Razorpay vs PhonePe Payment Gateway for Small Businesses (2026): Fees, Security and Settlement Compared

Small online sellers in India have a payment mix that looks very different from a typical card-led business. For a home bakery, a coaching centre or a new D2C label, most orders arrive through UPI, a smaller share through debit and credit cards, and very little through netbanking or wallets. That changes which gateway costs less and which features matter.

This guide compares Razorpay and PhonePe Payment Gateway (PhonePe PG) for small businesses with UPI-heavy payment mixes. It covers onboarding, published fees and offers, security, settlement and support, and ends with a worked monthly cost example. Figures come from each provider’s official pricing pages and documentation, checked in October 2026.

Quick answer: For most small businesses, Razorpay is the safer default in 2026 because it publishes its rates, offer terms, settlement fees and security controls in detail. It also supports unregistered sellers and 14 official ecommerce plugins. PhonePe PG is competitive for UPI-heavy sellers: it advertises zero setup and maintenance fees, a limited-period free offer, T+1 online settlement in its developer documentation, and a name most UPI users already recognise. Its per-method rates and offer terms are not published, so get a written quote before you choose.

How do onboarding and KYC compare?

Both providers onboard small businesses online, but Razorpay documents its process in more detail.

Razorpay lets you register with an email or mobile number, choose registered or unregistered, and enter a PAN from which it pulls your details. KYC runs through CKYC (the fastest route, with no video KYC), DigiLocker, or manual upload of Aadhaar, voter ID or passport. Registered businesses add a GST or Udyam certificate plus one supporting document, such as a Shop Establishment Certificate. Razorpay verifies the bank account with a Rs 1 deposit, and a test dashboard is available while the account is reviewed. Unregistered individuals can sign up with a personal PAN, which suits freelancers and home businesses.

PhonePe PG asks merchants to upload documents and complete KYC for activation. Its merchant onboarding guidelines list the standard KYC set by entity type: for a sole proprietor, identity checks on the proprietor plus two business proofs such as a Udyam certificate, GST certificate or a recent utility bill. PhonePe first tries to fetch details from the central KYC registry. Its product pages say integration can take as little as five minutes once the account is active, but they do not state an activation time.

PhonePe’s payment links are single-use and do not support recurring payments, so a coaching centre collecting monthly fees would need UPI AutoPay or a fresh link each month.

What do Razorpay and PhonePe PG charge?

This is where the two providers differ most, and the difference is about disclosure as much as price.

TheRazorpay pricing pagelists a standard platform fee of 2% plus GST, with zero setup and zero annual maintenance fees. Its FAQ says a 2% platform fee applies to standard UPI payments as well, even though the MDR on UPI itself is zero. Credit cards on UPI (RuPay) carry 2.15% plus GST. Businesses processing more than Rs 5 lakh a month can ask for custom enterprise pricing.

PhonePe’s pricing page shows a Standard Plan rate of 1.99%, struck through and marked “Free*” as a limited-period offer, with zero setup, zero annual maintenance and zero hidden charges. The page does not list rates by payment method, does not mention GST, and does not link to the offer terms.

The Razorpay offer terms are specific. The offer applies to accounts activated on or after 1 July 2026, covers domestic payment gateway transactions only, and ends after 90 days or Rs 5 lakh of cumulative volume, whichever comes first. It excludes prepaid cards, corporate credit cards, American Express, Diners and all EMI methods, allows one redemption per PAN or bank account, and can be withdrawn if credit cards exceed 90% of volume. GST on any fees still applies, and a Rs 199 plus tax KYC processing fee may be charged. You can read the full90-day offer termsbefore signing up.

PhonePe’s offer has a history but no published conditions. In June 2024, PhonePe announced zero transaction fees for SMEs for the first three months after onboarding. The 2026 pricing page still shows a free offer but gives no end date, cap, eligible methods or post-offer rate. Ask for those in writing.

How do their security controls compare?

Both providers say they are PCI DSS compliant and support 3D Secure. The gap is in how much each documents for merchants. For a primer on what certification covers, see our guide toPCI DSS certification in India.

Two rows deserve a closer look.

Webhooks. Razorpay signs each webhook payload with HMAC SHA256 using your webhook secret, so a tampered body fails verification. PhonePe’s documentation describes an Authorization header built from a username and password you set in the dashboard. That proves the sender knows the shared credential, but the documentation does not describe a signature over the payload itself. With either provider, confirm the payment status through the status API before you ship an order. Our guide topayment API and webhook securityexplains why.

Dashboard access. Small teams often share one login, which is the most common way gateway dashboards get misused. Razorpay’steam management documentationshows how the owner can switch on two-step verification for every user. PhonePe documents useful roles, including a Cashier role with no refund rights, but not dashboard two-factor login. Ourpayment gateway dashboard securitychecklist covers what to set up on either.

UPI-heavy businesses face less card fraud but more social engineering, such as fake payment screenshots and refund scams. Gateway tools do not stop those; process rules do. See our guide toUPI fraud prevention for merchants.

How fast do Razorpay and PhonePe PG settle, and what do refunds look like?

Settlement speed matters for small businesses buying stock or paying staff weekly.

Razorpay prices itsInstant Settlementsopenly. Same-day settlement pays out payments made between 9 am and 4:59 pm at 5 pm on the same working day, and on-demand settlement transfers funds within seconds, including weekends. Neither has a setup or annual fee.

PhonePe’s documented T+1 cycle is faster than Razorpay’s default T+2, and for a seller who does not want to pay for faster settlement, that is a real advantage. PhonePe notes the cycle can vary by merchant and business model, so confirm it in your agreement.

Neither provider publishes a dispute fee for domestic payments. UPI disputes are raised through the customer’s bank or app, and if the bank accepts a claim, funds are usually reversed from your settlement. Keep order and delivery records for every sale.

What does a month cost for a UPI-heavy small business?

The example uses assumptions, not provider quotes. Treat it as a method you can reuse with your own numbers.

Assumptions:

• Monthly sales: Rs 3 lakh across 500 orders (average Rs 600).
• Payment mix: UPI 75% (Rs 2,25,000), debit and credit cards 20% (Rs 60,000), netbanking 5% (Rs 15,000).
• No credit cards on UPI, corporate cards, Amex or EMI.
• Razorpay: standard 2% platform fee on all three methods after the offer, plus 18% GST.
• PhonePe PG: two scenarios, because no per-method rate is published. Scenario A assumes the free offer applies in full. Scenario B applies the listed 1.99% Standard Plan rate to all methods, plus 18% GST.
• Standard settlement, no instant settlement.

What the example shows:

• On listed standard rates, the two are close: about Rs 35 a month apart at Rs 3 lakh.
• The real difference is the UPI rate you negotiate. Because 75% of this business’s volume is UPI, every 0.5 percentage point off the UPI rate saves about Rs 1,125 a month before GST.
• Razorpay’s offer saving is fixed and known in advance. PhonePe’s could be larger or smaller, depending on terms you need to see.
• Adding Razorpay same-day settlement at 0.15% to 0.20% would add Rs 450 to Rs 600 a month at this volume.

For a full method-by-method approach to fee comparisons, ourRazorpay vs Cashfree pricingarticle walks through the arithmetic.

Which should a small business choose?

We compared the two on five documented criteria: published pricing and offer terms, onboarding flexibility, security controls documented for merchants, settlement options, and integrations. On that basis, Razorpay is the better default for most small businesses.

Choose Razorpay if:

• You want to know your costs before you sign. Its rates, offer conditions and instant settlement prices are all published.
• You are not yet registered, or you sell through Shopify, WooCommerce, Wix or another platform covered by its 14 plugins.
• You want enforceable two-step verification for your team and HMAC-signed webhooks.
• You may need same-day or on-demand settlement during busy periods.

Choose PhonePe PG if:

• Your sales are mostly UPI, and PhonePe gives you a written quote or offer that beats Razorpay’s 2% UPI platform fee.
• Default T+1 settlement without an extra fee matters more to you than optional instant payouts.
• Your customers already pay with the PhonePe app and you want a brand they recognise at checkout.
• You run a simple store on Shopify or WooCommerce and need only UPI, cards and netbanking.

If you run a D2C brand with higher order volumes, returns and cash on delivery, the trade-offs are different; ourRazorpay vs Cashfree for D2Cguide covers that angle.

Frequently asked questions

1. Is PhonePe Payment Gateway free?

PhonePe’s pricing page shows its 1.99% Standard Plan rate as “Free*” under a limited-period offer, with zero setup and annual fees. The offer terms, end date and eligible methods are not published, so confirm them before relying on the free rate.

2. Does Razorpay charge for UPI payments?

Yes, under standard pricing. Razorpay’s pricing page says the MDR on UPI is zero but a 2% platform fee plus GST applies. New accounts activated from 1 July 2026 get 0% platform fees for 90 days or Rs 5 lakh of volume.

3. Which settles faster, Razorpay or PhonePe PG?

PhonePe’s developer documentation describes T+1 settlement for online payments. Razorpay’s default is T+2 working days, with paid same-day and on-demand options.

4. Is PhonePe PG authorised by RBI?

Yes. PhonePe announced final RBI authorisation to operate as an online payment aggregator in September 2025.

5. Can I use Razorpay or PhonePe PG without a website?

Yes. Both offer payment links you can share on WhatsApp, SMS or email, and both have hosted payment pages.

6. Do both providers support Shopify and WooCommerce?

Yes. Razorpay lists 14 official plugins, and PhonePe PG supports Shopify, WooCommerce, Magento and OpenCart.

7. How quickly are UPI refunds processed?

PhonePe says UPI refunds reach the customer the same or next day via IMPS. Razorpay’s normal refunds take 5 to 7 working days, with instant refunds available.

8. Is GST charged on payment gateway fees?

Yes. GST at 18% applies to gateway fees. Razorpay deducts the fee and GST at source, and PhonePe’s settlement reports show GST components against its fee.