What are the UPI Payment Gateway Charges in India?
6 min read
These days, convenience is everything. Customers want to shop, pay, and do just about everything from the comfort of their homes. For online businesses, anything that makes the payment process smoother is a game-changer. Because at the end of the day, it’s all about boosting revenue and making the whole checkout experience as easy as possible. Less cart abandonment, fewer payment drop-offs- if you can make that happen, you’re winning as a merchant.
A key player in this is a UPI payment Gateway.
What is UPI Payment Gateway?
In simple terms, it’s a payment gateway that enables businesses (merchants) to receive payments directly from a customer’s bank account through UPI.
Unlike traditional payment methods, UPI removes the need for customers to manually input card details at checkout. Instead, it redirects them to their preferred UPI app, where they can quickly enter their MPIN, and the payment is processed almost immediately.
For instance, if you operate an online store and offer UPI as a payment option, when a customer selects UPI, the transaction is completed via their UPI app. As an online business, you know that a payment gateway allows you to offer multiple payment options, including UPI. But its benefits go beyond just payment acceptance.
They are extremely useful for merchants, making transactions a more streamlined and convenient process for everyone involved. However, it’s important to note that UPI payment gateways do come with their own fees and charges. Let’s take a look into what these are.
What are UPI Payment Gateway Charges?
When it comes to accepting payments online, there’s more to it than just processing transactions. Payment gateway charges play a key role in covering the costs of facilitating smooth and secure transactions between you and your customers. Typically, these charges are a small percentage of the payment amount and can vary depending on the payment method used.
Some payment gateways may also have additional charges, such as:
Setup Fees – This is a one-time cost to integrate the payment gateway with your website. It covers the technical setup, configuration, and activation to get the system up and running for smooth transactions.
Annual Maintenance Charges (AMC) – This yearly fee is for maintaining the payment gateway, including updates, security patches, and support. It helps keep your gateway secure and compliant with industry standards.
Different payment gateway service providers charge differently. For instance, some may not charge for setup or integration. Like, PhonePe Payment Gateway has zero setup fees and zero annual maintenance charges. Plus, you only pay transaction fees on successful payments, making it a cost-effective and transparent solution for your business.
Next let’s take a look at:
Factors Affecting UPI Payment Gateway Charges
There are various factors that may affect UPI payment gateway charges. These include:
1. Merchant Category & MDR Applicability
UPI transactions do not have a standard MDR (Merchant Discount Rate) like card payments, but charges may apply based on the merchant category.
The National Payments Corporation of India (NPCI) has introduced MDR for specific high-value UPI transactions, particularly for certain business categories.
Person-to-Person (P2P) transfers (e.g., sending money between friends) are free and do not involve a payment gateway.
Person-to-Merchant (P2M) transactions, where businesses accept payments via UPI, may incur charges based on the transaction type and merchant category.
Different UPI payment modes may have varying cost structures:
UPI Collect (VPA-based requests): May have a charge for high-volume businesses.
UPI Intent (one-tap checkout): Often preferred for better conversion rates, but charges may apply based on the provider.
UPI QR Code Payments: small merchants may have zero-cost options but high-value transactions typically incur MDR or fixed charges.
UPI AutoPay (Recurring Payments): Subscription-based businesses using UPI AutoPay may incur a fixed charge on setup and redemption or MDR per transaction. Charges vary based on the payment provider’s pricing structure.
4. Transaction Value & Volume
Some payment gateways offer tiered pricing, where businesses processing higher transaction volumes may negotiate lower charges.
Higher transaction values may attract MDR, especially for premium merchant categories.
5. Payment Gateway Provider Fees
Third-party UPI PGs (like PhonePe PG) may apply their own platform fees on top of MDR. Businesses may incur additional costs for features, such as:
Real-time payment reconciliation
Higher success rate optimisations
Custom integrations & analytics
6. Regulatory & NPCI Guidelines
The NPCI regulates MDR policies for UPI transactions, which can change based on government directives.
Government incentives sometimes reduce or eliminate charges for specific sectors (e.g., MSMEs, digital-first businesses).
UPI Payment Gateway charges vary based on merchant type, transaction volume, payment mode, and provider-specific fees. While UPI remains a low-cost option compared to card payments, businesses must evaluate MDR structures and PG provider fees to optimise their payment costs.
Next, let’s take a look at some of the recent developments in UPI payment gateway charges.
Recent Developments in UPI Payment Gateway Charges
1. Higher Limits for Small Transactions
If your business handles small-ticket payments often, here’s some good news. The RBI has increased the transaction limit for UPI 123Pay from Rs. 5,000 to Rs. 10,000, and the wallet capacity for UPI Lite has been bumped up to Rs. 5,000. This gives your customers more flexibility and helps you handle payments without interruptions.
2. Interchange Fee on Wallet Payments Above Rs. 2,000
If your customers use prepaid wallets for payments over Rs. 2,000, you’ll now be charged a 1.1% interchange fee by the payment service provider. This is something to keep in mind, especially for higher-value transactions, as it adds to your payment costs.
3. No Fees for Transactions Under Rs. 2,000
For smaller businesses or those handling low-value transactions, there’s relief. Payments below Rs. 2,000 using wallets are exempt from the interchange fee. So, if you’re dealing with smaller orders, you won’t have to worry about any extra charges eating into your margins.
Consumers are increasingly choosing UPI as their preferred payment option, and this trend is only set to grow. According to PwC, UPI will account for nearly 90% of digital payments by FY 2026-2027. For businesses, this means offering UPI as a payment method, along with a secure payment gateway that prioritises data privacy and security, is crucial to staying ahead.
PhonePe Payment Gateway is the perfect solution for businesses of all sizes. Built by India’s most trusted digital payments partner, it provides a secure, seamless platform for processing online payments. With zero setup fees, no annual maintenance charges, and no hidden costs, PhonePe PG is not only cost-effective but also capable of handling large-scale transactions with industry-best success rates.
