Are Percentage-Based Payment Gateway Fees Permissible in Islam?

Answered by Shaykh Muhammad Carr

Question

Is it permissible to use international payment gateways that charge a percentage-based fee? And how should I navigate differing scholarly opinions on this matter while striving to ensure that my income remains halal?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

I pray you are in good faith and health. Thank you for your question.

The principle of ikhtilaf al-ummah rahma teaches us that difference of opinion within the scholarly community is a source of mercy. It is not a Prophetic pronouncement as such but a reality and a sound way of understanding and approaching scholarly disagreement.

Where no lending is involved, the fees charged by the lessor (or service provider) are simply compensation for services, and therefore not subject to the suspicion of being a loan with interest. Actual cost limitations do not govern such payments. [See: AAOIFI Shari‘a Standards]

Payment gateways that charge a percentage-based fee are permissible, and the contractual arrangement can be structured in several valid ways.

The Construct

The initial agreement between the payment gateway company and the client is construed as a service level agreement. At this stage, the client allows the payment gateway company to withhold an agreed-upon percentage of every payment that it will facilitate.

The action of withholding the percentage in lure of the service provided without it being governed by a contract is referred to as istijrar.

Imam Ghazali considered istijrar, while the price is not known to be permissible. “The second case is that one seeks what he desires without mentioning any price, such as saying: ‘Give me a pound of bread or meat,’ for example. This is open to possibility. This is what Ghazali considered permissible.” [Shirbini, al-Mughni; ‘Uthmani, Buhuth fi al-iqtisad]

Thus, a fortiori, when the price of the services is tied to a known benchmark, it would be permissible.

Suppose that a formal contract governs the arrangement. It is then structured as a ji‘ala (performance-based contract) model. The fee, being a percentage of the total amount paid, is also not a problem. It is the same as saying, “I charge you 2/3rds of a $100$.” The definiteness of the fee is not compromised.

As a type of ji‘ala, scholars have permitted employing a person to perform hajj on your behalf in lure of his expenses, which is unknown. [See: Shirbini, Mughni al-Muhtaj]

It can equally be construed as an agency for a fee (wakala bi al-ujra). And Allah knows best.

Ji‘ala

Ji‘ala, legally defined, involves committing to pay a stipulated recompense in exchange for a known or unknown service. [Ibid.]

This type of contract finds its basis in the narration of Abu Sa‘id al-Khudri, who recited the Fatiha to successfully cure a man stung by a scorpion in exchange for a recompense of thirty sheep. The Prophet (Allah bless him and give him peace) affirmed such transactions and requested a portion of the flock be assigned to him.

In a Ji‘ala contract, the recompense must be clearly defined. Commissions, often calculated as a percentage of the selling price, exemplify this principle, as the selling price is predetermined, thereby establishing the commission amount. Khatib al-Shirbini elucidates this concept, stating, ‘If a person specifies, for instance, that whoever returns my slave will receive his clothing or a quarter of his value, they will be entitled to the agreed-upon amount provided they are aware of its terms.’”

Reasonable Percentage

The Percentage fee should be reduced to a reasonable percentage, and the gateway should collect no more than a reasonable amount in light of the time and effort devoted.

AAOIFI Standards

Regarding remuneration rules, AAOIFI states, “It may also be for a fixed or variable amount, according to whatever designated method the two parties agree upon.” [See: Item 5/2/3 below]

5/2/3 reads,

“In case the rental is subject to changes (floating rental), it is necessary that the amount of the rental of the first period of the Ijarah contract be specified in a lump sum. It is then permissible that the rentals for subsequent periods be determined according to a certain benchmark. Such a benchmark must be based on a clear formula that is not subject to dispute, because it becomes the determining factor for the rentals of the remaining periods. This benchmark should be subject to a ceiling on both maximum and minimum levels.” [AAOIFI Standards]

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.