Choosing a payment gateway for Indian SMEs

What this guide helps you compare

A payment gateway lets your website, app or payment link accept UPI, cards, net banking and other methods, and then settles the money into your bank account. For a small business the choice affects how quickly you get paid, how much each sale costs you, and how much time your staff spend matching payments to orders.

We do not name or rank gateway companies here. Offers and terms change, and the right choice depends on your business type, order size and the software you already use. Instead, this guide gives you the questions to put to every gateway on your shortlist and a sheet to compare their answers. The buyer-facing side of payments, such as how UPI and COD look at checkout, is covered in our guide to UPI and checkout must-haves for Indian online stores.

Gateway, payment aggregator and bank: who does what

The terms are often used loosely. A payment gateway is the technology that carries the payment request from your checkout to the banks and payment networks. A payment aggregator is a company that accepts payments on behalf of many merchants and then settles the money to them; most services that small businesses sign up for online work this way and combine both roles. Your bank holds the account where settlements arrive, and the buyer's bank or UPI app authorises each payment.

In India, payment aggregators are regulated by the Reserve Bank of India. Before signing up, check the company's regulatory status for yourself on the RBI website, where lists of authorised payment system operators are published, rather than relying only on the claim in its brochure. This matters because your sales money passes through that company before it reaches you.

Onboarding: documents and website requirements

Every gateway carries out KYC (know your customer) checks before it activates live payments. Requirements differ, but have these ready to avoid delays:

• PAN of the business, or of the proprietor for a sole proprietorship.
• Proof of business: GST registration certificate where you have one, or other registration documents accepted by the gateway.
• A current account or bank account in the business's name, with a cancelled cheque or bank statement.
• Identity and address proof for proprietors, partners or directors who sign the agreement.
• Company or LLP documents such as incorporation certificate and board resolution, if applicable.
• A live website or app with product or service details, prices, contact information, and refund, cancellation, shipping, privacy and terms pages.

The last point catches many businesses out. Gateways commonly review the website before activation and may hold approval until the policy pages are published and prices are visible. Some business categories are restricted or need extra approval, so mention exactly what you sell when you apply.

Pricing questions to ask, and get in writing

Do not compare gateways on a single headline percentage. Ask each one for a written schedule that answers these questions for your business:

• Transaction charges (often called MDR, merchant discount rate) for each method separately: UPI, debit cards, credit cards, net banking, wallets, international cards and EMI.
• Whether GST is charged on top of the transaction fee.
• Any one-time setup fee, annual maintenance fee or minimum monthly commitment.
• Charges for refunds, and whether the original transaction fee is returned when you refund.
• Charges for chargebacks and disputes.
• Extra charges for faster settlement, payment links, recurring payments or other add-on features.
• How and when the pricing can change, and how you will be notified.

Then estimate your actual cost using your own order mix. A store where most buyers pay by UPI will see a different total from one where most pay by credit card, even with the same gateway.

Settlement cycle and reconciliation

Settlement is when money collected from buyers reaches your bank account. Gateways describe this as a number of working days after the transaction, often written as T+1, T+2 and so on, and bank holidays shift it. For a small business buying stock on short credit, the settlement cycle can matter as much as the fee.

Ask what the standard cycle is for your category, whether a faster option exists and at what cost, and whether any amount is held back as a reserve. Then ask how settlements are reported. Each settlement usually bundles many orders after deducting fees, refunds and taxes; your accountant needs a report that breaks this down per order so it can be matched to invoices. If you run billing or ERP software, ask whether that report can be downloaded in a format your software can import, or fetched automatically through the gateway's API.

Payment methods, refunds and chargebacks

Confirm the methods you need are supported: UPI, the card types your buyers carry, net banking for your customers' banks, and international payments if you sell abroad. If you sell to businesses, ask about higher transaction limits and payments by business cards.

For refunds, check whether staff can issue full and partial refunds from the dashboard and through the API, so your store's admin panel can trigger them directly. For chargebacks, which happen when a cardholder disputes a payment with their bank, ask how you will be notified, how long you have to respond and what evidence is accepted. Keep invoices, delivery proof and customer messages for every order; they are your defence.

Integration with your website, app and billing software

Technical fit decides how much work integration takes and how reliable it is afterwards. Ask whether the gateway offers a ready plugin for your store platform or a documented API for custom sites, whether it sends server-to-server notifications (webhooks) for payment and refund events, and whether a test mode lets your developer try every scenario before going live.

Also ask about features you may grow into: payment links you can send on WhatsApp for phone orders, recurring payments for subscriptions or fees, split settlements if you run a multi-vendor marketplace, and data that can flow into your accounts. If you sell on credit to dealers as well as online, payment data that reaches your ledger helps with collections, a topic covered in our guide to outstanding collection in retail ERP.

A comparison sheet for your shortlist

Copy this table into a spreadsheet and fill in one column per gateway from their written answers. Leave a cell blank if the answer was vague; a blank is a question still to ask.

How MATROP helps with gateway integration

MATROP does not sell or resell payment gateways, so we have no reason to push you towards one. As part of our e-commerce development service, we integrate the gateway you select into your website, app or retail and distribution software, handle payment and refund notifications, and test success, failure, pending and refund cases before launch. If you have not yet prepared your launch, our e-commerce launch checklist includes the payment tests to run.

If you are only starting to take a few orders through WhatsApp or phone calls, you may not need a website integration yet. Payment links or a UPI QR code from your bank or gateway can be enough until order volume makes manual matching a burden.

Questions people ask

Can we use more than one payment gateway on the same website?

Yes, it is technically possible and some businesses keep a second gateway as a backup. It does add work, because you will reconcile two sets of settlements and manage two dashboards, so start with one unless you have a clear reason.

Do we need GST registration to get a payment gateway?

Not always; gateways accept different proofs of business depending on your business type. Whether you must register for GST is a separate tax question, so check your obligations with your CA and the GST portal.

Who handles a chargeback, the gateway or our business?

The gateway informs you and manages the process with the bank, but you must supply the evidence, such as the invoice, delivery proof and customer communication, within the deadline it gives. The outcome is decided under the card network's or bank's rules.

Can a sole proprietor or home business get a payment gateway?

Many gateways onboard sole proprietorships, usually with the owner's PAN, a bank account and some proof that the business exists. The exact document list differs between gateways, so ask for it in writing before you apply.