Payment gateway fees: what businesses need to know

Key takeaways

• Payment gateway fees are the charges your businesses must pay to process online customer payments. This can include transaction fees, monthly charges, chargeback fees, and cross-border costs.

• The payment gateway provider’s pricing model often has a bigger impact on your total costs than any single fee type.

• Airwallex offers transparent pricing, multi-currency Global Accounts, and 160+ local payment methods to help you cut payment gateway fees on domestic and international transactions.

Every online transaction costs you money. Payment gateway fees are the charges you pay your provider to process customer payments, and they can quietly eat into your margins, especially if you're processing hundreds or thousands of transactions each month. Most businesses can overpay on these fees because they don't fully understand how these fees break down, or because they simply haven't compared pricing models.

Payment gateway's are the middleman in every online transaction. They securely pass payment details between your customer, their bank, and yours. You need to use them, and if you want to keep costs down, you'll need to find a provider with fees that work for your business.

In this guide, we'll break down every type of payment gateway fee, explain how the three-layer fee structure works, walk through the four main pricing models, show you what pushes costs up or down, and give you practical ways to reduce what you pay.

How payment gateway fees work

Online payments look instant to your customers. Behind the scenes, a few different systems are working together, and each one takes a small cut. Here's the simplified version of what happens when someone pays you online:

1. Customer enters payment details: They add items to their cart, go to checkout, and enter their card information.

2. Payment gateway encrypts and sends the data: The gateway securely sends the payment details to the acquiring bank (your bank), which routes the request through the card network to the customer's bank.

3. The customer's bank approves or declines: If there are enough funds and no fraud flags, the transaction's approved. If not, it's declined, and the customer has to try another payment method.

4. Fees are deducted: The payment gateway, acquiring bank, and card network each take their cut from the transaction amount.

5. You receive the funds: The amount that's left lands in your account, usually within one to three business days.

Every card payment fee, also known as the merchant discount rate, is made up of three layers. Once you understand those layers, it's much easier to tell whether you're overpaying.

The three layers of every payment gateway fee

Think of it like a restaurant bill. The interchange fee is the cost of ingredients, the scheme fee is the restaurant's overhead, and the gateway markup is the service charge. You always pay all three.

Depending on your pricing model, though, you might see them itemised or rolled into one number.

The interchange fee is usually the biggest part, and it changes based on card type (credit vs debit), transaction type (online vs in-person), and merchant category. In the EU, interchange fees are capped at 0.3% for credit cards and 0.2% for debit cards. That helps keep costs lower than in markets like the US.

Scheme fees and gateway markup

Scheme fees are small, usually 0.05–0.15%, and you can't negotiate them. The gateway markup is different. That's the part you usually have the most control over. It's your provider's profit margin, and it's where shopping around can save you real money. When you're comparing providers, this is the layer to focus on.

Types of payment gateway fees

When you use a payment gateway to process payments, you'll run into a few different types of fees. Here's what to expect, along with the typical ranges for each:

• Transaction fees: These usually include a percentage of each sale plus a fixed amount per transaction. On a £100 sale at 2.9% + £0.20, you'd pay £3.10 in fees. If you process 1,000 of those transactions a month, that's £3,100. Rates vary by provider and payment method.

• Monthly and annual fees: Some payment gateways charge a recurring fee to use their platform, covering things like reporting tools and customer support. Expect £0–50 per month, although many providers charge nothing.

• Setup fees: This is a one-time charge to integrate the gateway with your website or payment system. These range from £0–100, and many modern providers have got rid of them entirely.

• Chargeback fees: If a customer disputes a transaction and starts a chargeback, you'll usually pay £15–25 per dispute. High chargeback rates can also push your overall fees up, because providers see you as higher risk.

• Refund fees: Some gateways charge a fee when they process a refund because they still use resources to handle the reversed transaction. Others don't charge at all, so it's worth checking.

• Cross-border and currency conversion fees: For cross-border payments, most gateways add 1–1.5% on top of standard fees. If the payment currency is different from your settlement currency, you'll also face currency conversion fees, sometimes at unfavourable rates.

• PCI compliance fees: Payment gateways may charge £5–25 per month to help keep your business compliant with Payment Card Industry Data Security Standards (PCI DSS), making sure sensitive payment information is handled securely.

• Early termination fees: If you're locked into a contract and want to switch providers before it ends, you may face significant early termination fees. Always check the contract terms before you sign.

• Online vs in-person differential: Online transactions (card-not-present) usually cost more than in-person ones, roughly 2.9–3.5% vs 2.4–2.6%. The reason is fraud risk. Without the physical card present, there's a higher chance of fraudulent transactions.

Those are the main fees you'll come across. But what you actually pay depends a lot on the pricing model your provider uses.

Payment gateway pricing models

The pricing model you choose often matters more than the headline rate. Two providers might both advertise "competitive fees", but the way those fees are structured can mean a difference of thousands of pounds over a year. These are the four main models:

Flat-rate pricing

With flat-rate pricing, you pay the same percentage plus a fixed fee on every transaction, say, 2.9% + £0.20. It's simple and predictable, because you always know what you'll pay. At £10,000 in monthly sales, you'd pay roughly £310 in fees. The downside is that you're paying the same rate whether the underlying interchange fee is 0.2% or 2.0%, so you might overpay on lower-cost transactions.

Interchange-plus pricing

Interchange-plus is more transparent. You pay the actual interchange fee, set by the card networks, plus the scheme fee, plus a fixed markup from your provider. That means you can see exactly what each part costs. For the same £10,000 in monthly sales, your total might be £250–280 depending on your card mix, which is often cheaper than flat-rate, especially at higher volumes. If you're processing £50,000 or more per month, this model is usually the better choice.

Tiered and subscription-based pricing

Tiered pricing puts transactions into categories like "qualified", "mid-qualified", and "non-qualified", and each category has a different rate. The problem is that providers decide which tier each transaction falls into, and the criteria aren't always clear. As your business grows and your transaction types change, you could get moved into higher tiers without warning. This is the least transparent model and the hardest to predict.

Subscription-based pricing works in a different way. You pay a monthly fee to use the platform, and in return you get lower per-transaction rates. This can work well for high-volume businesses, where the monthly fee is offset by savings on each transaction. But if your volume is inconsistent, you might end up paying the subscription fee without processing enough to benefit.

Factors that influence payment gateway fees

When you know what drives fee changes, it's easier to choose the right setup, cut your payment gateway fees, and keep more of your revenue. Here are the main factors:

• Transaction volume: The more transactions you process, the better the rates you can usually negotiate. Larger businesses are seen as lower-risk and more profitable for providers, so they often get discounted rates. Smaller businesses with fewer transactions usually face higher fees.

• Average transaction size: If your business handles large transactions, providers may charge lower fees per transaction because the larger amounts help balance out the processing cost. If you handle lots of small transactions, the fee per transaction can be higher.

• Business industry type: Some industries are seen as higher-risk, like travel, gambling, and subscription services, because they're more prone to fraud or chargebacks. Businesses are categorised through

  merchant category codes, and higher-risk categories face higher fees.

• Accepted payment methods: Credit and debit card payments generally cost more because of the fraud prevention and security measures involved. ACH or bank transfers usually cost 0.8–1% per transaction, compared to 2.9%+ for card payments. If you process high-value or B2B transactions, encouraging these methods can cut your costs significantly.

• Chargeback history: Businesses with high chargeback rates are seen as risky. If you've got a lot of chargebacks, your provider may charge higher fees to make up for the added risk and admin work.

• Your own payment history: Fees can change over time, so review your statements regularly to spot any surprises. What worked when you signed up might not be the best deal a year later.

These factors affect your costs, but they also show you where you can take action. So let's look at how to reduce what you're paying.

How to reduce payment gateway fees

You don't have to just accept whatever fees your provider charges. With the right approach, you can cut costs without switching to a worse service.

Negotiate rates and pick the right pricing model

If you're processing £100,000 or more per month, you can often negotiate custom rates, because providers want to keep high-volume merchants happy. Even at lower volumes, though, it's worth asking. The worst they can say is no. Beyond negotiation, make sure your pricing model fits your business. Flat-rate is simple, but it isn't always the cheapest option. Interchange-plus gives you more transparency and usually saves money at higher volumes.

Encourage lower-cost payment methods

Card payments are convenient, but they aren't always the cheapest option. ACH or bank transfers usually cost 0.8–1% per transaction, compared to 2.9%+ for cards. If you handle high-value or B2B transactions, encouraging customers to pay by bank transfer can save you a significant amount. Digital wallets like Apple Pay and Google Pay usually use standard card rates, so they won't save you money, but they can improve conversion. Buy now, pay later (BNPL) services cost merchants 5–6%, so make sure you factor that into your payment method mix.

Compare providers and review your costs regularly

Many businesses stay with their current provider because it's convenient. But sticking with what you know can mean overpaying. Payment gateways vary a lot in pricing, service, and features, so it's worth comparing providers every year or two. And don't just set it and forget it. Review your statements regularly so you can spot fee changes or unexpected charges.

Here's how some major providers compare on UK pricing:

Before you sign with any provider, read the contract closely. Check for hidden fees, automatic renewal clauses, and early termination charges. If anything is unclear, ask for clarification in writing.

How to choose the right payment gateway

It's easy to focus on fees when you're choosing a payment gateway, but cost alone shouldn't make the decision for you. To find the right fit, you need to look beyond fees and think about these factors as well.

Payment methods, multi-currency support, and scalability

77% of consumers say they'll likely abandon their cart if their preferred payment method isn't available. So choose a gateway that supports credit and debit cards, digital wallets like Apple Pay and Google Pay, and bank transfers. If you're selling globally, your provider should be a multi-currency payment gateway that handles multiple currencies efficiently, with competitive exchange rates and low fees for cross-border payments. It's also worth thinking ahead: can the provider grow with your business as your transaction volume increases?

Integration, security, and support

Your payment gateway should integrate with your eCommerce platform, accounting software, and CRM tools without making you do a major rebuild. Look for a provider with strong fraud protection, data encryption, and PCI DSS compliance to keep your customers' data safe. And don't overlook customer support. A cheaper provider with poor support can cost you more in the long run if issues go unresolved. Look for service that's easy to reach, responsive, and ideally available 24/7.

Cut your payment gateway fees with Airwallex

We built our pricing to be transparent, with no hidden fees. For UK transactions, we charge 1.30% + £0.20. For EEA transactions, it's 2.40% + £0.20. For international transactions, 3.15% + £0.20. You also get fraud detection tools and 24/7 security monitoring to help reduce chargebacks.

Here's how we help you keep more of your revenue:

Multi-currency accounts and competitive FX

Many payment providers make you convert funds into your home currency and charge conversion fees along the way. With Airwallex Global Accounts, you can hold and settle payments in the same currencies your customers pay in, with no forced conversion and no unnecessary fees. When you do need to convert, you get market-leading FX rates for 60+ currencies and can save up to 80% on fees compared to traditional banks.

Global coverage and easy integration

Accept payments with all major card schemes like Visa, Mastercard, and Amex, plus 160+ local payment methods across 180+ countries. You can get started in minutes with no-code plugins for Shopify, WooCommerce, and other platforms, or build your own solution with our Payments APIs.

We also offer 24/7 customer support if you ever need a hand. Start accepting payments with Airwallex.

Frequently Asked Questions (FAQs)

What are payment gateway fees?

Payment gateway fees are the charges you pay to a provider every time a customer makes an online payment. They usually include a percentage of the transaction plus a fixed fee, and they're split between the gateway provider, acquiring bank, and card network.

How much do payment gateway fees usually cost?

Most payment gateways charge between 1.5% and 3.5% per transaction, plus a fixed fee of £0.20–0.30. The total depends on your pricing model, payment method, and whether the transaction's domestic or international. On a £100 sale at 2.9% + £0.20, you'd pay £3.10 in fees.

What's the difference between flat-rate and interchange-plus pricing?

Flat-rate pricing charges you the same percentage on every transaction, whilst interchange-plus shows you the actual interchange fee plus a fixed markup. Flat-rate is simpler, but interchange-plus is usually cheaper for businesses processing higher volumes.

How can I reduce my payment gateway fees?

The most effective ways to reduce payment gateway fees are to negotiate rates based on your volume, choose the right pricing model, and encourage lower-cost payment methods like bank transfers. Reviewing your statements regularly also helps you catch unexpected fee changes.

Do payment gateways charge extra for international transactions?

Yes, most payment gateways charge an additional 1–1.5% on top of standard fees for cross-border transactions, plus currency conversion fees if the payment currency differs from your settlement currency. Some providers, like Airwallex, let you settle in the transaction currency so you can avoid forced conversion.

Sources and references

1. https://www.europeanpaymentscouncil.eu/document-library/other/epc-list-sepa-scheme-countries