A payment gateway is an online service that lets a website or app accept payments by card, UPI, net banking, wallets and EMI, securely passing each transaction to the bank for authorisation and settling the money to the merchant's account, usually within one to two days. Razorpay, PhonePe, Cashfree, PayU and Paytm are common Indian gateways.
Why it matters for an Indian small business
A plain UPI QR covers most Indian customers, but a gateway adds what a growing business needs: automatic confirmation that updates an order, refunds without manual transfers, card and EMI options for a ₹40,000 purchase, international cards for NRI customers, recurring billing, and a dashboard that reconciles every rupee. It also provides the hosted checkout page that handles security compliance so you never touch card data.
Costs are predictable: most Indian gateways charge around 2 percent plus 18 percent GST on cards and net banking, often zero or near zero on UPI, with no setup fee on standard plans. Settlement is typically T+1 or T+2, and instant settlement is available for a fee.
How it works
You sign up with the gateway, submit KYC (PAN, bank account, business proof, website URL, and GSTIN if registered), and get API keys or a no-code payment button or link. On checkout, the customer is sent to the gateway's secure page or a popup, picks a method and pays. The gateway talks to the card network or NPCI, gets authorisation and notifies your site, which marks the order paid. Funds are held and settled to your bank in a batch minus fees.
Gateways also issue payment links and QR codes for businesses without a cart, support subscriptions via UPI AutoPay and card mandates, and provide reports for GST reconciliation. Approval usually takes a few days and requires the website to be live, on HTTPS, with terms, privacy and refund policy pages.
Example: a Mumbai interior designer
Studio Andheri Interiors charges ₹25,000 for a design consultation and 50 percent of project value up front, which can be ₹3 lakh. Clients wanted card EMI and some NRI clients needed to pay from abroad. The studio integrates a gateway: the proposal page carries a Pay now button that opens a checkout with UPI, cards, EMI and international cards. The gateway's 2 percent fee on a ₹3 lakh card payment is ₹6,000 plus GST, which the studio accepts for the convenience, while most consultation fees come through UPI at no charge. Automatic receipts and a reconciled dashboard replace a spreadsheet the accountant used to maintain by hand.
Common mistakes
- Applying before the site has privacy, terms and refund pages, which stalls approval.
- Paying gateway fees on UPI when a direct QR would be free for small amounts.
- Not enabling the payment methods customers actually use, such as UPI intent on mobile.
- Ignoring settlement timing and running short of cash on weekends.
- Hard-coding one gateway into the site with no way to switch.
How Neweb handles it
Neweb generates the privacy, terms and refund pages gateways require, serves every site over HTTPS, and supports embedding Razorpay, PhonePe, Cashfree and similar payment buttons and links alongside the built-in UPI QR block.
Payment Gateway questions
How much does a payment gateway cost in India?
Typically about 2 percent plus GST per transaction on cards, net banking and wallets, with UPI often free or under 1 percent. Standard plans have no setup or annual fee; enterprise plans negotiate lower rates.
Do I need a payment gateway if I accept UPI?
Not for simple payments. You need one when you want automatic order confirmation, refunds, card or EMI options, international payments or subscriptions.
What documents are needed to get a payment gateway?
PAN, bank account proof, business registration or Udyam, GSTIN if applicable, identity proof of the owner, and a live website with policy pages.
How fast do I receive the money?
Usually one to two business days after the transaction. Many gateways offer same-day or instant settlement for an extra fee.
Which payment gateway is best for small business in India?
Razorpay, PhonePe, Cashfree and PayU all serve small businesses well. Compare fees on your main payment method, settlement speed, support quality and how easily the gateway embeds in your site.
Related terms.
Related pages.
Choose a payment gateway in India
Fees, settlement and features compared for small businesses.
Privacy policy generator
One of the pages every gateway asks for before approval.
Terms and conditions generator
Draft the terms page required for merchant onboarding.
Create a return and refund policy
The third policy page gateways check.
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