E-Commerce Payment Gateway: Types, Fees & India Guide
TL;DR - Summary
- What is an e-commerce payment gateway? - An e-commerce payment gateway is the technology that securely facilitates online payments between a customer's checkout and the payment-processing infrastructure. It captures, encrypts, and transmits payment data between a customer, a merchant's website, and the banks involved.
- What are the main types of e-commerce payment gateways? - The main types of e-commerce payment gateways are hosted, self-hosted, API-based, and bank payment gateways, classified by how payment processing is integrated into the checkout experience and who provides the service.
- What does an e-commerce payment gateway typically cost in India? - An e-commerce payment gateway in India typically charges a transaction-based fee, which varies by payment method, provider, merchant category and transaction volume. Additional costs may include setup, annual maintenance, international payment and other service charges, depending on the provider and plan.
- Which payment gateway should an Indian exporter use to receive foreign payments? - Indian exporters can use an RBI-compliant cross-border payment provider such as Skydo or Razorpay. They can also receive payments through a traditional bank wire, depending on the payment method, transaction size and documentation requirements.
What Is an E-Commerce Payment Gateway?
An e-commerce payment gateway is a technology that securely facilitates online payments between a merchant's website or application and the payment-processing infrastructure involved in a transaction. It securely captures or receives payment information, encrypts and transmits transaction data for authorisation, and communicates the payment status back to the merchant.
A payment gateway is a digital version of a physical card terminal that a store uses to accept payment at the register, except that it allows consumers to pay using online payment methods that are supported.
A payment gateway performs several essential functions to securely process and communicate payment transactions.
- Securing Payment Information: It encrypts sensitive payment data during transmission to help protect it from unauthorised access.
- Facilitating Authorisation: It securely transmits transaction data to the relevant payment-processing infrastructure for authorisation.
- Communicating the Transaction Status: It relays the approval or decline response to the merchant's website or application, enabling the merchant to confirm the order or request another payment attempt.
Using a payment gateway can reduce the need for merchants to handle cardholder data directly. However, merchants may still have applicable PCI DSS responsibilities depending on how their payment solution is implemented and integrated, particularly when handling payments that involve additional considerations such as cross-border payments.
How Does an E-Commerce Payment Gateway Work?
An e-commerce payment gateway securely passes payment information between the customer, merchant, payment processor, and relevant banking or card networks. The transaction is authorised or declined within seconds, after which the payment moves through the settlement process.
How a Payment Gateway Processes a Transaction
A typical online card payment follows these steps:
- Checkout: The customer selects a product, proceeds to checkout, and enters details such as the card number, expiry date, and CVV.
- Encryption: The gateway encrypts the payment information to protect it while the data is being transmitted.
- Transaction Routing: The encrypted information is passed to the payment processor, which handles the technical routing of the transaction.
- Authorisation Request: The processor sends the transaction to the customer's issuing bank or relevant card network, such as Visa or Mastercard.
- Bank Verification: The issuing bank checks the card's validity, available funds or credit, and relevant fraud indicators before approving or declining the transaction.
- Response: The processor sends the bank's response back to the payment gateway, which passes it to the merchant's website.
- Order Confirmation: If approved, the merchant confirms the purchase and begins fulfilment. The customer receives a payment-success notification.
- Settlement: The transaction proceeds to settlement, when the funds are transferred through the banking system to the merchant's account. The timing can vary by gateway and acquiring bank and may take several days.
Three Stages Behind an Online Payment
Every successful payment involves three key processes:
- Authorisation: The issuing bank determines whether the transaction can be approved based on factors such as card validity and available funds.
- Authentication: The payment system verifies that the transaction and payment credentials are legitimate. Additional customer verification may be required, such as 3D Secure.
- Settlement: The approved transaction is financially settled and the funds are transferred to the merchant through the acquiring bank.
A payment gateway primarily transmits payment information and the resulting authorisation response. It does not itself hold the customer's money. The movement and settlement of funds involve the acquiring bank and other financial institutions.
Related: 2D vs 3D Payment Gateway: Understanding the Key Differences
What Are the Types of E-Commerce Payment Gateways?
E-commerce payment gateways can be categorised in two different ways, i.e, by the type of provider and by the mode in which the payment experience is presented to the end-user on the merchant's website and/or application. For businesses that receive payments from overseas customers, understanding the available payment gateways for international payments in India can help choose a suitable method based on supported currencies, fees, settlement options and compliance requirements.
Classification by Provider Type
Payment gateways can also be distinguished by the type of provider that offers and operates the payment infrastructure.
- Third-party Payment Gateway: Provided by an independent payment service provider and integrated with the merchant's website or application. These gateways typically support multiple payment methods and can simplify payment integration and transaction management.
- Bank Payment Gateway: Provided by a bank to enable merchants to accept online payments through supported payment methods. The specific payment options, features and integration capabilities depend on the bank and its payment infrastructure.
Classification by Payment Flow
The payment flow can vary depending on where the customer enters their payment details and where the actual payment processing takes place.
- Hosted or Redirect Gateway: The customer is redirected to a secure payment page hosted by the payment provider to complete the transaction. This offers strong security and a familiar experience, but the merchant loses control over how checkout actually looks and feels.
- Self-Hosted Gateway: Payment details are collected through the merchant's website before being securely transmitted to the payment provider for processing. The merchant may have greater control over the checkout experience, but its security and PCI DSS responsibilities depend on the implementation.
- API-Based Gateway: The merchant integrates the payment provider's APIs into its website or application, allowing greater control over the payment experience while the provider handles the underlying payment processing. This generally requires greater technical integration.
- On-Site Checkout With Off-Site Processing: The customer completes the checkout experience on the merchant's website, while payment processing is handled by the payment provider's infrastructure. This can provide a balance between checkout control and outsourced payment processing.
Additional Category
Customised or industry-specific gateways exist for particular business models, online auctions, subscription billing, or digital goods among them. These may include features such as recurring payments, automated billing, split payments or specialised transaction management.
| Feature | Domestic Gateway (e.g. Razorpay, PayU) | International Payment Receipt Platform (e.g. Skydo) |
|---|---|---|
| Transaction direction | Outgoing: collecting money from Indian customers | Incoming: receiving money from foreign clients |
| Currencies supported | INR | USD, EUR, GBP, AED, SGD, AUD, CAD |
| Typical fees | Percentage of transaction (TDR/MDR model) | Flat fee per transaction |
| FIRC/FIRA certificate | Not issued | Issued free for every transaction |
| RBI compliance support | PCI DSS, domestic RBI norms | Authorised for cross-border inward remittance |
| Settlement timeline | 1 to 3 business days | Within 24 hours |
| eBRC/EDPMS support | No | Yes |
What Are the Top Ecommerce Payment Gateways in India?
Indian e-commerce businesses can choose from several payment gateways, depending on whether they primarily accept domestic payments, receive money from overseas, or need both.
| Payment Gateway | Best Suited For |
|---|---|
| Razorpay | Domestic online payments and business payment solutions |
| PayU | Online businesses handling high-volume digital payments |
| Paytm Payment Gateway | Businesses accepting a broad range of digital payment methods |
| Cashfree Payments | Payment collection, payouts, and cross-border payment needs |
| Easebuzz | Online businesses looking for payment collection and payout solutions |
| CCAvenue | E-commerce businesses requiring multiple payment options |
| Instamojo | Small businesses and independent sellers |
| Skydo | Indian businesses and freelancers receiving international payments |
The right e-commerce payment gateway depends on supported payment methods, pricing, integration requirements, settlement timelines, and domestic or international payment coverage. A gateway designed primarily for INR transactions may not be the best fit for an exporter receiving payments from overseas customers.
What Does an E-Commerce Payment Gateway Cost?
The cost of an e-commerce payment gateway is borne by the merchant and not the customer. The actual figure varies depending on the gateway chosen, the payment method used, and overall transaction volume.
The main fee is usually a transaction-based processing fee, often expressed as a percentage of the transaction value. Depending on the provider, merchants may also incur setup or onboarding fees, annual maintenance charges, integration fees or other service charges. Note that not all providers charge every type of fee.
- Domestic Payments: Domestic payment gateway charges in India vary by provider and payment method, so no single industry-wide rate applies. Debit card transactions may typically attract percentage-based fees, depending on the provider and card type.
- International Payments: If the payment is made internationally, the overall cost may include international transaction fees, foreign exchange conversion fees and relevant intermediary or banking fees, depending on the payment method used. When receiving funds from a business across the border, the total cost of receiving payment should be compared to the transaction fee.
For example, Skydo charges $19 + applicable GST on transactions up to $2,000, $29 + applicable GST on transactions between $2,001 and $10,000 and 0.3% + applicable GST on the transaction amount over $10,000. Under its stated pricing structure, it does not require a monthly subscription fee.
The most suitable pricing model depends on the merchant's transaction size and payment requirements. Percentage-based fees may be suitable for smaller transactions, while a flat-fee structure can be more economical for certain higher-value transactions.
For businesses evaluating other options for receiving international payments, comparing Razorpay alternatives for international payments can help assess different fee structures and features.
What Key Features Should You Look for in a Payment Gateway?
Factors that matter most when evaluating a payment gateway include security standards, supported payment methods, ease of integration, transaction speed, fee transparency, support quality, and, for Indian exporters specifically, compliance documentation such as FIRA certificates.
Security
Security should be the first consideration, particularly when the gateway handles sensitive customer and payment information.
- PCI DSS Compliance: The Payment Card Industry Data Security Standard (PCI DSS) is a baseline requirement mandating that any company processing card payments maintains a properly secure network.
- SSL/TLS Encryption: Encrypts data transmitted between the customer’s browser or application and the payment infrastructure, helping protect sensitive information during transmission.
- Tokenisation: Replaces sensitive card details with a randomly generated token for future use, meaning the actual card number is never stored or transmitted again.
- Fraud Detection Tools: The tools analyse transaction patterns as they happen, flagging and blocking suspicious activity in real time.
- 3D Secure: Adds an extra authentication step, an OTP confirmation being the common example, that a customer has to clear before a transaction is approved.
- CVV/CVC checks and AVS: These can provide additional verification for card transactions, although the availability and use of AVS may vary by gateway, card network and market.
Payment Methods and Reach
Once security is covered, check whether the gateway supports the payment methods, currencies, and markets your customers use.
- Multiple Payment Methods: The gateway should support payment methods relevant to the target customers, such as credit and debit cards, UPI, net banking and eligible wallets or other payment options in India.
- Multi-Currency and International Payments: Businesses receiving payments from overseas customers should check the gateway’s supported currencies, countries, payment methods and settlement options.
Integration and Experience
A gateway also needs to fit smoothly into your existing website or e-commerce setup while keeping the payment journey simple for customers.
- Integration Options: The gateway should integrate with the existing e-commerce platform, such as Shopify or WooCommerce, or a custom website through APIs, plugins or supported libraries.
- Checkout Experience: A simple and efficient checkout can reduce friction during payment. Whether a redirect is appropriate depends on the gateway's implementation and the merchant's security and user-experience requirements.
- Mobile Optimisation: The checkout should work effectively across mobile devices, particularly where a significant portion of the merchant's customers transact through smartphones.
Operations and Compliance
Finally, consider what happens after the payment is processed, including settlement, support, scalability, and the documentation your business may need.
- Scalability: The gateway should be able to support increasing transaction volumes while maintaining reliable processing.
- Settlement Timeline: Predictable settlement timelines affect cash flow planning directly and matter more than raw speed alone.
- Support Quality: Accessible and responsive support can help resolve payment failures, disputes and technical issues more efficiently.
- Export Documentation: Indian exporters should check whether the provider supports relevant inward-remittance documentation, such as FIRA or FIRC where applicable, and whether it provides assistance with export-related reconciliation and documentation requirements.
How Do You Choose the Right E-Commerce Payment Gateway?
Start by identifying who your customers are and how they pay. If you mainly sell to customers in India, a domestic gateway with UPI, cards, wallets, and net banking may be sufficient. If you receive payments from overseas clients, you may need a gateway that supports international payments, or a separate cross-border payment platform.
What Should Every Seller Consider?
- Customer Payment Preferences: Match the gateway to how your customers pay. Indian customers commonly use UPI, cards, wallets, and net banking, while international customers may use cards, wire transfers, or SWIFT payments.
- Geographical Coverage: Check whether the gateway supports payments from the countries where your customers are located.
- Product or Service Type: Physical products, digital services, subscriptions, and one-time purchases may require different features, including recurring billing, refunds, or chargeback management.
- Fees and Transaction Size: Compare percentage-based charges, fixed fees, FX costs, and other applicable charges against your typical transaction value. For larger international invoices, a flat-fee structure can be more economical.
- Security: Check PCI DSS compliance, encryption, authentication, and fraud-prevention capabilities.
- Integration: Make sure the gateway works with your existing setup, whether that is Shopify, WooCommerce, or a custom-built website.
- Customer Experience: Test the checkout process yourself. Unnecessary redirects, payment failures, or complicated steps can discourage customers from completing a purchase.
- Customer Support: Check how quickly and through which channels the provider handles technical and payment-related issues.
- Scalability: Ensure the gateway can accommodate higher transaction volumes as your business expands.
What Should Indian Exporters Check?
For businesses receiving payments from overseas, a few additional checks are important:
- Remittance Documentation: Confirm whether the provider supplies the appropriate documentation, such as FIRA, FIRS, e-FIRA, or FIRC where applicable, and whether it meets your GST, banking, and export-record requirements.
- Regulatory Authorisation: Verify that the provider is authorised to offer the relevant cross-border payment service in India.
- Settlement and Currency Handling: Check whether funds are converted into INR before settlement or whether the provider offers multi-currency receiving accounts that allow you to receive and manage foreign-currency funds.
Related Read: How to receive payments from Amazon Global Selling in India
How Does Skydo Help Indian Exporters Receive International Payments?
Skydo is a cross-border payment method that serves Indian businesses and freelancers receive payments from overseas customers. It provides local receiving account details in supported currencies and facilitates settlement of international payments into the user's Indian bank account. Skydo offers:
- Multi-Currency Receiving Accounts: Skydo offers receiving account information for local currencies, facilitating payments via local payment rails for eligible overseas customers.
- No Monthly Subscription Fees: Instead of a monthly subscription fee, Skydo charges fees per transaction. At present, its pricing is USD 19 + GST for transactions up to USD 2,000, USD 29 + GST for transactions between USD 2,001 and USD 10,000 and 0.3% + GST for transactions exceeding USD 10,000.
- Inward-remittance Documentation: Skydo supports exporters by providing them with documentation for eligible payments i.e, FIRA, for inward remittance. The documentation needed to support claims for GST, export realisation or other regulatory requirements will vary according to the nature of the transaction and the relevant requirements.
- eBRC support: Skydo offers tools and support for eBRC related activities for eligible exporters, such as eBRC export proceeds reconciliation.
- Export Related Reconciliation and EDPMS Support: Skydo also offers assistance with export-related reconciliation and EDPMS processes. Exporters are advised to comply with the relevant RBI and banking guidelines for reporting and closure of export transactions.
- Quick Settlement: Eligible payments may take between 24 hours to be credited to the Indian bank account of the user, depending on the transaction, verification, and banking conditions.
- Digital Onboarding: The platform offers online onboarding and verification, enabling users to complete the onboarding process online, rather than via a branch-based process.
Skydo is best suited for eligible Indian exporters of goods or services, freelancers receiving payments from foreign businesses, and sellers earning through international marketplaces.
What is the best e-commerce payment gateway in India for receiving payments from foreign clients?
The right option depends on fees, exchange rates, supported payment methods, settlement times, and remittance documentation. Providers such as Razorpay and PayU support international payments, while specialised platforms such as Skydo may be better suited to businesses that primarily receive cross-border payments and need multi-currency receiving accounts and inward-remittance documentation.
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