For an Indian business processing under ₹25 lakh in monthly Gross Merchandise Value (GMV), the cheapest payment gateway is rarely the one with the lowest advertised Merchant Discount Rate (MDR). At this volume band, fixed costs such as annual maintenance charges (AMC) and setup fees, plus revenue lost on failed transactions, dominate small differences in headline transaction rates. A payment gateway with a 1.8% MDR but a ₹4,999 AMC and an 85% payment success rate can leave more rupees on the table than one with a 2% MDR, zero AMC, and a 93% success rate. This guide reframes “cheapest” as the payment gateway that maximises net realised revenue.
Key Takeaways
- “Cheapest” under ₹25 lakh GMV means highest net realised revenue, not lowest MDR.
- A ₹4,999 annual AMC adds ₹416 to monthly operating cost before a single transaction is processed.
- At ₹2.08 lakh monthly GMV, a 0.2 percentage point MDR discount is fully erased by a ₹4,999 AMC.
- One percentage point of payment success rate is worth 10x a 0.1 percentage point MDR saving at ₹10 lakh GMV.
- Bank-account UPI carries 0% network MDR, but UPI on wallets or RuPay credit cards can attract 0.5% to 2% merchant cost.
- MDR is generally not refunded when you refund a customer.
- Instant settlement typically costs 0.15% to 0.30% per transaction.
Quick Answer: Which Payment Gateway Is Cheapest Under ₹25 Lakh GMV?
The cheapest payment gateway for a business under ₹25 lakh monthly GMV is almost never the one with the lowest advertised transaction rate. It is the payment gateway that produces the highest net rupee deposit in your bank account after factoring in transaction fees, fixed fees, payment success rate, refunds, and any settlement add-ons.
For this volume band, the lowest total cost of ownership (TCO) comes from a payment gateway that combines six attributes:
Attribute |
What to look for |
| Setup fee | ₹0, or fully waived |
| Annual maintenance charge | ₹0, or under ₹1,200 per year |
| Domestic MDR | Transparent, flat, around 2% for cards, UPI, net banking, wallets |
| Payment success rate | Independently verifiable at or above 93% |
| Instant settlement | Optional and per-transaction, not bundled |
| Refund and chargeback policy | No additional refund processing fee, clear MDR treatment |
A payment gateway charging 1.9% MDR but ₹4,999 in AMC and showing an 85% success rate can produce ₹10,000 to ₹60,000 less monthly revenue than a zero-AMC, 93% success payment gateway at the same ₹10 lakh GMV. The brand to choose is the one whose published rate card plus operational metrics deliver the highest net realised revenue against your actual payment mix. Razorpay’s standard plan, which lists ₹0 setup and ₹0 maintenance with a 2% platform fee on domestic transactions, is a reference point for evaluating any other published rate card.
Why Lowest MDR Is Not the Same as Lowest Cost
Most merchants treat MDR as the entire cost of a payment gateway. This is incorrect for businesses under ₹25 lakh monthly GMV, because at lower volumes fixed fees and failure-driven revenue loss dominate small MDR differences.
MDR only applies when a payment succeeds
MDR is levied on successful transactions. A failed UPI handshake, a timed-out card authentication, or a dropped 3D Secure flow does not show up as a gateway fee, but it does erase the entire order value from your top line. A payment gateway with a slightly lower MDR but a weaker success rate effectively charges you the full margin of every dropped order.
The real metric is net realised revenue
A merchant-friendly formula for evaluating any payment gateway is:
Net Realised Revenue = (Attempted GMV × Payment Success Rate) – Transaction Fees – Fixed Fees – Settlement Add-ons – Refund and Dispute Costs
This formula starts with attempted GMV rather than successful GMV, because the payment success rate determines how much of your traffic actually converts into captured revenue. A payment gateway with 93% success on ₹10 lakh attempted GMV captures ₹9.3 lakh. One with 85% captures only ₹8.5 lakh. That ₹80,000 monthly gap is 40x larger than the saving from a 0.1 percentage point lower MDR at the same volume.
Why this matters more below ₹25 lakh GMV
Fixed fees amortise over fewer transactions at low GMV. A ₹4,999 annual AMC works out to ₹416 per month. At ₹2 lakh GMV, that ₹416 is 0.21% of your top line — enough to wipe out an entire 0.2 percentage point MDR advantage advertised elsewhere. At ₹50 lakh GMV, the same ₹4,999 is only 0.008% of GMV and effectively irrelevant.
This is why our low-cost payment gateway decision guide recommends building a TCO model rather than ranking payment gateways by their landing-page MDR.
Did You Know? A payment gateway charging ₹4,999 per year in AMC adds ₹416 to monthly operating cost. At ₹2 lakh monthly GMV, that single line item adds 0.21 percentage points to your effective cost, enough to erase the advantage of a 0.2 percentage point lower advertised MDR.
The 7 Cost Components You Must Compare
A complete payment gateway comparison must look at seven cost categories. Each interacts with your GMV, payment mix, and refund rate differently.
1. MDR or platform fee by payment mode
MDR varies by instrument. Typical Indian benchmarks for 2026 cluster as follows:
| Payment mode | Typical MDR band |
| Bank-account UPI | 0% network, gateway platform fee may apply |
| Domestic debit cards | 0.4% to 0.9% |
| Domestic credit cards | 1.5% to 2.2% |
| Net banking | 1.0% to 1.5% |
| Wallets | 1.5% to 2.5% |
| EMI | 2.5% to 3.5% |
| International cards | 3.0% to 4.5% |
Use a blended MDR to compare flat-fee and instrument-wise payment gateways. Our breakdown of MDR, TDR, AMC, setup fee, and platform fee details each component.
2. Setup fee and AMC
Some payment gateways still charge ₹5,000 to ₹50,000 in one-time setup fees and ₹2,400 to ₹9,999 per year in AMC. Others, including Razorpay, list ₹0 setup and ₹0 maintenance. One legacy payment gateway publishes a ₹1,200 plus GST annual software upgradation charge with a privilege plan setup fee of ₹30,000. At low GMV, these fixed line items dominate.
3. Payment success rate
Independent comparisons place payment success rates across Indian payment gateways between roughly 80% at the low end and 93% or higher at the top end. One comparison reports at least 93% payment success rate for Razorpay’s payment gateway. An 8 percentage point gap on ₹10 lakh GMV equals ₹80,000 of revenue that either converts or evaporates.
4. GST on payment gateway fees
GST at 18% applies on payment gateway fees in India. A 2% MDR becomes an effective 2.36% after GST. Always compute MDR × 1.18 when modelling cost.
5. Instant settlement fees
Same-day or instant settlement is rarely free. Razorpay lists instant settlement pricing starting at 0.20% for settlements within 10 seconds and 0.15% to 0.20% for same-working-day settlements with no setup or AMC on the facility itself. Some payment gateways charge 0.20% to 0.50% per day for advancing settlement.
6. Refund and chargeback cost
MDR is generally not refunded when a merchant refunds a customer. Our explainer on whether MDR is refunded on refunds confirms that the principal goes back to the customer but the original transaction fee is not reversed. For a business with a 5% refund rate at ₹10 lakh GMV and 2% MDR, that is ₹1,000 in MDR retained on reversed revenue every month.
7. Recurring payment and mandate costs
Subscriptions ride on UPI AutoPay, e-NACH, or card mandates. Razorpay’s e-mandate and recurring payments overview notes transaction limits of ₹1,00,000 per transaction for categories such as mutual fund subscriptions, insurance premiums, and credit card bill payments, and ₹15,000 for other categories.
Public Pricing Snapshot of Major Indian Payment Gateways
The table below consolidates publicly listed standard pricing as inputs to your TCO calculation. Treat these as starting points, since enterprise pricing is negotiable above approximately ₹5 lakh monthly GMV.
| Payment gateway | Domestic standard pricing | International cards | Setup fee | AMC or annual fixed fee | Settlement notes |
|---|---|---|---|---|---|
| Razorpay | 2% per successful domestic transaction across cards, UPI, net banking, wallets | 3% for Amex, Diners, international cards, and EMI | ₹0 | ₹0 | Standard settlement free, optional instant settlement at 0.15% to 0.30% |
| One promotional-rate payment gateway | 1.95% standard domestic MDR | ~3% standard | Not publicly listed | Not publicly listed | T+2 default; instant settlement available up to a per-day limit |
| A pay-as-you-use payment gateway | 2% plus GST for cards, net banking, wallets, UPI | 3% plus GST | Not standard | Not standard | T+1 or T+2 typical |
| An instrument-priced legacy payment gateway | 1.90% UPI, 2.15% credit card on UPI, 3% corporate/Amex/Diners | 3% international cards | ₹0 startup plan; higher for premium plans | ₹1,200 annual software upgradation charge plus GST on standard plan | Early settlement at 0.20% to 0.50% per day |
| An online-only zero-AMC payment gateway | 2% plus ₹3 per transaction | 3% plus ₹3 | ₹0 | ₹0 for gateway; store plans up to ₹14,999/year | Standard T+2 |
| An SME-focused payment gateway | 0.40% UPI under ₹2,000, 0.90% UPI over ₹2,000; card rates 1.20% to 3.99% by category | Category-dependent | ₹0 for SME | Not explicitly listed | Mixed T+0/T+1 products |
Important context. Some payment gateways charge ₹4,999 per year in AMC, which adds materially to effective cost under ₹25 lakh GMV. Some gateways with lower TDR recover margin through annual maintenance charges, software upgradation charges, or per-settlement fees not visible on the rate card. To turn the table into a ranking, layer your GMV, payment mix, refund rate, and target settlement speed onto the rate cards.
Did You Know? Some payment gateways still charge a one-time setup fee between ₹5,000 and ₹50,000 and an annual maintenance charge of up to ₹9,999 per year. Razorpay’s published pricing lists ₹0 for both setup and maintenance.
How to Calculate Real Payment Gateway Cost Under ₹25 Lakh GMV
Use a five-step model to convert any rate card into an actual rupee cost for your business.
Step 1: Start with attempted GMV, not successful GMV
Pull your last six months of transaction data and identify gross attempted transaction value, including failed and abandoned attempts. This number, not your captured revenue, is the input into the cost model, because it is where payment success rate acts as a multiplier.
Step 2: Apply payment success rate
Captured GMV = Attempted GMV × Payment Success Rate
A payment gateway claiming 93% on ₹10 lakh of attempted GMV captures ₹9.3 lakh. A payment gateway delivering 85% captures ₹8.5 lakh. Always treat success rate as the first cost lever, because it acts on the full cart value, not just the fee slice.
Step 3: Apply MDR and GST
Transaction Fees = Captured GMV × MDR × 1.18
Use a blended MDR based on your actual payment mix:
Blended MDR = (UPI share × UPI MDR) + (Card share × Card MDR) + (Wallet share × Wallet MDR) + (Net Banking share × Net Banking MDR)
For a D2C brand with 70% UPI, 20% cards, and 10% wallets, the blended MDR calculation depends heavily on the gateway’s platform fee on bank-account UPI — which varies across providers and is often not prominently disclosed.
Step 4: Add fixed fees
Monthly Fixed Cost = (Annual AMC / 12) + (Setup Fee / 12 for the first year)
A ₹5,000 setup fee plus a ₹4,999 AMC adds ₹833 per month in year one. At ₹2 lakh GMV, that is 0.42% of GMV, effectively a hidden MDR. Razorpay’s payment gateway misconceptions guide flags this as a common mistake.
Step 5: Add refund, chargeback, and settlement costs
Refund MDR Cost = Refunded GMV × MDR
Instant Settlement Cost = Instant-settled GMV × Instant Settlement Fee Percentage
Add these to fixed and transaction costs to arrive at total cost. Subtract from captured revenue to get net realised revenue.
The break-even principle
A ₹4,999 AMC needs to be offset by MDR savings somewhere. The break-even GMV at which a 0.2 percentage point lower MDR offsets a ₹4,999 AMC is approximately ₹2.08 lakh per month. Below that, a zero-AMC payment gateway with 0.2 percentage points higher MDR is cheaper in absolute rupee terms. Above ₹2.08 lakh, the lower-MDR plan starts to win on direct transaction cost, but only if its success rate matches.
Worked Examples: ₹5 Lakh, ₹10 Lakh, and ₹25 Lakh Monthly GMV
The following examples use generic “Payment Gateway A” and “Payment Gateway B” labels. Numbers are illustrative but anchored in the published rate cards above.
Example 1: ₹5 lakh monthly GMV
| Payment Gateway A | Payment Gateway B | |
|---|---|---|
| MDR | 2% | 1.8% |
| AMC (monthly) | ₹0 | ₹416 |
| Payment success rate | 93% | 86% |
| Captured GMV | ₹4,65,000 | ₹4,30,000 |
| Transaction fees | ₹9,300 | ₹7,740 |
| Net realised revenue | ~₹4,55,700 | ~₹4,21,844 |
The 0.2 percentage point MDR advantage on Payment Gateway B is worth ₹860 per month at most. The 7 percentage point success rate gap costs ₹35,000 in captured GMV. Payment Gateway A wins by roughly ₹33,856 per month.
Example 2: ₹10 lakh monthly GMV
| Payment Gateway A | Payment Gateway B | |
| MDR | 2% | 1.80% |
| AMC (monthly) | ₹0 | ₹416 |
| Payment success rate | 93% | 87% |
| Captured GMV | ₹9,30,000 | ₹8,70,000 |
| Transaction fees | ₹18,600 | ₹15,660 |
| Net realised revenue | ~₹9,11,400 | ~₹8,53,924 |
Gap: roughly ₹57,476 per month in favour of the zero-AMC, higher-success-rate payment gateway. At ₹10 lakh attempted GMV, one percentage point of payment success rate is worth ₹10,000 in captured GMV, while a 0.1 percentage point MDR difference is worth only ₹1,000.
Example 3: ₹25 lakh monthly GMV
| Payment Gateway A | Payment Gateway B | |
|---|---|---|
| MDR | 1.95% (custom-priced above ₹5L GMV) | 1.8% |
| AMC (monthly) | ₹0 | ₹833 |
| Payment success rate | 93% | 88% |
| Captured GMV | ₹23,25,000 | ₹22,00,000 |
| Transaction fees | ~₹45,338 | ~₹39,600 |
| Net realised revenue | ~₹22,79,662 | ~₹21,59,567 |
Gap: approximately ₹1,20,095 per month. At ₹25 lakh GMV, MDR negotiation begins to matter because absolute rupee amounts grow, but success rate continues to dominate. Razorpay offers volume-based pricing once businesses have six to twelve months of transaction history, and our volume-based payment gateway pricing guide explains what data to bring.
Did You Know? At ₹10 lakh attempted monthly GMV, one percentage point of payment success rate is worth ₹10,000 in captured revenue, while a 0.1 percentage point MDR saving is worth only ₹1,000. Success rate is roughly 10x more valuable than equivalent MDR negotiation at this volume band.
UPI Is Not Always Free for Merchants: What Changed in 2025-2026
A common merchant assumption is that UPI is free. This is half-true. UPI is free for end customers, but the merchant cost depends on the UPI rail used.
Three UPI cost layers
| UPI type | Free for customer? | Merchant cost |
|---|---|---|
| Bank-account UPI | Yes | 0% network MDR; gateway platform fee may apply |
| UPI on wallet or PPI above ₹2,000 | Yes | Interchange of 0.5% to 1.1% applies to merchant |
| RuPay credit card on UPI | Yes | Credit-like MDR of approximately 1.1% to 2% applies |
| UPI AutoPay | Yes | Gateway or mandate platform charges may apply |
Per our UPI transaction charges for merchants explainer, UPI PPI interchange varies by merchant category: 0.5% for fuel, 0.7% for telecom, utilities, and education, 0.9% for supermarkets, and 1.1% for insurance, mutual funds, and railways for transactions above ₹2,000.
2025-2026 policy updates that affect cost calculus
UPI per-transaction limits were raised to ₹5 lakh for categories such as capital markets, insurance, government e-marketplace tax payments, travel, credit card bill payments, and business or merchant payments. Jewellery transactions are capped at ₹2 lakh per transaction. RBI’s updated authentication rules, effective 1 April 2026, require two factors of authentication from different categories with at least one dynamic factor for every digital payment transaction. Stronger authentication should lower fraud and chargebacks over time but may temporarily affect conversion if integrations are not updated.
For a merchant with 70% of GMV through UPI, the cost picture depends on whether customers default to bank-UPI or wallet-UPI. If 80% of UPI flows are bank-account UPI and 20% are wallet-UPI above ₹2,000 in a supermarket category, the blended UPI cost is approximately (0.8 × 0%) + (0.2 × 0.9%) = 0.18%, before the payment gateway platform fee.
When Should You Pay for Instant Settlement?
Standard payment gateway settlement in India is typically T+2. Instant or same-day settlement is an optional facility priced per transaction. It is a working capital tool, not a default setting.
The pricing
Razorpay’s instant settlements for businesses facility prices same-working-day settlements at 0.15% to 0.20% and within-10-second settlements at 0.20% to 0.30% per transaction. There is no setup or AMC. Some payment gateways price instant settlement as 0.20% to 0.50% per day of advancement, which compounds quickly.
When it makes sense
Suppose a merchant uses instant settlement on 20% of ₹10 lakh monthly GMV at 0.20%:
- Instant-settled GMV: ₹2,00,000
- Extra cost: ₹400 per month
- Effective MDR increase, blended: 0.04 percentage points
If those ₹2,00,000 in same-day funds let you restock inventory and avoid working capital borrowing at 14% per annum, the facility pays for itself many times over. If your business runs on healthy cash reserves and T+2 settlement is not causing operational friction, the extra cost is not justified.
How to Make Your Final Decision
Once you have run each gateway’s rate card through the five-step model above, three numbers determine the ranking: net realised revenue at your GMV, the break-even GMV for any AMC difference, and the success rate gap expressed in rupees per month.
For most businesses under ₹25 lakh monthly GMV, the decision reduces to: find the gateway with the highest payment success rate and zero fixed fees, then evaluate whether any MDR difference at your specific GMV and payment mix offsets that. At volumes below ₹2.08 lakh per month, a zero-AMC gateway with 2% MDR is cheaper than any gateway with a ₹4,999 AMC, regardless of how low the competing MDR is. At higher volumes approaching ₹25 lakh, begin a pricing conversation with your existing gateway or evaluate alternatives that offer volume-based negotiation.
Razorpay’s pricing page is a useful starting point. Our true cost comparison guide walks through how to model cost across different volume bands.
Frequently Asked Questions
Which payment gateway is cheapest for a business under ₹25 lakh monthly GMV?
The cheapest payment gateway is the one that produces the highest net realised revenue, not the lowest advertised MDR. For businesses below ₹2.08 lakh per month, a zero-AMC gateway with a 93%+ payment success rate will retain more rupees than a lower-MDR gateway charging ₹4,999 in annual maintenance. At volumes approaching ₹25 lakh, the calculation shifts and MDR negotiation starts to matter. Razorpay lists ₹0 setup, ₹0 AMC, and a 2% flat domestic MDR as its standard rate, with custom pricing available above ₹5 lakh monthly GMV.
What is the difference between MDR, TDR, AMC, and platform fee?
MDR (Merchant Discount Rate) and TDR (Transaction Discount Rate) are often used interchangeably and refer to the percentage fee charged on each successful transaction. AMC (Annual Maintenance Charge) is a fixed fee charged by some gateways regardless of transaction volume. A platform fee is a fixed rupee amount charged per transaction in addition to, or instead of, a percentage MDR. Our complete guide to payment gateway charges explains how each component is calculated.
Does Razorpay charge an annual maintenance fee or setup fee?
No. Razorpay’s published pricing lists ₹0 for both setup fee and annual maintenance charge on its standard plan. The domestic transaction MDR is 2% across cards, UPI, net banking, and wallets. International cards, Amex, Diners, and EMI transactions are charged at 3%.
Is UPI free for merchants in India?
Bank-account UPI transactions carry 0% network MDR for merchants, but a payment gateway may charge a platform fee on top of the network rate. UPI transactions made through a prepaid payment instrument (PPI wallet) above ₹2,000 attract an interchange fee of 0.5% to 1.1% depending on merchant category. RuPay credit card transactions on UPI attract a credit-card-like MDR. The full picture depends on your payment mix and your gateway’s specific platform fee policy on UPI.
What is the break-even GMV when comparing two payment gateways on cost?
If Gateway A charges 2% MDR with ₹0 AMC and Gateway B charges 1.8% MDR with ₹4,999 AMC (₹416/month), the break-even point is approximately ₹2.08 lakh per month in GMV. Below that volume, Gateway A is cheaper in absolute rupees despite the higher MDR. Above ₹2.08 lakh, Gateway B’s MDR saving begins to exceed the AMC cost, but only if its payment success rate matches Gateway A’s. A lower success rate on Gateway B can shift the break-even point significantly higher.
Does Razorpay refund MDR when a customer is refunded?
No. MDR is charged on the original successful transaction and is not reversed when a refund is issued to the customer. The principal amount is returned to the customer in full, but the gateway retains the transaction fee. This is standard practice across Indian payment gateways. Our MDR refund policy explainer details how this affects merchants with high refund rates and how to model the cost.
What is payment success rate and why does it matter more than MDR?
Payment success rate is the percentage of attempted transactions that result in a successful payment capture. A gateway with a 93% success rate converts 93 out of every 100 checkout attempts into revenue. A gateway at 85% loses 8 additional transactions per 100 attempts. At ₹10 lakh in attempted GMV, that 8 percentage point gap equals ₹80,000 in lost revenue per month, while a 0.1 percentage point MDR difference at the same volume is worth only ₹1,000. Payment success rate is the single highest-leverage variable in the cost model for businesses under ₹25 lakh GMV.
When does instant settlement make financial sense for a small business?
Instant settlement makes sense when the cost of waiting for T+2 funds exceeds the settlement fee. If same-day funds allow you to avoid short-term borrowing at 14% to 18% per annum, restock inventory faster, or fulfil orders without a cash gap, the 0.15% to 0.20% instant settlement fee is likely cheaper than the alternative. It does not make financial sense as a default setting for all transactions. Razorpay’s instant settlement facility lets you apply it selectively per transaction rather than bundling it across your full GMV.
