Cost Examples and Choosing an Acceptance Set-up
Worked example: what a payment gateway costs an Indian online store each month
A line-by-line illustrative month for a D2C online store: gateway fees by method, refunds, chargebacks, instant settlement, GST, and how the UPI MDR changes the total.
For an online store, the payment gateway bill is more than the rate per payment. In the illustrative month below, a D2C store selling ₹12 lakh online pays about ₹8,400 in gateway fees on payments, plus fixed fees, refund, chargeback and settlement costs and lost chargeback goods that take the total to about ₹16,900 before GST, an effective rate of roughly 1.4%. UPI under ₹2,000 is free; most of the cost comes from credit cards, net banking and the extras. When NPCI implements the UPI MDR on select payments above ₹2,000, the bill rises by the 0.4% on those payments. Repeat the method with your own dashboard export. This guide belongs to the best-fit method.
The store (illustrative)
- Sells clothing through its own website and app.
- 1,500 successful orders a month, average ₹800; total ₹12,00,000.
- Uses one payment aggregator (PA-O) with per-method pricing; hosted checkout, so it never sees card numbers.
- Refund rate 8% of value (returns and cancellations).
- 6 chargebacks a month on average.
- Uses instant settlement on half of its sales during the festive season.
Fees on successful payments
| Method | Sales | Rate (illustrative) | Fee |
|---|---|---|---|
| UPI up to ₹2,000 | ₹6,60,000 | 0% (law) | ₹0 |
| UPI above ₹2,000 | ₹60,000 | 0% now; 0.4% after UPI MDR | ₹0 → ₹240 |
| RuPay debit | ₹30,000 | 0% (law) | ₹0 |
| Other debit | ₹90,000 | 0.9% | ₹810 |
| Credit (domestic) | ₹2,70,000 | 2.0% | ₹5,400 |
| Credit (international) | ₹30,000 | 3.5% | ₹1,050 |
| Net banking | ₹50,000 | 1.9% | ₹950 |
| Wallets | ₹10,000 | 2.0% | ₹200 |
| Total | ₹12,00,000 | ₹8,410 → ₹8,650 |
The extras
| Extra | Basis (illustrative) | Monthly cost |
|---|---|---|
| Fixed fee ₹3 per paid card, net banking or wallet order (about 520 orders) | Agreement | ₹1,560 |
| Refund processing fee ₹5 × 120 refunds | Agreement | ₹600 |
| Chargeback fee ₹300 × 6 | Agreement | ₹1,800 |
| Chargebacks lost: 3 orders × ₹1,200 goods value | Lost sales | ₹3,600 |
| Instant settlement 0.15% on ₹6,00,000 (festive month) | Agreement | ₹900 |
| Extras total | ₹8,460 |
Gateway fees on payments (₹8,410) plus fixed fees, refund fees, chargeback fees and instant settlement (₹4,860) give ₹13,270 in charges billed by the gateway. Adding the lost chargeback goods (₹3,600) gives ₹16,870 of payment-related cost before GST. Charges billed by the gateway attract 18% GST (about ₹2,389), which a registered store can usually claim as ITC.
Refunds hide a further cost. If MDR is not returned on refunds, the fee on refunded card payments (8% of ₹4,50,000 of charged sales at an average 2%, so about ₹720) is already inside the ₹8,410 but buys you nothing. Ask whether your gateway returns it.
| Summary | Amount |
|---|---|
| Gateway charges (before GST) | ₹13,270 |
| Lost goods on chargebacks | ₹3,600 |
| Total cost | ₹16,870 |
| As % of ₹12,00,000 | 1.41% |
What drives this store's cost
| Lever | Effect (illustrative) |
|---|---|
| Shift ₹1 lakh from credit cards to UPI under ₹2,000 | −₹2,000 a month |
| Cut chargebacks from 6 to 3 | −₹900 fees and fewer lost goods |
| Skip instant settlement outside festive months | −₹900 |
| Negotiate fixed fee from ₹3 to ₹2 | −₹520 |
| UPI MDR starts | +₹240 |
Payment-method mix and disputes matter more than the UPI MDR for this store, because its average order is well below ₹2,000.
Checks for an online store
- Fixed fees: make sure they do not apply to UPI up to ₹2,000 or RuPay debit.
- Refunds: ask whether MDR is returned; if not, reduce returns or price them in.
- Chargebacks: keep delivery proof, invoices and customer communication; see chargebacks and refunds.
- COD: cash on delivery has its own costs (courier COD fees, returns, cash handling) that are outside this guide but belong in the comparison.
- Tokenisation: use hosted or tokenised checkout; see tokenisation and PCI DSS.
- Settlement: compare instant settlement fees with your working-capital cost; see settlement and cash flow.
Check it with the calculator
In the MDR fee calculator, for domestic credit cards: amount ₹2,70,000, rate 2%, fixed fee ₹3, transactions 340 (an illustrative share of the 520 charged orders), other charges 0. Fee = ₹5,400 + ₹1,020 = ₹6,420. Repeat for each method, then add the extras.
FAQ
Is 1.5% a normal effective rate for an online store?
It depends on your methods, refund rate and disputes. A UPI-heavy store with few returns can be far lower; a card-heavy store selling abroad can be higher.
Should I push customers to UPI?
Offering UPI prominently is lawful and common. Do not add a surcharge on cards without checking the rules; see the surcharge guide.
Are marketplace fees part of this?
No. Marketplace commissions and fees are separate from payment processing and are not covered here.
Does the gateway hold back money for new stores?
Some apply a rolling reserve to new or higher-risk merchants. Ask in advance; see payment aggregator rules.
Sources
- Reserve Bank of India — Master Direction on Payment Aggregators, tokenisation and failed-transaction timelines
- NPCI — UPI MDR notices
- Department of Financial Services — UPI MDR FAQ
- CBIC GST — GST on gateway charges
