Payment gateway fee structures use specific terminology that's easy to confuse. This glossary covers every fee-related term Indian businesses encounter when evaluating, using, or negotiating with payment platforms.
A
Acquiring Bank
The bank that processes card transactions on behalf of the merchant. The acquiring bank is the counterpart to the issuing bank (the cardholder's bank). In India, acquiring banks include HDFC Bank, ICICI Bank, Axis Bank, and others. Payment gateways like Razorpay, Cashfree, and Playto Pay work through acquiring bank partnerships.
ACH (Automated Clearing House)
The US domestic payment network for bank-to-bank transfers. US clients paying Indian businesses via bank transfer often use ACH to send funds to the Indian business's USD VBA account.
B
BIN (Bank Identification Number)
The first 6-8 digits of a credit/debit card number that identify the issuing bank and card network. Fraud attacks using BIN ranges ("BIN attacks") test multiple card numbers within the same BIN to find valid cards.
BNPL (Buy Now Pay Later)
Installment payment option allowing customers to split purchases into 3-6 monthly payments. Playto Pay: Klarna and Afterpay available for international customers at 10% flat. For Indian domestic BNPL: Simpl, LazyPay via Razorpay/Cashfree.
C
Chargeback
A forced payment reversal initiated by a cardholder's bank when the cardholder disputes a transaction. Different from a refund (which you initiate). Chargebacks carry a fee ($15-$30) regardless of outcome.
Chargeback Fee
Fee charged by your payment platform for each chargeback dispute, whether you win or lose. Typically $15-$30 per dispute.
Chargeback Rate
Chargebacks in a month divided by transactions in the prior month. Visa/Mastercard monitoring begins at 0.9-1%. Merchant account termination risk above 1.5-2%.
D
Dunning
Automated failed payment recovery sequence. When a recurring subscription charge fails, dunning sends retry attempts and customer notification emails on a schedule. Platform feature that reduces involuntary churn.
F
FEMA (Foreign Exchange Management Act)
Indian law governing all foreign exchange transactions. Inward foreign currency receipts for legitimate services are permissible current account transactions under FEMA.
FIRA (Foreign Inward Remittance Advice)
Bank document confirming foreign currency receipt through RBI-authorized channels. Required for Indian GST zero-rated export of services filing. Playto Pay and Skydo auto-generate per transaction.
Fixed Per-Transaction Fee
A flat fee charged per transaction regardless of transaction size. Stripe: $0.30. Paddle/Lemon Squeezy: $0.50. Playto Pay: $0 (pure percentage only). Fixed fees penalize small transactions.
Forex Markup (FX Markup)
The spread between mid-market exchange rate and the rate applied by a payment platform when converting foreign currency to INR. Hidden in settlement rate. PayPal: 3-4%. Razorpay/Cashfree: 1-2%. Playto Pay: 0%.
I
IBAN (International Bank Account Number)
Standardized European bank account identifier used for SEPA transfers. Playto Pay and Skydo provide EUR VBAs with IBAN details that European clients use for SEPA transfers.
Interchange Fee
The fee a card network charges the acquiring bank for each transaction, based on card type and region. Interchange is passed through to merchants in most pricing models. Not typically shown as a separate line item on merchant statements.
Issuing Bank
The bank that issued the cardholder's card. When your international customer pays by Visa, their US bank is the issuing bank. Chargeback disputes are arbitrated between you (via acquiring bank) and the issuing bank.
L
LUT (Letter of Undertaking)
Annual filing with the GST department (Form GST RFD-11) that allows Indian businesses to export services without paying IGST upfront. Required for zero-rated export of services treatment.
M
MDR (Merchant Discount Rate)
The total percentage fee a merchant pays for payment processing. Technically covers interchange + scheme fees + acquirer margin. Often used interchangeably with "processing fee."
MDR-Zero
RBI regulation mandating zero MDR on UPI transactions and RuPay debit card transactions. All Indian PGs pass through zero MDR on UPI per RBI mandate.
MoR (Merchant of Record)
A platform that takes on the legal role of seller for transactions, handling tax collection and compliance (US sales tax, EU VAT) on your behalf. Paddle, Lemon Squeezy, Dodo Payments are MoR platforms. Higher rates (5% + $0.50) in exchange for tax compliance automation.
P
PA (Payment Aggregator)
RBI-licensed entity that aggregates payment collection for multiple merchants. Razorpay, Cashfree, Paytm hold PA authorization. Required to legally process merchant payments in India.
PA-CB (Payment Aggregator – Cross-Border)
RBI authorization specifically for cross-border payment aggregation (inward and outward). Razorpay, Cashfree, PayU, Skydo, and Playto Pay's partner infrastructure operate under PA-CB authorization.
Processing Fee
The stated percentage fee charged on each transaction. Does not include forex markup (unless specified as all-in). Always calculate true all-in rate: processing fee + forex markup.
R
Rolling Reserve
A percentage of your monthly processing revenue held by the payment processor for 90-180 days as a risk buffer against chargebacks. Not a fee — working capital that returns to you after the hold period. Typical: 5-10% held 90-180 days.
RCM (Reverse Charge Mechanism)
GST provision where the recipient pays GST instead of the supplier. Applies to GST-registered Indian businesses paying service fees to foreign entities (Stripe, PayPal, Paddle). India-built platforms (Playto Pay, Razorpay, Cashfree, Skydo) don't trigger RCM.
S
SEPA (Single Euro Payments Area)
European domestic payment network for EUR transfers across 36 countries. SEPA transfers use IBAN. European clients sending EUR to your EUR VBA use SEPA (cheap and fast for them).
Settlement
The process of converting transaction funds from the platform's holding and transferring to your bank account in INR. Playto Pay: daily INR direct. PayPal: manual withdrawal required, 3-5 days. Razorpay: T+1 to T+2.
Scheme Fee
Fee charged by card networks (Visa, Mastercard, Amex) for using their network. Typically 0.1-0.15% per transaction. Included in the total MDR your acquiring bank charges you.
T
T+1, T+2
Settlement timing shorthand. T = transaction date. T+1 = next business day. T+2 = two business days later. Razorpay: T+1 to T+2. Cashfree: T+1. Playto Pay: T+0 to T+1 (daily).
3DS (3D Secure)
Card authentication protocol that adds OTP or biometric verification. 3DS 2.0 shifts fraud chargeback liability to issuing bank on successful authentication. EU PSD2 regulations require 3DS for most EU card transactions.
V
VBA (Virtual Business Account)
A foreign-currency bank account in your name, hosted at a partner bank in the destination country (US, UK, EU), provided by an India-authorized payment platform. International clients wire to your VBA as a domestic transfer; you receive INR in your Indian bank.
Velocity Check
Fraud detection mechanism that flags unusual transaction patterns — multiple transactions from same IP in short window, unusually large order vs typical transaction size. Used by payment platforms to prevent card testing and BIN attacks.
W
Wire Transfer
Bank-to-bank electronic transfer via SWIFT network (international) or domestic ACH/Faster Payments/SEPA. For Indian businesses, VBA wire receipts (via Playto Pay or Skydo) are significantly cheaper than traditional SWIFT wire to Indian bank.