Payments · 2 October 2026
What Is a Payment Gateway? Meaning, How It Works and Charges in India
A payment gateway is a service that lets a website or app accept online payments. When a customer pays, the gateway securely passes the payment to their bank, card network or UPI, gets the approval, and tells the merchant whether the payment succeeded. The money is then settled to the merchant's bank account.
How a payment gateway works
- The customer chooses a payment method at checkout: UPI, card, netbanking or wallet.
- The gateway encrypts the details and sends the request to the right network or bank.
- The customer's bank checks the balance and authentication, then approves or declines.
- The gateway shows the result to the customer and the merchant.
- The collected money is settled to the merchant's bank account, usually after a fixed settlement cycle.
Payment gateway charges
Gateways usually charge a percentage of each transaction, called the merchant discount rate (MDR), and sometimes a setup or annual fee. Rates differ by payment method: in India, UPI and RuPay debit card payments to merchants carry zero MDR under government rules, while credit cards and international cards cost more. Always compare the full price list, settlement time and refund fees, not just the headline rate.
How to choose a payment gateway
- Payment methods supported: UPI, cards, netbanking, wallets, EMI and international cards.
- Success rate and uptime, especially at peak times.
- Settlement speed and reconciliation reports.
- Ease of integration for your website and apps.
- Support for saved cards with RBI-compliant tokenisation and recurring payments.
When one gateway is not enough
As payment volume grows, many businesses add a second gateway for backup and better rates. Managing several gateways is easier with payment orchestration, which connects them through one integration.
Frequently asked questions
What is the difference between a payment gateway and a payment aggregator?
A gateway is the technology that processes the payment. A payment aggregator also collects and settles the money for merchants. Many Indian providers do both, and RBI regulates payment aggregators.
Do I need a payment gateway to accept UPI on my website?
Yes. To accept UPI, cards or netbanking on a website or app, you need a payment gateway or a checkout built on one.
Are there charges on UPI payments through a gateway?
UPI payments to merchants carry zero MDR under government rules, though a provider may charge for other services. Check the provider's price list.