One of the most important steps that need taken to start making money on Shopify is setting up a way to collect payments. Among a ton of payment providers that Shopify supports, Shopify Payments is still considered to be the most prominent name. In this Shopify Payments review, let LitExtension – #1 Shopping Cart Migration Expert walk you through everything you need to know about Shopify Payments:
- What is Shopify Payments?
- How does Shopify Payments work?
- What is Shopify Payments Fee?
- Shopify Payments vs Stripe – Which is Better?
- Why use Shopify Payments? Shopify Payments Pros and Cons
Need Help To Migrate Your Store?
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What is Shopify Payments?
Before getting to the nitty-gritty of this Shopify payments review, let's head down to the biggest question: What is Shopify Payments?
Shopify Payments is an in-house payment provider by Shopify, a top eCommerce platform in the market. It plays the role of the default integrated payment gateway for your Shopify store. From the moment your customers fill in their credit card information, it is responsible for managing all the steps up until the money has already been in your bank account.
Shopify Payments is powered by Stripe technology, thus they are the same payment processor in essence. However, it is a much more merchant-friendly platform than Stripe and fully integrated into your store dashboard.
Are you ready to start a new adventure with Shopify to take advantage of Shopify Payment? Check out our Shopify resources now for more:
How Does Shopify Payments Work?
Now that we have a brief overview of what is Shopify Payments, let's take a look at how does Shopify Payments work.
Shopify Payments is a part of the Shopify ecosystem. It integrates well with both versions of this eCommerce platform, Shopify and Shopify Plus. In case you are a newbie in this field, let's take a look at this quick Shopify review to see all the Shopify features.
Shopify Payments plays the role of a “virtue bridge” between sellers and buyers. Whenever a customer makes a purchase in your Shopify store, Shopify Payments will collect their money and send them directly to store owners. With Shopify Payments, the checkout process will be quick, smooth, and highly secure.
As a “middleman”, Shopify Payments comes with a fraud analysis. This Shopify payment processing automatically runs an analysis to detect any suspicious activities. It will protect e-merchants from scam orders or fake transactions.
Then how does Shopify pay you? Well, you get paid by Affirm and your payouts are sent to the same bank account that you use for Shopify Payments. Custom payout schedules don't affect Shop Pay Installments payouts.
What is Shopify Payments Fee?
Accepting payments in Shopify will involve 2 types of fees:
- Credit card processing fee: The fee that your payment provider charges you for executing all the transactions, including transmitting data among buyers, sellers, issuing banks, and acquiring banks. This rate depends on the provider that you choose.
- Transactions fee: The fee that Shopify charges you on each transaction. Fortunately, after activating Shopify Payments, you will not have to pay a single coin for this. Even when you have multiple payment methods (including Shopify Payments) and customers end up choosing PayPal at checkout, it is still free of charge.
Please note that if customers use the Shop Pay speed checkout button that Shopify offers, they won't be charged any transaction fee for their purchases.
About the credit card processing fee, you will be charged based on your current Shopify pricing plan, the number of purchases, and the order value.
Shopify Payments vs Stripe – Which One Should You Choose?
Though Shopify Payments is a payment processor tailored for Shopify stores, it is not the sole solution for business owners on Shopify. Besides Shopify Payments, Stripe appears as a top payment provider for any online business and a fierce competitor to Shopify.
So the question is, who is the winner between Shopify Payments vs Stripe? Which one is better for your business? LitExtension has compiled a detailed comparison of Shopify Payments vs Stripe for you.
|– Credit and Debit cards
– Accelerated checkout button (Shop Pay, Apple Pay, Google Pay, PayPal)
– Buy Now, Pay Later with Shop Pay
– Other manual payment methods (COD, bank transfer,…)
|– Credit and Debit cards
– Digital wallets
– Buy Now, Pay Later with Klarna or Afterpay
– ACH debit, credit, and wire transfer
|Shopify Payments transaction fee is variable depending on your Shopify pricing plan
|– Online payment: 2.9% + $0.30 per transaction
– In person payment: 2.7% + $0.05 per transaction
|Average payout time
|Two business days for stores based in the US
|Two business days for stores based in the US
|24/7 support via phone call and live chat
|24/7 support via phone call, live chat, and email
Shopify Payment Review – Why Use Shopify Payments?
1. Set up Shopify Payments is quick
Different from conventional payment acceptance methods, Shopify Payments is a super straightforward solution for eCommerce merchants. You no longer have to go through a third-party provider and be approved for a merchant account before you can process payments. And once you finish setting up Shopify Payments for your store, your finances are synced up with your sales and inventory.
In the latter part of this Shopify Payments review, we will walk you through the detailed setup instructions so that you can activate your Shopify Payments right away.
2. Shopify Payments is fully integrated
With Shopify Payments, your customers will stay on your website at all times because all transactions are on your Shopify store. Meanwhile, if you choose PayPal or other third-party providers, buyers will be redirected to the platform to complete the purchase. The complexity can annoy your customers that are not tech-savvy, which can decrease your conversion rate.
Besides, sellers can also take advantage of an integrated payment back office in the dashboard. All payments will be synced with their corresponding orders, which makes Shopify Payments the only solution that can track all your orders and payments all in one place. Therefore, it is easier than ever for merchants to understand how much they have earned for individual orders with Shopify Payments.
3. Shopify Payments rates for a transaction is zero
As mentioned above, you will incur a transaction fee when using third-party Payment Processors. The rate varies based on the Shopify pricing plan that you choose.
To be specific, you will have to deduct 0.5%, 1%, and 2% of your revenue if you are using Advanced Shopify, Standard Shopify, and Basic Shopify respectively. That number can turn out to be hundreds of thousands of dollars per month, even higher than the subscription fee that Shopify charges you.
4. Shopify Payments supports offline sales
This is also a big plus for Shopify Payments over its main competitor – PayPal. While PayPal does not support POS payments, you can fully integrate Shopify Payments with Shopify POS. All your business data, including both online and in-store sales, are unified.
5. Customers have more options to pay
Choosing Shopify Payments does not mean you cannot use other payment providers. In fact, you can choose over 100 payment providers on Shopify. More Shopify payment methods mean that customers will have more options to check out. For instance, you can let users choose PayPal at checkout beside a credit card or American Express.
What are Shopify Payments Cons?
1. Not available in every country
Although people worldwide are able to open a Shopify store, the number of countries that Shopify Payments supports is still small. Here is the list of countries that Shopify Payments are available in:
- Hong Kong SAR
- The Netherlands
- New Zealand
- United Kingdom
- United States (does not include US territories, except Puerto Rico)
In order to expand to a new country, Shopify must make sure that the Shopify version in that country is compliant with the requirements of that country. Therefore, it would take a long time for you to wait. If you are running your online business in other countries, you have no choice but to choose other payment options that Shopify supports.
2. Must comply with products T&Cs
Before starting to sell on Shopify, you may have heard from other seniors that Shopify has such a long list of prohibited products that you cannot sell. That was owing to Shopify Payments’ compliance with the laws, the rules from Payment Networks, or the requirements of the Processor’s Financial Services Providers.
Before migrating to Shopify or opening a brand new business on this platform, make sure that you have checked the list below. Otherwise, Shopify will terminate your account any time for any reason.
Financial and professional services
- Credit and investment services
- Money and legal services
- Virtual currency or stored value
IP Infringement, regulated or illegal products and services
- Adult content and services
- Counterfeit or unauthorized goods
- Intellectual property or proprietary rights infringement
- Regulated or illegal products or services
Products or services that are otherwise prohibited by law or Shopify’s financial partners
- Drug paraphernalia
- High-risk businesses
- Multi-level marketing
- Pseudo pharmaceuticals
- Social media activity
- Substances designed to mimic illegal drugs
- Use of Shopify Payments in a manner inconsistent with its intended use or as expressly prohibited in the Processor Terms
- Video game or virtual world credits
Unfair, predatory, or deceptive practices
- Opportunities for investment or other services which offer high rewards
- Mugshot publications or pay-to-remove websites
- No-value-added services
3. High Chargeback fees
Chargeback is a return of money to a payer of an online credit card transaction. Suffering a chargeback means that you have just lost the order and may incur an additional charge. Obviously, one of the biggest concerns of a small online business is how to protect itself from chargebacks.
When your buyer contacts their bank to dispute a charge on your store, you will be deducted $15 right away from your next available payout in your Shopify Payments Account (it varies based on countries, but will fluctuate $15). Shopify will refund you that $15 if you win the chargeback, but the chance is way too low.
However, Shopify Payments always does its best to protect its merchants and help them thrive. When you are issued a chargeback, Shopify will compile all the evidence and send it to the issuing bank on your behalf. Besides, they also provide a free app Fraud Filter on app stores to help you avoid chargebacks. It can provide an additional layer of protection to help you fight fraud.
4. Sudden account frozen
Whenever there is a chargeback or suspicious account activity that needs investigating, Shopify Payments always freeze your payment until the problem is solved. If the final verdict is quickly made, you will receive your money in the next payout. However, there is a likelihood that it will take longer to look into. In that case, your payment can be frozen for months, which is the topic with most complaints on Shopify Community.
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How to Set Up Shopify Payments?
Before getting to the detailed setup procedure, let's take a quick overview at how to set up Shopify Payments.
First, you need to set up and activate Shopify Payments first before your clients can purchase items on your e-store using their credit cards. In the Shopify settings, you can activate Shopify Payments from the Payment Providers tab.
Step 1: Decide on your store currency
This is such an essential part of the setup process, as it will affect your product price and sales report in your Shopify admin. Therefore, make sure you choose the right currency. In case you want to select a new monetary unit, go to Settings → General → Store currency
Step 2: Go to the Payments section in your store’s settings
After clicking on the Settings section on your left, you can see a section named “Payments: Enable and manage your store’s payment providers”.
Step 3: Choose Shopify Payments as a payment provider
In the Accept credit cards section, you can see Shopify Payments right at the top of the payment provider list. As you can see, Shopify has briefly listed some basic information like Credit card rate, Transaction fee, and Accepted payment methods. If merchants conduct research on other payment providers like PayPal, Amazon Pay, they can see that it is obviously at competitive prices.
To proceed, just click on “Complete account set up” and then provide all the necessary information to Shopify.
Step 4: Complete account setup
Here you can see all the required information to set up your Shopify Payments account, including Business details, Personal details, Product details, Customer billing statements, and Banking information. Do not forget to read the terms and conditions of Shopify Payments before clicking on the “Complete account setup” button at the bottom of the page.
And you have finished the setup process. Now all you need to do is wait for Shopify to review your application and start the approval process for applicable local payment methods and credit card methods.
💡 If you want to discover other ways to test and set up payments on Shopify, please visit our guide to test Shopify payments!
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What is Shopify Payments – FAQs
If you are running a Shopify store, Shopify Payments is better than PayPal. This payment processor fully integrates with your store and charges a lower fee than PayPal.
Shopify Payments doesn't require any fee to get started with. However, in order to use Shopify Payments, store owners need to pay for a Shopify pricing plan to get your store up and running.
The default pay period for Shopify is from 2 to 4 days depending on the location of your store. Please note that after the money is sent, it might take up to 72 hours for the fund to appear in your deposit.
Shopify requires a small commission fee for each transaction you make in your Shopify store. This fee will be variable based on your Shopify pricing plan.
Shopify Payments Review – Final Words
Let's get back to our very first question, what is Shopify Payments?
In short, Shopify Payments is the most recommended payments provider when selling on Shopify, bringing in so much convenience. It is easier than ever for Shopify users to sell their products, receive money and manage the revenue.
Although there are still so many complaints about strict regulations, Shopify Payments still stay ahead of the game. The convenience of Shopify Payments also makes a great contribution to the success of Shopify.
If you are facing hardships selling on Shopify, dive into our recommended Shopify tips to get better sales immediately.
In case you are using other eCommerce platforms like WooCommerce or BigCommerce and are not satisfied with its payment gateways, you can migrate WooCommerce to Shopify or BigCommerce to Shopify to take all advantages of Shopify Payments. With LitExtension – #1 Shopping Cart Migration Solution, this is as easy as a pie.
We hope that this article has gathered all the information you need about what is Shopify Payments. Don't forget to check out LitExtension blog and join our Facebook Community to get more eCommerce tips and news.