Razorpay Payment Gateway Pricing Vs. Other Payment Gateways: True Cost Comparison

Most founders pick payment gateways by sorting a spreadsheet by “Lowest Platform Fee.” They compare 1.7% vs 1.9% vs 2.0%, pick the cheapest number, and call it a win.  Three months later, they’re losing ₹2.5 lakhs per month to failed payments, and they don’t know why.

Here is the problem: The platform fee only tells you what you pay when a payment succeeds. It doesn’t show you what you lose when payments fail, what you bleed in hidden Annual Maintenance Charges (AMC), or how many engineering hours you burn fixing bad APIs.

In 2026, the real cost of payments isn’t a percentage; it is Net Realised Revenue (the money that actually lands in your bank account after all failures, fees, and friction).

Why Platform Fee-Only Comparisons Fail (The Hidden Cost Framework)

When you compare payment gateways, most pricing pages look the same: “1.7% + GST” in large font, maybe a “Zero Setup Fee” badge, and that’s it. The assumption is simple: pick the lowest percentage, save money, and be done.

But that is not how payment economics work.

The Platform Fee (or TDR) is the percentage charged on successfulstransactions. The problem? It ignores the payments that fail. It doesn’t capture the annual fixed charges you pay regardless of performance, the hours your finance team wastes reconciling messy data, or the interest you lose while waiting for settlements.

In other words, Platform Fee is a variable cost that ignores fixed costs, failure costs, and opportunity costs.

The Math of Failure (₹1 Lakh Example): Let’s say you process ₹1 Lakh per month (₹12L/year).

• Gateway A (The Discounter): Has a 70% success rate. You don’t pay fees on ₹1L; you collect ₹70,000 and lose ₹30,000 to failures.
• Gateway B (The Performer): Has an 80% success rate. You collect ₹80,000 and lose only ₹20,000.

The Result: You paid slightly higher fees on Gateway B, but you banked ₹10,000 more revenue in a single month. That is a 10% increase in gross revenue just by choosing a better gateway.

The 5 Buckets of True Payment Cost

To compare payment gateways correctly, you need to model all five cost buckets, not just the first one.

1. Variable Fees 

This is what pricing pages advertise: the percentage per successful transaction (e.g., 2% + GST). Note that rates often vary by instrument, UPI, Credit Cards, Netbanking, and EMI often have different cost structures.

2. Fixed Fees 

These include Setup fees, Annual Maintenance Charges (AMC), and minimum monthly commitments.

• The Trap: A “cheap” 1.8% gateway often charges a ₹4,999 Annual Maintenance Charge (AMC).
• The Impact: If you process ₹1 Lakh/month, that ₹4,999 AMC adds roughly 0.4% to your effective transaction fee. So, your “cheap” 1.8% gateway actually costs you 2.2% (1.8% + 0.4%). Suddenly, the “premium” 2.0% gateway with Zero AMC is mathematically cheaper.

3. Revenue Lost to Failures

Your Payment Success Rate (SR) directly determines Realised Revenue, the money that actually hits your bank. If a gateway has weak routing or high downtime, 10–30% of legitimate payments fail.

• The Impact: You don’t just lose the sale; you waste the CAC (Customer Acquisition Cost) you spent to bring that user to the checkout page.

4. Operational Overhead 

This covers reconciliation complexity, refund tracking, and dispute handling. If a gateway provides poor settlement reports or lacks UTR-level matching, your finance team burns hours manually reconciling payments.

• The Impact: Engineering and Finance salary hours spent fixing gateway issues are a direct cost to your business.

5. Cash-Flow Impact 

Settlement speed determines your working capital. A T+1 settlement vs. T+3 can tie up cash flow. Some gateways also hold funds during “risk reviews,” freezing your capital for weeks.

• The Impact: Slower access to cash means higher reliance on working capital loans or delayed inventory restocking.

Razorpay Payment Gateway Vs. Other Payment Gateways: The Math

Let’s stop talking in abstracts and run the actual numbers. This is the calculation most founders skip, and it’s why they end up with the “wrong” payment gateways.

Before we compare, here’s exactly what Razorpay charges; no fine print, no surprises:

Razorpay Standard Pricing

• Platform Fee: 2% + GST on domestic transactions
• Setup Fee: ₹0
• Annual Maintenance Charge (AMC): ₹0

The Scenario: You are running a growing startup processing ₹2,00,000 (2 Lakhs) per month in attempted payments (total checkout value before failures). You are comparing two options:

• Other Payment Gateways (“The Budget Option”): Advertises 1.8% fees. Looks cheap.
• Razorpay Payment Gateways: Standard 2.0% fees. Looks “expensive.”

Here is what happens when you model the True Cost over 12 months.

Breaking Down the Numbers

1. Success Rate Impact 

Gateway A’s 70% success rate means only ₹1.4 Lakhs of your ₹2L monthly traffic succeeds. You lose ₹60,000 every month to payment failures.

• Razorpay’s Advantage: With an 80% success rate, you capture ₹1.6 Lakhs per month. That is ₹2.4 Lakhs more in realised revenue over the year.

2. Fixed Costs 

This is where small businesses get hurt the most.

• Gateway A: You pay ₹15,000 (AMC + Setup) regardless of sales. On a realised revenue of ₹16.8L, this fixed fee acts like an additional 0.9% tax on every transaction.
• Razorpay: Charges ₹0. You don’t start your financial year in debt.

3. Transaction Fees

• Gateway A Fees: ₹30,240
• Razorpay Fees: ₹38,400
• The Reality: You paid roughly ₹8,160 more in fees to Razorpay. But you gained ₹2.4 Lakhs in revenue and saved ₹15,000 in fixed costs.

The Verdict: The ROI on “Premium” Pricing

By paying ₹8,160 extra in transaction fees, you capture ₹2,46,840 more in net income.

That is a 30x Return on Investment.

Disclaimer: This is an illustrative example. Actual ROI depends on your baseline success rates, industry, and payment mix. Replace the 70% vs 80% assumptions with your own data to see your specific gain.

How to Compare Any Two Gateways?

Stop guessing. If you are evaluating a payment partner, don’t just look at the website pricing page. Use this step-by-step audit framework to uncover the hidden costs before you sign the contract.

Step 1: Get the “Real” Pricing in Writing

Sales teams often quote the lowest rate (e.g., “UPI is free!”) while hiding the premium costs. Demand a written term sheet that breaks down:

• Instrument-Wise Rates: Don’t accept a blended rate. Ask for specific TDRs for Credit Cards (Corporate vs. Consumer), Netbanking (Top 5 banks vs. others), Wallets, and EMI.
• The “Fixed” Stack: explicitly ask: “Are there Setup Fees, Annual Maintenance Charges (AMC), Integration Audit Fees, or Software Upgrade Charges?”
• Hidden Penalties: What are the fees for Refunds and Chargebacks? (Some gateways charge you even if you refund the customer.

Step 2: Estimate Your Success Rate Baseline

The TDR is irrelevant if the payment fails.

• Ask the Hard Question: “What is your Net Success Rate for my industry?”
• Drill Down: If you are a D2C brand, ask for the success rate specifically for Credit Cards on mobile web. Aggregate numbers often hide poor performance in high-value segments.

Step 3: Calculate Your Annual Effective Cost

Plug the numbers into this formula to see the truth.

Total Cost = (GMV × Success Rate × TDR) + Annual Fixed Fees + Operational Overhead

Model this for three scenarios:

1. Current Volume: What do I pay today?
2. 2x Growth: What happens when I scale? (Do fixed fees shrink as a %?)
3. Peak Volume: What happens during a flash sale? (Does their infrastructure hold up?)

Step 4: The “Uncomfortable” Interview

Before signing, ask these four questions to gauge operational maturity:

1. “How do you handle peak loads?” (Ask for specific TPS – Transactions Per Second limits).
2. “Show me your reconciliation export.” (If it’s a messy PDF instead of a clean CSV/API, your finance team will hate you).
3. “What is your standard Settlement Speed?” (Is it T+2 working days or T+1 calendar days? The difference is your cash flow.
4. “What triggers an account freeze?” (Understand their risk policy so you don’t get blocked during a sale).

The Bottom Line is that if a payment gateway hesitates to answer these, they are hiding a cost. Walk away.

FAQs

1. Is Razorpay expensive compared to other payment gateways?

No, not when you calculate the Total Cost of Ownership (TCO). While Razorpay’s headline fee of 2% is slightly higher than some budget competitors (offering 1.8%), Razorpay charges Zero Setup Fees and Zero Annual Maintenance Charges (AMC). For most businesses, the absence of fixed annual fees combined with a higher Success Rate (which recovers lost revenue) makes Razorpay mathematically cheaper than “low-fee” gateways that charge for maintenance and lose sales to downtime.

2. Does Razorpay charge an Annual Maintenance Charge (AMC)?

No. Razorpay has a strict Zero AMC policy for its standard payment gateway plans. You only pay a transaction fee (TDR) when you successfully receive a payment. Unlike legacy competitors who may charge ₹5,000–₹20,000 annually, Razorpay does not charge you for simply keeping your account active.

3. Why is Razorpay’s platform fee 2% when others offer 1.8%?

The 2% fee covers more than just payment processing; it includes Smart Routing technology, 24/7 developer support, and access to the Flash Checkout network. Budget gateways offering 1.8% often rely on single-bank rails (lower reliability) and hide costs in setup fees or lower success rates. The extra 0.2% premium on Razorpay essentially acts as insurance to ensure your transactions don’t fail during peak traffic.

4. What is the cheapest payment gateway in India for startups?

For early-stage startups processing under ₹5 Lakhs/month, Razorpay is often the most cost-effective option due to its Zero Fixed Cost structure. Many competitors advertised as “cheapest” (e.g., 1.7% TDR) levy annual fees (AMC) or setup charges. For a small business, a ₹5,000 fixed fee effectively acts as a 1% to 5% tax on your volume, making the “cheap” gateway significantly more expensive than Razorpay’s standard 2% model.

5: How do I calculate the true cost of a payment gateway?

To calculate the real cost, use this formula: Total Cost = (Transaction Fees) + (Annual Fixed Costs) + (Revenue Lost to Failures). Most founders make the mistake of only looking at Transaction Fees. However, if a gateway has a 5% lower success rate, the Revenue Lost to Failures will be 10x higher than any savings you make on the transaction fee.