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Small Businesses

#Shopify

Everything You Need to Know About Shopify Payments

October 27, 2020
8 MINUTES
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Danica Popovic

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If you’ve just set up an online store on Shopify, it’s important to understand how ecommerce works on this website building platform.

If you’re looking to make money selling stuff online, there are few ecommerce platforms better than Shopify. Apart from great ease of use and the awesome Shopify app market tailored for helping businesses grow, Shopify’s best assets are its ecommerce features.

To illustrate, we’ve recently compared Wix vs Shopify to see which one might be a better choice for online businesses. And while the conclusion is that Wix offers a more budget-friendly solution for a more general use, when it comes to ecommerce Shopify cannot be beaten.

And one of Shopify’s awesome ecommerce features is its payment processing solution called Shopify Payments.

What is Shopify Payments?

Shopify Payments is the platform’s integrated ecommerce solution that came about as an alternative to third-party payment options like PayPal or Amazon Pay. In other words, it’s the service that transfers funds paid by your customers to your bank account.

Shopify Payments was developed in partnership with Stripe. This means that Shopify payment processing goes through Stripe, however, you can still set up a different Stripe account to accept payments on your Shopify store.

It’s definitely the simplest way to accept payments through your Shopify online store, so in this article, we’ll guide you through setting up your Shopify payments account and highlight a few details that you should be aware of.

List of eligible countries

Before you get started with Shopify Payments, make sure that your country is on the list this feature is available. Here’s the full list:

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It’s probably intuitive for most, but before you decide to set up make sure to check out the terms and conditions specific to your country to ensure that your type of business is not prohibited.

How does Shopify Payments work?

Customers buying from your Shopify store can select a number of payment options that you have previously decided on. It’s important to note that if you’re using Shopify Payments, when customers select PayPal and Amazon Pay as their payment method, you will get money through these payment processors.

For every other type of payment option, you get paid through your Shopify payments account. Shopify Payments uses an accelerated checkout called Shopify Pay that lets users save their email, credit card details, billing and shipping information for faster checkout with future payments.

The customer’s payment information is stored securely on Shopify servers which comply with global Payment Card Industry (PCI) Security Standards.

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Why use Shopify Payments?

Well, it’s a fair question. You’d assume that most of your customers have heard of a payment processor like PayPal and that they might think of this to be a safer payment method.

However, bear in mind that if you want to allow your customers a range of different payment options, without using Shopify Payments, you’ll need to set up a different merchant account on each of these payment processing platforms. This doesn’t just require some time, but it also means that your earnings from the same Shopify store are located across several different platforms.

Moreover, when it comes to processing fees, using Shopify Payments allows you to save up! With Shopify Payments, you won’t be charged additional fees Shopify charges as a commission with other payment gateways: 2% with Basic Shopify; 1% with Shopify and 0.5% with Advanced Shopify. However, don’t forget that you’ll still need to pay Shopify transaction fees (more on that in the payments chapter).

Although including Shopify Payments as a checkout option is highly recommended, this doesn’t mean you have to use it exclusively. Adding a few more payment options, especially the notable ecommerce platforms, can increase the trustworthiness of your site and perhaps allow for a more seamless shopping experience for your customers.

Remember that there are over 100 payment gateways, including Apple Pay, Authorize.net and Skrill to name a few, so I suggest you try and figure out which third party payment providers your customers are comfortable using and include a few of those too.

You can always add or manage payment providers by heading over to the Settings section in your Shopify backend, and in the Payment section hit “Choose another provider”. Note that this can only be done by the store owner, in case you have several staff accounts.

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Shopify payments and Stripe

We mentioned already that Shopify Payments was developed in partnership with Stripe, but what does this mean? Well, essentially it means that Shopify Payments transactions are processed through Stripe.

As a business owner, this doesn’t mean all that much to you, except that it’s useful looking at Stripe’s terms and conditions as well, so that you’re clear on what you’re signing up for. These are a few to consider:

  • No dropshipping
  • 3% + chargeback rate for terminating your account
  • No nudity in products (and other prohibited businesses)

Again, like with other payment processors, you’re free to set up a separate account on Stripe and use this as a payment method on your website.

Setting up your Shopify Payments account

To set up your account simply head over to the Payment section in the Settings page of your Shopify store. Depending on the country where you are located additional information might be required, but generally this is what you need to set up Shopify payments:

  • Your employed identification number (EIN)
  • Banking information (the bank account which you want to use for payouts)

After entering your data, your request will be subject to review and once approved you can start using Shopify Payments on your website.

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Credit cards accepted with Shopify payments

Shopify Payments allows you to accept all major credit cards. However, bear in mind that the transaction fees will depend on your Shopify plan (the bigger the plan, the smaller the fees). Here’s a quick breakdown of credit card payment fees across different pricing plans:

  • Shopify Lite and Basic Shopify (monthly fee $9 and $29 and respectively): 2.9% + 30¢ per online transaction.
  • Shopify (monthly fee $79 ): 2.6% + 30¢ per transaction
  • Advanced Shopify (monthly fee $299): 2.4% + 30¢ per transaction
  • Shopify Plus is the enterprise plan which starts at $2,000 per month and the processing fees here are 2.15% + 30¢ per transaction.

Businesses in all countries can accept Visa, Mastercard and American Express debit and credit cards. As for other eligible payment options with Shopify payments, these are country-specific additions:

  • United States: JCB, Discover, and Diners Club credit and debit cards
  • Japan: JCB
  • Germany: SOFORT and Klarna Pay Later
  • Netherlands: iDEAL
  • Belgium: Bancontact, and iDEAL
  • Sweden: Klarna Pay Now, Klarna Pay Later, and Klarna Slice

Payouts with Shopify payments

You can view pending and old payouts from your Payments page. There are three types of payouts that can be listed:

  • In transit: the payout is being sent to your bank account;
  • Paid: the payout was sent to your bank; note that this doesn’t necessarily mean the funds will be in your bank account since your bank might still be processing the payment.
  • Failed: your bank failed to process the payout so the money was not deposited into your account.

You cannot receive a payout if you profit is below $1, £1, or €1 depending on your currency

Your payout schedule (when you get the money is sent to your account) will depend on the country where you’re located. For most eligible countries, the pay period is between 2 to 4 business days.

Perhaps the best feature regarding payouts is that you can track your funds in real-time.

POS and Shopify Payments

Another amazing way where Shopify goes above and beyond as an ecommerce website is the ability to get a point of sale (POS) terminal for your brick-and-mortar business.

In this case, your only option is to use Shopify Payments so if you’re wanting to get a Shopify POS card reader, you might as well use the same payment processor on your website.

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Unfortunately, Shopify Payments isn’t available for in-person payments outside the US, Canada, UK and Ireland.

Fraud analysis and chargeback

Although Shopify Payments has many advantages, there is one area where improvement is needed. The main cons of Shopify Payments are chargebacks and, by extension, how fraud analysis works.

Chargeback is the cost of a purchase you pay back to the customer in case they change their mind or report a stolen credit card. In the second instance, you might end up losing money and your product.

And to add insult to injury, Shopify also charges you a $15 fee every time a chargeback happens. So this is definitely something to be aware of if you’re just starting out and testing a few products or if you notice a shopping cart that looks suspicious.

Of course, this area is closely tied to fraud analysis. Shopify does have a helpful page on this topic that you should definitely check out if you’re worried about a high-risk order. Ultimately though, the fee is by no means neglectable so if you’re worried about potential scams this payment option can have a considerable financial impact on you.

Conclusion: Is Shopify Payments worth it?

If you’re a Shopify merchant you definitely want to create a positive shopping experience for your customers, but also use a payment gateway that is safe, reliable and grants you quick access to your money.

The good news is that Shopify Payments is all of those things! Unsurprisingly, it’s designed to help Shopify stores thrive so it makes a near-perfect payment solution in this case.

The chargeback fee is still one major drawback, so if you’re dealing with a lot of high-risk orders, do bear this in mind.

On the other hand, if you’re using an altogether different ecommerce website, this may not be the most cost-effective or best solution for you. By removing the standard Shopify transaction fees you are saving money in the first case, but if you don’t use Shopify then there might be more affordable solutions out there.

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Danica Popovic

October 27, 2020

Having lived and studied in London and Berlin, I'm back in native Serbia, working remotely and writing short stories and plays in my free time. With previous experience in the nonprofit sector, I'm currently writing about the universal language of good graphic design. I make mix CDs and my playlists are almost exclusively 1960s.