Payment gateway fees and pricing: What to know and how to save

Key takeaways:

• A payment gateway fee is what you pay to process online payments, and it’s usually a small percentage of each transaction plus a fixed fee.

• Common mistakes you might make when choosing a payment gateway provider include: ignoring contract terms, choosing the wrong pricing model, not comparing providers, or failing to monitor fees regularly.

• When choosing a gateway, consider security, accepted payment methods, integrations, multi-currency capabilities, and scalability.

Every time you process an online payment, your payment gateway charges a fee. If your business handles a lot of transactions, these fees can quietly add up.

Knowing how payment gateway fees work helps you spot unnecessary costs and keep more of your revenue. In this guide, we’ll break down what these fees are, how they’re calculated, the different types you’ll encounter, and practical ways to manage them. 

By the end, you’ll know how to choose the right gateway, reduce extra charges, and make your payment process run more smoothly.

What is a payment gateway fee?

A payment gateway is the tool that lets you accept online payments, whether it’s credit and debit cards or digital wallets like Apple Pay and Google Pay. Think of it as the bridge between your customer’s bank and your own.

Every time a customer makes a payment, the gateway handles the transaction behind the scenes: it encrypts sensitive data, communicates with banks, verifies funds, and confirms whether the payment is approved. For all that work, the gateway charges a fee.

These fees usually include:

• A percentage of the transaction (often 1.5–3.5%)¹

• A fixed amount per transaction

Different providers also have different pricing models, which can affect how much you end up paying. Later, we’ll break down those models and the other types of fees you might encounter.

What payment gateway fees cover and who gets a cut

Payment gateway fees cover the work and technology that makes online payments possible. Here’s what those fees typically pay for:

• Security infrastructure: Encryption and fraud detection systems that keep your customers’ payment data safe.

• Transaction processing: Technology that verifies payments and routes funds between banks and networks.

• Compliance: Ensuring the gateway meets industry standards like PCI DSS and other regulatory requirements.

But it’s not just the gateway taking a slice. Multiple players get a share of the fees:

• Payment gateway provider: Handles the transaction and provides the platform for processing.

• Acquiring bank (your bank): Authorises the payment and manages the flow of funds.

• Card networks (Visa, Mastercard, Amex): Facilitate communication between your bank and the customer’s bank.

How payment gateway fees work

Online payments feel instant, but behind the scenes, multiple systems work together to process each transaction. Here’s a visual representation of how this works:

We’ll give you a clear breakdown of what happens when your customer makes a payment:

Step 1: Your customer makes a purchase

They add items to their cart, head to checkout, and enter their payment details.

Step 2: The gateway processes the payment

The gateway encrypts your customer’s data to keep it safe and checks for any signs of fraud.

Step 3: Your bank authorises the transaction

The acquiring bank (your bank) receives the payment info and manages the flow of funds.

Step 4: The card network verifies the payment

The acquiring bank sends the request through the card network (Visa, Mastercard, Amex), which contacts your customer’s issuing bank.

Step 5: The issuing bank approves or declines

The customer’s bank confirms whether they have enough funds or credit and sends the response back through the network.

Step 6: The gateway completes the transaction

If approved, the gateway lets you know so you can finalise the sale. If declined, the customer is prompted to try a different payment method.

Step 7: All parties collect their fees

The gateway takes its percentage plus any fixed fees, and the acquiring bank and card network take their share.

Step 8: Funds reach your account

Money moves from the customer’s bank to your acquiring bank, and finally into your account – usually within a few hours to a couple of days.

8 types of payment gateway fees

Payment gateways charge various fees to cover different aspects of transaction processing. These can be categorised into transactional fees and recurring fees: 

Transactional fees

These are charged on each payment your business processes:

1. Transaction fees

These typically include a percentage of each sale plus a fixed amount per transaction, with rates varying by provider and payment method (credit card, debit card, etc.). 

2. International transaction fees

For cross-border payments, some payment gateways charge additional fees for currency conversion, international transactions, and handling different payment methods. 

These fees typically include both a percentage of the transaction amount and a fixed charge per transaction.

3. Chargeback fees

If a customer disputes a transaction and initiates a chargeback (a reversal of their payment), you'll pay a chargeback fee. This covers the payment gateway's admin work in managing the dispute process.

4. Refund fees

Some gateways charge a fee when processing a refund, as they have to process the reversal of funds and update the payment system. 

Recurring or special-case fees

These are periodic or less frequent costs associated with using the gateway:

5. Setup fees

Many payment gateways charge a one-time setup fee to integrate their services with your website or payment system. This fee covers initial configuration and any setup assistance you might need.

6. Monthly fees

Some payment gateways charge a monthly fee for access to their platform. This fee covers features like software access, customer support, and reporting tools.

7. Annual maintenance fee

Similar to monthly fees, these are recurring costs you pay annually for operations, software maintenance, and customer support.

8. PCI compliance fees

Payment gateways sometimes charge a fee to keep your business compliant with the Payment Card Industry Data Security Standards (PCI DSS).

5 factors that influence payment gateway fees

Payment gateway fees aren’t one-size-fits-all – they can vary a lot depending on your business and how you process payments. Understanding what drives these fees helps you plan better and spot opportunities to save.

1. Business industry type

Payment providers consider some industries higher-risk than others, like travel, gambling, or subscription services, as they're more prone to fraud or chargebacks. For these industries, providers charge higher payment gateway fees to cover potential losses. 

On the other hand, lower-risk industries like retail or professional services often get more competitive rates.

2. Transaction volume

The more payments you process, the better rates you can often negotiate. High-volume businesses are seen as lower-risk, so providers may offer discounts to these businesses. On the flip side, businesses with lower transaction volumes usually pay more per transaction.

3. Average transaction size

If you typically handle large transactions, payment providers often charge lower fees per transaction, as larger amounts help balance out the risk and cost. 

On the other hand, if you're processing lots of small transactions, the fee per transaction is typically higher because processing costs get spread over a smaller amount.

4. Accepted payment methods

Credit and debit card payments generally incur higher payment gateway fees due to the fraud prevention and security measures required. Accepting alternative payment methods like digital wallets (e.g. Apple Pay), often reduces fees. 

5. Chargeback history

Chargebacks occur when customers dispute transactions, and payment processors generally consider businesses with high chargeback rates to be risky. If you have frequent chargebacks, the payment provider will likely charge higher fees to compensate for the added risk and admin work in resolving disputes.

Payment gateway pricing models

Once you understand what drives payment gateway fees, the next step is knowing how providers structure them. Payment gateways generally use three main pricing models, each with their own pros and cons:

Pricing model 1: Flat-rate pricing

This is the simplest pricing model. You pay a single fixed percentage and fee for every transaction, regardless of card type (for example, 2.8% + S$0.20 per transaction). It's predictable and easy to understand, which is why it’s popular with start-ups and small businesses.

Pricing model 2: Tiered pricing

With this pricing model, the payment provider groups transactions into several tiers (usually 'qualified', 'mid-qualified', and 'non-qualified'), each with a different rate. 

This model is less transparent, as the provider decides which transactions fall into which tier, making it difficult for you to predict costs or understand exact markups.

Pricing model 3: Interchange-plus pricing

This pricing model breaks fees into two parts: 

• The 'interchange fee' (set by the card networks and varies by card type) 

• The payment gateway’s fixed markup

Interchange-plus is more transparent than tiered pricing, and it’s usually cheaper for businesses with high transaction volumes. You only pay the actual interchange fee plus a small markup, instead of the higher rates some gateways charge under tiered pricing.

How to choose the right payment gateway

Picking a payment gateway isn’t just about fees. You want a provider that fits your business, supports your customers, and grows with you. Here are the key things to look for:

1. Payment methods and currency support

According to Airwallex research², 77% of consumers will abandon their basket if their preferred payment method is unavailable. Make sure your gateway accepts all the ways your customers want to pay – cards, digital wallets, and local alternatives – and handles multiple currencies efficiently with competitive rates.

2. Integration and scalability

The gateway should connect smoothly with your eCommerce, accounting, and CRM systems. It should also scale as your transaction volume grows, so you don’t have to switch providers later.

3. Security and compliance

Look for strong encryption, fraud protection, and PCI DSS compliance to keep your customers’ data safe.

4. Customer support

Choose a provider with responsive, accessible support, so you can resolve any issues quickly without affecting your operations.

3 common payment gateway fee mistakes to avoid

The wrong payment gateway choice means higher fees, slower operations, and reduced business growth. Here are three common mistakes to avoid:

1. Overlooking contract terms

One of the common pitfalls is not thoroughly reviewing the payment gateway contract. It's easy to overlook hidden fees or terms, such as cancellation fees, monthly fees, or charges for extra services.

Some contracts have automatic renewal clauses that lock you into unfavourable terms without you realising it. Always read the fine print before signing, ask your provider to clarify any terms, and consult a legal or financial adviser when in doubt.

2. Not comparing payment gateway providers

It’s common for businesses to stick with your current payment gateway provider out of convenience. 

However, payment gateways differ a lot in pricing, service offerings, and transaction costs. Even if you're happy with your current provider, reassess your options from time to time to make sure you're getting the best deal.

3. Choosing the wrong pricing model

Your pricing needs can change over time. You might start with a tiered plan, but after a year, interchange-plus could give you more predictable fees and better value. Reevaluate your pricing regularly to make sure it’s still the best fit for your transaction volume and business.

How Airwallex can help you reduce payment gateway fees

Airwallex isn’t just another payment gateway – it’s a full financial platform built to help businesses save on fees and simplify cross-border payments. Here’s how we can help:

• Multi-currency accounts and cards: With Airwallex, you can hold and spend in multiple currencies. This means you avoid forced conversions and the extra costs that come with them. When you do need to convert, you get market-leading FX rates which allow you to save up to 80% on FX fees.

• Global coverage: Airwallex supports all major card networks – Visa, Mastercard, Amex – plus 160+ local payment methods in 180+ countries. You can reach international customers without juggling multiple providers or paying extra fees.

• Seamless integration: Whether you prefer no-code tools, low-code setups, or full API customisation, Airwallex integrates with your existing systems – eCommerce platforms, accounting software, and CRMs – so you spend less time on manual work.

• Built-in fraud protection and 24/7 monitoring: Keep your payments secure and reduce costly chargebacks, all while having support available whenever you need it.

Frequently asked questions (FAQs)

What is a typical payment gateway fee?

While fees vary widely, a typical fee for online card transactions runs from 1.5–3.5% of the transaction value¹, plus a small fixed fee such as S$0.20. What you actually pay depends on your transaction volume, industry, and the provider's pricing model.

Who pays payment gateway fees – the business or the customer?

The business (merchant) is responsible for paying payment gateway fees. While some businesses add a surcharge to customer bills (where it's legal), the payment provider charges the fees to you, the merchant.

Can I negotiate payment gateway fees?

Yes, if you have high transaction volumes, you can often negotiate lower fees. Comparing offers from multiple providers gives you more leverage when you negotiate.

How do I compare payment gateway fees across different providers?

Look beyond the headline transaction rate and figure out what you'll actually pay in total, including monthly charges, setup fees, chargeback fees, and international transaction costs. Use your actual sales data to see which provider offers the best value.

What hidden fees should I watch out for?

Watch for fees providers don't advertise upfront, including PCI non-compliance fees, account inactivity fees, batch settlement fees, and early termination fees. Always read the full fee schedule and contract terms before signing up.

Sources:

1. https://www.shopify.com/sg/blog/credit-card-processing-fees

2. https://www.airwallex.com/sg/ecommerce-campaign-2024 

This publication does not constitute legal, tax, or professional advice from Airwallex, nor does it substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you would like to request an update, feel free to contact us at [[email protected]]. Airwallex (Singapore) Pte. Ltd. (201626561Z) is licensed as a Major Payment Institution and regulated by the Monetary Authority of Singapore.