Payment gateway fees: What to expect and how to minimise costs

The rise of digital commerce has made online payments a necessity for businesses across industries. Payment gateways make transactions seamless, but if not managed wisely, their costs can quickly cut into profits. From setup and maintenance fees to transaction charges and dispute costs, understanding the fee structure is crucial. Yet, many businesses end up paying more than necessary simply because they don’t know where optimisations can be made.

Navigating payment gateway fees doesn’t have to be complicated. By breaking down the different charges and learning how to optimise them, businesses can reduce expenses without compromising on efficiency. This blog will discuss the key costs associated with payment gateways and provide actionable strategies to keep them in check.

Understanding payment gateway fees

Payment gateway fees encompass several types of charges, each impacting the overall cost of processing transactions. These typically include:

1. Setup fees

Many payment gateways charge a one-time setup fee to cover account creation, system integration and technical onboarding. While some providers offer zero setup fees, others may charge depending on the level of customisation required.

2. Transaction fees

Every transaction processed through a payment gateway incurs a charge, usually as a percentage of the transaction amount. The rates vary based on factors such as payment method (credit card, debit card, UPI or net banking) and business size. In India, transaction fees typically range from 1.85% to 3.5%.

3. Annual maintenance fees

Recurring yearly charges help cover technology updates, security enhancements and operational costs. Some providers bundle this into the transaction fee, while others have separate charges.

4. Chargeback fees

When customers dispute a transaction, the business often incurs chargeback fees. Excessive chargebacks can also lead to increased processing rates.

5. Currency conversion fees

For businesses accepting international payments, currency conversion fees can add up quickly. 

6. Additional service fees

Some payment gateways charge extra for services such as tokenisation, fraud prevention tools and detailed analytics. These costs can vary based on the provider and the level of security required by the business.

Strategies to reduce payment gateway costs

Minimising payment gateway expenses requires a mix of strategic decisions and technological adjustments. Below are effective ways to reduce costs without compromising service quality.

1. Compare fee structures

Different providers offer varied pricing models, including flat rates, interchange-plus or tiered pricing. Understanding these structures helps businesses choose the most cost-effective option based on their transaction volume and customer payment preferences.

2. Negotiate transaction fees

If your monthly transactions exceed a certain threshold, many payment gateways allow businesses to negotiate transaction rates. Large enterprises processing significant volumes can often secure lower fees.

3. Leverage cost-effective payment methods

UPI and net banking typically have lower processing costs than credit cards. Encouraging customers to use these methods can help reduce overall transaction fees. Some businesses also implement surcharging (passing transaction fees onto customers) where legally permitted.

4. Enhance fraud prevention measures

Excessive chargebacks not only result in direct penalties but can also increase processing fees over time. To reduce chargebacks:

• Use advanced fraud detection tools.
• Clearly communicate refund policies.
• Offer multiple customer support channels to resolve disputes proactively.

5. Automate payment reconciliation

Manual reconciliation of payments can lead to errors and increased operational costs. Using automated reconciliation tools can help businesses track transaction details, identify discrepancies and reduce unnecessary fees.

6. Opt for bundled services

Some payment gateways offer bundled services, including fraud protection, analytics and multi-currency processing, at a lower combined cost. Choosing such integrated solutions can help businesses save on individual service fees.

7. Monitor and analyse payment data

Regularly reviewing payment reports helps identify unnecessary expenses. Businesses can use analytics to detect high-fee transactions, assess chargeback rates and optimise the payment flow.

Leveraging a reliable payment gateway solution

Selecting the right payment gateway is essential for balancing cost and performance. A provider with competitive transaction fees, seamless API integration and a high success rate can significantly impact a business’s bottom line. Solutions like Plural by Pine Labs offer zero setup costs and customisable payment flows to match unique business needs. 

A high transaction success rate minimises payment failures, reducing lost sales and improving customer satisfaction. Additionally, an intuitive API simplifies integration, lowering development costs and ongoing maintenance.