arrive on WhatsApp, a payment link or a UPI QR code may be enough, and the gateway account gives you those without a checkout page. A checkout page earns its keep when customers need to order without talking to you, at night, or in numbers you cannot handle by hand. That is the point at which an e-commerce site pays for itself.

Questions people ask

Sources

1. Razorpay pricing — 2% per successful transaction, Rs. 0 setup, Rs. 0 AMC, Rs. 0 refund fee