Payment gateway fees explained: costs, comparisons, and how to reduce them

Key takeaways

• Payment gateway fees typically include transaction fees (1.5-3%), monthly charges, and additional costs for chargebacks, refunds, and cross-border payments—with FX margins often the largest hidden expense

• Understanding pricing models (flat-rate vs interchange-plus) and calculating total cost of ownership reveals the true cost difference between providers, which can exceed 2% on international transactions

• Airwallex offers transparent pricing with reduced FX margins and cross-border fees, helping businesses save up to 90% on currency conversion compared to traditional payment gateways

Managing payment costs shouldn't feel like solving a puzzle. Yet many UK businesses struggle to understand exactly what they're paying in gateway fees and why. Between transaction charges, monthly fees, and hidden costs that only appear on invoices, the true cost of accepting payments often exceeds initial expectations.

A business processing £100,000 monthly might see £2,900 on their gateway invoice but miss the £3,200 lost to FX margins on international transactions. These hidden costs compound quickly for businesses selling across borders.

This guide breaks down payment gateway fees into clear categories, explains how pricing models work, and shows you practical ways to reduce costs. Whether you're evaluating providers or optimising current payment operations, you'll gain the clarity needed to make informed decisions.

What are payment gateway fees?

Payment gateway fees are charges for processing payments through your online checkout. When a customer pays, the gateway securely transmits card details between your website, the customer's bank, and your merchant account.

You're paying for:

• Transaction authorisation and processing

• Fraud detection and security measures

• PCI DSS compliance infrastructure

• Integration and technical support

• Settlement and reconciliation systems

These fees fund the complex infrastructure that makes instant, secure online payments possible. The challenge isn't whether these fees are justified—it's understanding exactly what you're paying and whether you're getting competitive rates for your business profile.

Gateway fees differ fundamentally from merchant acquiring fees, though they're often bundled together. The gateway handles the technical transmission of payment data. The acquirer (merchant bank) processes the actual transaction and assumes fraud risk. Many modern providers bundle both services, which simplifies operations but can obscure individual cost components.

The main types of payment gateway fees businesses pay

Transaction and processing fees

The most visible cost. Typically 1.5-3% of transaction value plus a fixed fee (often 20-30p). This covers the payment processor, card networks (Visa, Mastercard), and the issuing bank.

For a £100 transaction at 2.5% + 20p, you pay £2.70 total. At £50,000 monthly volume with an average transaction of £75, this equals approximately £1,800-£2,000 in monthly fees depending on your payment mix.

Monthly and platform fees

Fixed monthly charges ranging from £10-£50+, depending on features and transaction volume. Some providers waive this for high-volume merchants, while others charge £200+ for enterprise features like advanced fraud detection or multi-currency settlement.

Small businesses often accept these fees as unavoidable. But they're negotiable above £25,000 monthly processing volume.

Authorisation and settlement fees

Charged each time a payment is authorised (checked for sufficient funds) or settled (money transferred to your account). Usually included in transaction fees but sometimes billed separately at 5-15p per transaction.

For businesses with high-value, low-volume transactions, this matters less. But marketplace businesses processing frequent small transactions can see these fees consume 0.3-0.5% of revenue.

Chargeback and dispute fees

£15-£30 per chargeback, regardless of whether you win the dispute. For businesses maintaining healthy chargeback rates (under 0.5%), this represents minimal cost. But industries with higher dispute rates—digital goods, travel, subscription services—can see monthly chargeback fees reach hundreds of pounds.

Beyond the direct fee, chargebacks carry indirect costs. High rates (above 1%) trigger increased monitoring from card networks, potentially leading to higher processing fees or account termination.

Refund and payout costs

Processing refunds often incurs the same transaction fee as the original payment, though some providers refund their markup while retaining third-party costs. International payouts may carry additional fees (£5-£25) and FX margins.

For businesses with 5-10% return rates, this doubles your effective processing cost on those transactions.

How payment gateway pricing models work

Flat-rate pricing

One standard rate for all transactions (e.g., 2.9% + 20p). Popular with Square, Stripe, and PayPal for small businesses. Simple to understand and budget, but rarely the most cost-effective for established businesses.

When it works: New businesses with under £10,000 monthly processing volume, unpredictable revenue, or highly variable transaction sizes.

When it doesn't: Established businesses with consistent volume who would benefit from interchange-plus pricing, typically saving 0.3-0.7% on each transaction.

Interchange-plus pricing

Separates interchange fees (paid to card networks and issuing banks) from the gateway's markup. For example: interchange rate (varies by card type) + 0.3% + 20p.

More transparent and typically cheaper for businesses processing £15,000+ monthly. You see exactly what card networks charge and what your provider adds.

A UK debit card might cost interchange of 0.2% + 3p, plus your provider's 0.3% + 20p = 0.5% + 23p total. Compare this to a flat 2.9% + 20p on the same transaction—you save 2.4% on a £50 purchase.

Blended vs unbundled pricing

Blended combines all fees into one rate, averaging costs across different card types. Unbundled itemises each component separately (interchange, scheme fees, gateway markup).

Blended seems simpler but hides which transactions cost more. If you process mainly UK debit cards (low cost) but pay rates averaged across credit cards and international cards (high cost), you overpay significantly.

Unbundled pricing reveals your actual cost structure, enabling you to optimise by encouraging lower-cost payment methods or negotiating based on your specific transaction mix.

Payment gateway fees by payment method

Card payments breakdown

Debit cards carry lower interchange fees than credit cards. A UK consumer debit card costs approximately 0.2% interchange, while a UK consumer credit card runs 0.3%. Business and premium cards (rewards cards) cost significantly more—often 1.5-2.5% in interchange alone.

This variability means your actual processing cost depends heavily on which cards your customers use. B2B businesses see higher costs due to commercial card usage. Luxury retailers face similar challenges with premium card concentration.

Domestic vs international cards

International transactions typically add 1-2% in cross-border fees plus FX margins of 2-4% above mid-market rates. A £100 transaction from a US customer might cost you £2.50 in gateway fees plus £3.00 in FX costs—5.5% total versus 2-3% for domestic transactions.

Alternative payment methods

Digital wallets (Apple Pay, Google Pay) improve conversion by reducing friction at checkout, potentially offsetting their cost through increased sales. Account-to-account payments (Open Banking, bank transfers) offer lower percentage rates but slower settlement and less customer familiarity.

The optimal payment mix balances cost with conversion rate. Offering only the cheapest payment method won't maximise profitability if it reduces completed purchases.

Factors that influence how much you pay in gateway fees

Transaction volume and average value

Higher volumes unlock better rates. Providers negotiate based on monthly processing value, not just transaction count. Processing £50,000 monthly with £50 average transactions positions you differently than £50,000 with £500 average transactions.

Businesses processing £50,000-£100,000 monthly should expect to negotiate 0.1-0.3% off standard rates. Above £200,000 monthly, custom pricing becomes standard, potentially reducing costs by 0.5-1%.

Customer location and currency

Cross-border transactions incur additional fees. Processing in multiple currencies multiplies FX costs and complexity. A business serving UK and EU markets pays FX margins on every euro transaction, even if they hold euro accounts.

Geographic distribution impacts cost significantly. A business with 70% UK customers and 30% international customers faces different economics than one with an inverted ratio.

Business model specifics

• eCommerce: Standard online rates with card-not-present risk premiums

• SaaS and subscriptions: Lower risk profile, predictable revenue, potentially 0.2-0.4% better rates

• Marketplaces: Split payment complexity may increase costs by 0.1-0.2% but enables better customer experience

Fraud risk and chargeback rates

Industries with higher fraud rates (digital goods, travel, nutraceuticals) face increased fees or stricter acceptance criteria. Chargeback rates above 1% may trigger penalties, reserve requirements, or account reviews.

Maintaining low chargeback rates (under 0.3%) through fraud prevention, clear product descriptions, and responsive customer service directly reduces processing costs.

Industry and regulatory considerations

Regulated industries (gambling, financial services, CBD products) often pay 0.5-1% premium rates due to compliance requirements and elevated risk profiles. Some providers won't serve these industries at all, limiting negotiating leverage.

Comparing payment gateway fees across providers

Look beyond headline rates

A provider advertising 1.4% + 20p may charge additional fees that make them more expensive than a competitor at 2.9% + 20p. Total cost of ownership includes:

• Transaction fees across all payment methods

• FX margins on international sales (often 2-4% markup)

• Monthly platform or account fees

• Chargeback and dispute handling costs

• Integration, development, and maintenance resources

• Reconciliation and accounting overhead

Hidden costs to verify

• Currency conversion margins: Often 2-4% above mid-market rates, dwarfing transaction fees for international businesses

• International transaction fees: Additional 1-2% on top of standard rates

• Monthly minimums: Some providers charge the greater of percentage fees or minimum monthly amounts

• Integration costs: Custom integration may require developer time worth thousands of pounds

• Withdrawal and payout fees: £5-£25 per international payout plus FX margins

• PCI compliance fees: £5-£20 monthly, though often included in modern solutions

• Statement and reporting fees: Occasionally charged for detailed transaction reporting

Regional pricing variations

UK-focused providers like GoCardless or TrueLayer may offer better rates for domestic transactions but charge premium rates for international payments. Global providers like Stripe or Adyen might have higher base rates but better cross-border pricing.

For businesses with 80%+ domestic transactions, UK-focused providers often deliver lower total costs. For international businesses, global providers with transparent FX pricing typically win.

Total cost calculation example

Business profile: £75,000 monthly revenue, £85 average transaction, 60% UK debit cards, 25% UK credit cards, 15% international cards.

Provider A (flat-rate): 2.9% + 20p = approximately £2,350/month

Provider B (interchange-plus): Average 1.2% + 20p on domestic, 2.8% + 20p + 2% FX on international = approximately £1,650/month

Provider B saves £8,400 annually despite appearing more complex.

Common mistakes businesses make when evaluating gateway fees

Focusing exclusively on transaction rates

The advertised rate rarely tells the full story. A 2% rate with 4% FX margins costs more than 2.5% with 1% FX margins for businesses with 40%+ international revenue.

Calculate total cost based on your actual transaction mix, including FX exposure, chargeback history, and payment method distribution.

Ignoring FX margins and cross-border economics

Currency conversion can be the largest hidden cost for international businesses. Many gateways add 2-4% above mid-market rates without transparency.

A business processing £30,000 monthly in international transactions with 3% FX margin pays £900 monthly in conversion costs—potentially more than their transaction fees.

Overlooking chargeback and dispute management

Beyond the £15-£30 per chargeback fee, high chargeback rates damage your merchant reputation and can trigger account termination or rolling reserves (holding percentage of revenue).

Providers vary significantly in how they handle disputes. Some offer automated evidence submission and proactive fraud prevention. Others provide minimal support, increasing your loss rate on disputes.

Underestimating operational complexity

Complex fee structures create reconciliation nightmares. Hidden costs include:

• Accounting team time spent reconciling statements (2-5 hours monthly)

• Discrepancy investigation and resolution

• Manual intervention for failed payments or fraud reviews

• Multiple provider management for different markets or payment methods

Simplicity has value. A provider charging 0.2% more but delivering cleaner reporting and fewer operational headaches often delivers better ROI.

Not negotiating or reviewing regularly

Standard rates aren't fixed. Businesses processing £25,000+ monthly should negotiate based on industry, volume, and risk profile. Even small businesses can negotiate monthly fee waivers or reduced rates with consistent volume.

Market rates evolve. A competitive rate 18 months ago may now be 0.3-0.5% above market. Review pricing annually, especially after significant business changes.

How Airwallex helps businesses manage payment gateway fees

Airwallex is built for businesses operating internationally who want transparent, competitive payment costs without hidden FX margins.

Transparent pricing with no hidden FX markups

Clear breakdown of transaction fees, interchange costs, and cross-border charges. Unlike traditional providers adding 2-4% FX margins, Airwallex provides rates close to mid-market with transparent markup disclosure.

For businesses processing £50,000 monthly in international payments, competitive FX rates can save £1,000-£1,500 monthly compared to traditional gateways.

Reduced cross-border and multi-currency costs

Collect payments in 60+ currencies with industry-leading FX rates. Hold funds in multiple currencies to avoid unnecessary conversions, paying FX only when you choose to convert.

This flexibility means accepting euros from European customers, holding euros until exchange rates favour conversion, then converting to pounds at optimal timing—impossible with traditional gateways that auto-convert at their rates.

Support for local payment methods globally

Accept local payment methods across markets without managing multiple provider relationships. Reduce cart abandonment while controlling costs through a unified platform.

Offering SEPA transfers in Europe, local cards in Asia-Pacific, and region-specific wallets improves conversion while maintaining centralised reconciliation and reporting.

Optimised total payment costs beyond gateway fees

Airwallex helps reduce:

• Currency conversion losses through competitive FX rates

• International wire transfer fees for payouts and settlements

• Multi-provider reconciliation complexity and accounting overhead

• Cross-border receivables costs through local collection capabilities

For scaling businesses with international ambitions, these combined savings often exceed 2-3% of international revenue.

Learn more about how Airwallex compares to other payment solutions.

Conclusion

Payment gateway fees represent a significant operational cost, but understanding fee structures empowers better provider selection and negotiation. Look beyond headline transaction rates to evaluate total costs including FX margins, cross-border fees, and operational overhead.

For UK businesses selling internationally, currency conversion and cross-border charges often exceed standard transaction fees. Choosing a provider with transparent pricing and competitive FX rates delivers substantial savings—potentially 1-3% of international revenue.

Don't accept provider pricing as fixed. Negotiate based on your volume, payment mix, and competitive landscape. Review pricing annually as your business evolves.

Ready to reduce payment processing costs? Open an Airwallex account to access transparent pricing and industry-leading FX rates.

FAQs

Why do payment gateway fees vary so much between providers?

Fees reflect different cost structures, risk profiles, and business models. Providers targeting small businesses charge higher standard rates to offset lower volumes and higher relative costs. Enterprise-focused gateways offer custom pricing based on volume and risk assessment.

Technology infrastructure, fraud prevention capabilities, and supported payment methods impact pricing. Providers investing heavily in fraud detection and global payment method support may charge premium rates but deliver lower total costs through reduced chargebacks and better conversion rates.

Are payment gateway fees negotiable for small businesses?

Yes, particularly once you're processing £25,000+ monthly. While you won't achieve enterprise rates, many providers will reduce transaction fees by 0.1-0.3% or waive monthly charges for consistent volume.

Focus negotiations on your specific payment mix, growth trajectory, and competitive quotes. If you process primarily low-risk debit card transactions with low chargeback rates, emphasise this. Providers negotiate based on expected profitability and relationship potential.

How often should businesses review their payment gateway fees?

Review fees every 12-18 months or when business circumstances change significantly (new markets, higher volumes, different customer base). Market rates evolve, and your growing volume may qualify for better pricing.

Also review when launching new products, entering new geographies, or seeing changes in payment mix. A business shifting from 90% domestic to 50% international transactions should re-evaluate providers to ensure competitive cross-border pricing.

How can businesses reduce FX-related payment gateway fees?

Choose providers with transparent FX pricing close to mid-market rates. Traditional gateways often add 2-4% above mid-market without disclosure. Modern providers like Airwallex offer visibility into FX markups, enabling informed decisions.

Consider multi-currency accounts to hold funds in customer currencies and convert strategically. For B2B businesses, explore invoicing in customer currencies to shift FX decisions to your timing rather than automatic conversion at provider rates.

Understanding eCommerce payment gateways helps identify solutions with better cross-border economics.