Shopify is a good listener. It has been instrumental in releasing features that solve the real pain points of e-commerce store owners, such as abandoned cart recovery (automatic email trigger), automatic shipping calculations, customer profiling, bulk discount solutions, social media integrations, blogging platform, and professional themes.
The list is really extensive and stores of every kind find it easy to use this platform.
One of their recent releases is their payment gateway. It is only accessible in certain countries at the moment, but they are slowly rolling it out to all their markets. If you are in one of the countries where you can already use this feature (check the list here), this article is your comprehensive guide to understand everything relevant to Shopify Payments.
Topics we will discuss:
- Overview
- Pros and Cons
- Associated Fees
- Setting up Shopify Payment and Testing
- Payment for In-Person Transactions
- Final Takeaways
As a Shopify store owner, you need to accept payments and pay charges/taxes to the platform. Initially, you would have had to install a third-party payment processor to your store to facilitate payments. For instance, you can use PayPal, Stripe, Alipay global, and almost 200 other options.
But now, Shopify has released its own payment processor. With Shopify Payments, you can manage payment processing directly in your user dashboard. It is, by default, integrated into your account, which makes your work quick and easy. In a nutshell, they cut out the need for a middleman for monetary transactions on their platform.
Pros and Cons of Shopify Payments
While this payment feature is almost perfect, it has some disadvantages, as well. Here is a collated list of all the advantages you can expect and some pain points which are not yet resolved.
Advantages of Shopify Payments:
Track in Real-Time
Sure, every payment processor has a dashboard. However, it needs an extra browser tab, another login, and an additional couple of minutes to navigate to the dashboard screen before you get your report. Using Shopify Payment means it is directly on your dashboard and you can keep an eye on it every time you log in to your store.
Shopify has really easy and user-friendly reporting. Your payout schedules (both scheduled and past) are displayed, and when you click on one of them you can get detailed information such as charges, refunds, balance. The reporting gives you a real-time overview each time you access your admin panel.
Shopify Transaction Fees Waived
This is one of the biggest advantages and an incentive for all store owners to use Shopify Payments. Initially, for every transaction, Shopify had its own fees. A range between 0.5%-2% depending on your sales amount.
With Shopify Payment, this transaction fee is now waived. This increases the profit margin for owners. However, you will still pay payment gateway fees.
To explain this better, every payment processor takes 2–3 types of fees: payment processing fees, transaction fees, and sometimes hidden fees (e.g. currency conversion fees).
For Shopify Payment, only the transaction fees are waived using their gateway. You will still pay the processing fee. Shopify is very transparent with its pricing, so you will not have hidden charges like in PayPal.
Simplified Chargeback Recovery
Chargebacks are every store owner’s nightmare. They are time-consuming, are never fun, and are always a hassle. Chargebacks happen when one of your customers reports that they did not receive the product, got a faulty one, or never ordered and was charged incorrectly. In such a situation, the payment processor notifies you about it and you can deal with it by providing proof relevant to the situation.
With Shopify Payment, this process has been made a bit easier. Firstly, it is directly on your dashboard. This way you will not miss it and can look into it quickly. Shopify also has an option for automatic response, where they include the details (customer name, ID, shipping, purchase) and send the first email.
On the dashboard, they have a very easy reporting process for this. You get a notification that you have received a chargeback along with the reason. Then you get two options: respond to them (automated or manual) or contact the customer directly so it can be resolved quicker.
Instant Approval for Shopify Payments
Applying for other payment processors involves a series of steps. Firstly, you need to create an account with them, then integrate it to your Shopify store. When you associate your bank and the store, the whole verification process requires a certain amount of form filling, and the whole process takes anywhere between a couple of days to some weeks.
Shopify Payment is already integrated and has instant approval. This saves a lot of time and effort in the initial setup and helps you get started quickly.
Discounted Credit-Card Processing Fees
When compared to other payment providers, Shopify has a discounted processing fee. Most providers have a rate of about 3%. With Shopify Basic, it is a 2.7% fee (which is the same as other providers).
This might seem like a menial difference, but if you have a big store, the numbers add up. Further, the rate goes down with an upgrade of your Shopify subscription plan (falling as low as 2.4%).
Security of Shopify Payments
Shopify has many security measures in place. From an efficient chargeback process to tools that help flag high-risk orders, the platform has many sophisticated tools that protect both the retailer and the customer.
Side note: As an owner, you can also install additional tools like Fraudblock to help you with the store’s payment security.
Disadvantages of Shopify Payments
Limited Availability
If your store is selling in multiple countries, you will need a back-up payment provider. Shopify Payment is currently available in only select countries (also has some further business restrictions).
Chargeback Fees
While they make the chargeback handling process really easy, it comes with a price. The store owner gets billed as much as $15 for every chargeback. This is especially high considering there are always fraudulent chargeback claims from some customers.
Fund Withholding Possible
Shopify reserves the right to terminate an account without any prior notice to the owner. This scares a lot of owners. However, they only do this when they notice high volumes of suspicious activity or pending claims.
Initially, they freeze your account and then analyze both sides. There is comprehensive scrutiny at this stage. The owner can pay all their pending bills and outstanding charges to unfreeze.
Associated Fees for Shopify Payments
We already touched upon this in our previous section. Here we give you some more details.
Shopify has different subscription plans (Lite, Basic, Shopify, Advanced, and Plus). The price ranges from $9/month to $2000/month. As you upgrade, the payment fees go down.
When you have a third party payment provider, Shopify charges commission or transaction fees (between 0.5%-2%, depending on subscription plan). With Shopify Payment, this is waived. This is also waived when you have Shopify + another platform.
For example, you can have PayPal as a backup payment provider for countries where shopify payment is not yet released. When the customer opts for PayPal, Shopify still won’t charge you the commission or the transaction fees.
You will, however, pay payment gateway fees, also called credit card fees on Shopify. The rate Shopify provides is already lower than most payment providers. Further, the rate decreases when you upgrade your subscription. Rates begin at 2.9% (for Lite and Basic) and go down to 1.6% (for Shopify Plus).
Setting up Shopify Payments and Testing
Before you can set up Shopify payments, you need to confirm that your bank meets their requirements.
- You need to have a checking account
- The bank accepts electronic transfers
There are some further region-based requirements, too, which are detailed on their help page. For instance, if you are a store owner in Germany, your bank account must be eligible for SEPA transfers and have an IBAN.
Steps to Set up Shopify Payments
- Log in to your account → Go to Settings from your admin dashboard
- Go to Shopify Payments → Click on Complete account setup
- Set up your credit card payment provider
- Go to Settings again → Select Payment providers
- Shopify Payment box → “Activate Shopify Payments”
- You will get an option to enter details (about your store + bank) → save
You definitely need to make sure your payment system works well. Being unable to accept money from willing customers is not a good situation.
Shopify allows a test mode, where you can experiment with how you and your staff can process orders. With the test mode on, you do not use real credit cards, but fill in fake details. We will show you how to enable test mode and conduct a test.
Steps to Test Shopify Payments
Step 1: Enable Test Mode.
1. Log into your Shopify Account → access your admin panel
2. In Settings → go to Manage
3. You will find a test mode section → enable Test Mode → save!
Step 2: Create an order and simulate a transaction.
1. Order any product
2. Fill out the following information for a fake credit card:
Name on card: any two words
Expiration date: any date in the future
Security code: any three digits
Card number: choose from the list below
Visa: 4242424242424242
Mastercard: 5555555555554444
American Express: 378282246310005
Discover: 6011111111111117
Diners Club: 30569309025904
JCB: 3530111333300000
3. Ensure that the whole process is completed without errors. You can also proofread the communication the customer receives at each stage of the ordering and checkout process.
At this point, you have set up Shopify Payments and also tested it for any errors. The last thing you need to know is how you can collect payments in case of manual transactions.
Payment for In-Person Transactions
Shopify has a mobile point of sale system, which allows you to make transactions in-person, such as if you are selling at a fair, conference, pop-up, or a local market.
When you have Shopify Payments enabled on your account, you can use the Shopify Mobile card reader (also called Audio Jack), which retails below $10. You can use this to securely accept credit card payments for your store when you are selling products in-person.
Final Takeaways about Shopify Payments
Shopify truly has done a good job with its multi-currency payment provider feature. With its top three features (transparent and low fees, simplified processes and reporting, seamless integration for all payments), it has made using the platform even easier. As an owner, your focus should be on the products and marketing, trusting Shopify’s well-built back-end solutions.