How payment gateways work in an Indian checkout
A gateway takes the payment from your checkout to the customer's bank or UPI app, then settles the collected money to your business account. Card data goes to the gateway, not your server; the store only receives a confirmation.
The flow has four steps: the customer picks a method, the gateway authorises it with the issuing bank or UPI app, your store records the order as paid through a webhook, and the gateway settles the balance after its holding period. A failed webhook is the usual reason a paid order still shows as pending.
The best payment gateways for Indian ecommerce
Razorpay is the default for a new Indian store because UPI coverage and the plugin ecosystem are the broadest. Cashfree suits stores that care about settlement speed, PayU larger catalogs, and Paytm or PhonePe buyers who already live in those apps.
| Gateway | Published card rate | Best for |
|---|---|---|
| Razorpay | About 2% per transaction, plus 18% GST on the fee | WooCommerce and Shopify stores wanting UPI, cards and net banking in one checkout |
| Cashfree | About 1.75–2% | Fast settlement and payout APIs |
| PayU | About 2% | Larger catalogs and enterprise support |
| Paytm | About 1.99% on cards; UPI advertised at 0% MDR | Stores whose buyers already use the Paytm app |
| PhonePe | About 1.95% | UPI-heavy checkouts |
| CCAvenue | Quoted; ₹1,200 annual maintenance | International cards and 200+ payment options |
Rates as published by the providers or in a comparison read on 30 October 2026; card MDR excludes 18% GST on the fee. Confirm current pricing before you integrate.
CCAvenue's annual fee is the exception: most gateways advertise no setup or annual charge and earn on the transaction. A provider quoting a lower card rate often recovers it on settlement speed or add-ons, so compare the cost per ₹1,000 of sales rather than the headline rate.
Payment gateway fees and settlement times in India
Card MDR is about 2% at most gateways, and 18% GST applies to the fee itself, so a ₹2,000 card sale costs roughly ₹47 in total. UPI is cheaper and several providers advertise 0% MDR on it; T+2 settlement is common.
- Card MDR: about 2% of the transaction at the major gateways.
- GST on the fee: 18%, charged on the MDR and not on the sale value.
- UPI: priced lower than cards; some providers advertise 0% MDR with conditions.
- Settlement: T+2 is common, and instant settlement is a paid option.
- Annual fees: CCAvenue charges ₹1,200 a year; most others advertise none.
Negotiate once monthly volume is steady, because rates move for stores processing a few lakh a month. A second gateway is often the cheapest lever: it lifts success rates when one provider has an outage, without changing your price. Hosting and other first-year costs sit in the e-commerce website cost guide.
UPI, cards and net banking: what Indian customers expect
UPI is the default for most Indian buyers, cards follow, and net banking still matters for larger tickets. Offer all three, keep saved cards enabled through tokenisation, and leave COD on for first-time buyers.
A checkout that throws the buyer into a separate wallet app and loses the cart is the most common conversion leak. Prefer a gateway with an in-page UPI flow and app switching, and show the final amount including shipping before the payment screen. If the sales channel is not settled yet, the guide to selling products online in India compares marketplaces with your own store.
Adding a payment gateway to WooCommerce
Install the gateway's official plugin, paste test keys, place a test order, confirm the webhook marks it paid, then switch to live keys. Test UPI on its own, because it is the mode most of your buyers will use.
- Install the plugin published by the gateway and enable it under WooCommerce payments.
- Paste test keys and place an order with a real product; check that the order moves to processing.
- Confirm the webhook is registered and a paid order appears in the gateway dashboard without a manual refresh.
- Switch to live keys, run a small live order in each mode, then refund it to test the reverse flow.
- Repeat on staging after any plugin update, because checkout breaks quietly.
The store runs on WooCommerce hosting sized for the catalog; the gateway is a plugin on top, not a hosting feature. If you want the integration tested before launch, a WebJi store build includes live test orders through each payment mode.
Gateway onboarding: documents and KYC timeline
Onboarding needs PAN, GSTIN, a bank account in the business name, proof of the business and a live website with terms, shipping and refund pages. Approval usually takes a few working days once the documents are complete.
A sole proprietor can onboard with PAN and a bank account; a company adds its incorporation documents. The website has to be live and show products and policies before review, which is why the store is built first and KYC started in parallel rather than after.
PCI-DSS and checkout security for Indian stores
Use the gateway's hosted checkout so card data never touches your server, force HTTPS on every page, and enable tokenisation for saved cards. That keeps a small store in the lightest PCI scope available.
Store only the last four digits and the gateway reference, never the full card number. Keep the plugin updated and watch failed payments, because a spike usually means an expired key or a broken webhook rather than fraud.
Frequently Asked Questions
Which is the best payment gateway in India?
Razorpay for most stores: about 2% per card transaction, UPI and net banking in one checkout, and plugins for WooCommerce and Shopify. Cashfree is the alternative when settlement speed matters, and CCAvenue when you need international cards.
What are payment gateway charges in India?
Around 2% per card transaction at most gateways, plus 18% GST on the fee. UPI is priced lower and several providers advertise 0% MDR on it; setup is usually free, and CCAvenue charges an annual maintenance fee.
Which gateway has the lowest MDR?
UPI rates are the lowest, with some providers advertising 0% MDR, but the card rate is what most of your revenue pays. Compare the card rate, the GST on the fee, settlement time and the plugin rather than the headline UPI number.
How long does settlement take?
T+2 is common, meaning funds arrive two working days after the transaction. Instant settlement is available from some providers as a paid option. Ask for the cycle in writing before you integrate.
Can I add Razorpay to WooCommerce?
Yes. Install the official Razorpay plugin, paste test keys, place a test order and confirm the webhook marks it paid, then switch to live keys. The same flow works on Shopify through the Razorpay app.
Is UPI free for merchants?
Some providers advertise 0% MDR on UPI and others price it inside the card rate. UPI pricing has changed more than once, so confirm the current scheme on the provider's pricing page before you model margins.