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Shopify Payments: Review, Usage, Fees, and How it works

May 01, 2024
Written and researched by experts at AvadaLearn more about our methodology

By Sam Nguyen

CEO Avada Commerce

Key Takeaways

  • Shopify Payments is powered by Stripe technology, it’s basically the same payment processor, but it’s much more merchant-friendly and fully integrated (as the default payment service) into your store.
  • Shopify Payments has no monthly fees, no hidden fees, and no setup fees. But you will have to deal with chargeback fees and 1% fees for credit cards issued outside of the United States.
  • Shopify Payments only available at some countries, and has a list of prohibited products/services.
  • Sometimes it is annoying to deal with Shopify freezing your payment.

What is Shopify Payments?

What is Payment Processing?

Shopify Payments is Shopify’s in-house payment provider that facilitates online transactions for Shopify stores as the default payment gateway.

Since Shopify Payments is powered by Stripe technology, it’s basically the same payment processor, but it’s much more merchant-friendly and fully integrated with your store.

Requirements for using Shopify Payments

Shopify Payments requires you to submit the following information:

  • Your Employer Identification Number (EIN)
  • Your banking information
  • Please also check out these additional requirements before using Shopify payments:

Depending on the country and region you are located in, Shopify Payments may not be available for your store.

It is worth noting that, two-step authentication feature is required to use Shopify Payments, and if you deactivate it in the future, your account and financial information are vulnerable to potential attacks.

Throughout this article, we will guide you deeper into this topic.

Why Use Shopify Payments?

1. It’s easy to set up Shopify Payments

Shopify Payments is the default payment gateway for your store. It is designed for the Shopify platform, by the Shopify platform! As soon as you set up Shopify Payments for your store, your finances will be synchronized with your sales and inventory, so you don’t have to go through a third-party provider to accept payments.

2. Shopify Payments is fully integrated into your Shopify store

Shopify Payments keeps your data on your Shopify dashboard so that all your orders and payments can be tracked in one place.

Also, Shopify Payments keeps your customers on your website because all transactions are processed on your Shopify store.

In the case of PayPal or other third-party providers, buyers will be directed to the platform to complete the transaction. It might cause confusion or a drop in your conversion rate, as your customers are really sensitive to a disruption in their shopping experience.

3. Shopify Payments transaction fees are 0

Besides the credit card rate that varies based on your pricing plan, Shopify Payments fees are 0.

In other words, Shopify Payments has no monthly fees, no hidden fees, and no setup fees.

Meanwhile, using third-party payment service providers instead of Shopify Payments will incur transaction fees.

For third-party payment services, Shopify charges a 2% fee on all Basic Shopify transactions, 1% on Standard Shopify plan transactions, and 0.5% on Advanced Shopify plan transactions.

4. Shopify Payments supports offline sales

Shopify Payments is available for offline sales, as it is integrated with your Shopify POS.

It means that your business data is unified, including sales both online and in-store. However, this is not the case with Paypal, as it doesn’t support POS payments.

5. Customers have more payment options

Shopify Payments is not the only payment provider you can choose from. You can add other payment providers, such as Paypal to your Shopify store.

It means that your customers will have more options to pay when shopping on your Shopify store because more payment methods are available at checkout.

How does the Shopify Payments payment processing work?

Shopify Payment helps you to accept payments online that are made with credit cards and debit cards from Visa, MasterCard, AMEX, Cryptocurrency, etc.

Shopify Payments also accepts Diner Club debit and credit cards, and Elo, JCB and Union Pay automatically through Discover. In addition, Shopify plans also allow businesses to sell in multiple currencies and manage international sales through online stores.

And for collecting your fund, Shopify Payout is where you can receive your money if a customer uses Shopify Payments and specific accelerated checkouts.

Who can use Shopify Payments?

Currently, Shopify Payments is only available to stores in certain countries. Here is the list of Shopify Payments supported countries:

  • Australia
  • Austria
  • Belgium
  • Canada
  • Denmark
  • Czechia
  • Finland
  • France
  • Germany
  • Hong Kong SAR
  • Ireland
  • Italy
  • Japan
  • Netherlands
  • New Zealand
  • Portugal
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • United Kingdom
  • United States

Does Shopify Payments have any fees?

Processing fee for credit card payments

Shopify Payments fees are 0. The only fees will be the credit card rate which is included and varies based on your Shopify plans.

  • Basic Plan: 2.9% + 30¢ USD online; 2.7% + 0¢ USD in person
  • Shopify Plan: 2.6% + 30¢ USD online; 2.5% + 0¢ USD in person
  • Advanced Plan: 2.4% + 30¢ USD online; 2.4% + 0¢ USD in person

Shopify will also waive the 0.5%-2 commission it would otherwise charge on each sale. So in other words, Shopify Payments has no monthly fees, no hidden fees, and no setup fees.

Transaction fees

Meanwhile, using a third-party payment provider instead of Shopify Payments will incur transaction fees.

For third-party payment services, Shopify charges a 2% fee on all Basic Shopify transactions, 1% on Standard Shopify plan</a transactions, and 0.5% on Advanced Shopify plan transactions.

Additional Fees

Chargeback fee

Chargebacks, also known as payment disputes, are when a customer disputes a credit or debit card transaction. To be more specific, it occurs when a cardholder questions a transaction and asks their card-issuing bank to reverse it.

Shopify will charge a $15 fee if you experience a chargeback. It will also refund the fee if you win (but you won’t for most of the time).

Here are the common reasons that cause a chargeback:

  • Fraudulent transactions: For example, the credit card used for purchasing your products was stolen.
  • Shipping, delivery, or pricing issues: It often happens when there is an error on the product shipping, which causes the customers to not receive their orders.
  • Credit not processed: Sometimes your customers make mistakes and would like to cancel the orders.
  • Dissatisfaction with product or service: It happens when the products are damaged or do not match with the advertisement.
  • Unrecognizable business name: It might be because of the company’s name does not match the name on the receipts.
  • Failure to cancel subscription: It might happen when your customers forgot a renewal subscription and dispute the transaction to cancel it.

For Credit Cards issued outside of the United States

Transactions on credit cards issued outside the United States incur a 1% fee.

How to set up Shopify Payments?

Step 1: Check if you are eligible

You will not be able to use Shopify Payments if you are not in one of the countries where the Shopify commerce platform is available.

It is also necessary to open an account with a bank located within your country, although banking requirements vary from one country to another.

In addition, you need to make sure you do not fall within the prohibited businesses list, which varies slightly from country to country.

Step 2: Configure your account

  • Go to Settings > Payments
  • Click on Add business details - if you haven’t submitted yours

Depending on your type of business, you may also have to provide your EIN (or other identifiers) as well as your personal information. Upload any required documentation, and you will be able to move forward.

The EIN (also sometimes referred to as the “business tax ID number”) is a unique 9-digit number that identifies your organization, similar to how a social security number identifies you personally. As part of your EIN, the IRS identifies your business.

In addition to filings related to the IRS, your EIN may also be required for opening a business bank account, obtaining a business license, or applying for a business loan.

Step 3: Active Shopify Payments

Activate Shopify Payments if you have already enabled a payment processor.

Your current payment processor will be removed from your account and replaced by Shopify Payments.

This option is located under Settings > Payments.

Step 4: Set up Shopify Payments

  • Payment Notifications: Select whether you want to be notified by email when you receive a payout.
  • Fraud Prevention Tools: By enabling the address verification system (AVS) as well as the card verification value (CVV), you can make things a little more challenging for fraudsters.
  • These require additional information from your customers before they can complete a credit card transaction. We recommend that you enable these features, although they only function if the issuing bank of the customer’s card is compatible with them.
  • Your Bank Account: This section allows you to update your bank account information.
  • Customer Billing Information: Several tweaks can be made to the information that appears on a customer’s credit card bill. It is also necessary to include your telephone number.
  • Tax Info: Previously, you entered this information, but if any changes have occurred, you can adjust it here, along with any additional tax requirements imposed by your government.

Step 5: Enable POS app (optional)

With Shopify Payments, a Shopify card reader and Shopify POS app can help businesses to make sales in person.

  • Download the Shopify POS app from the Shopify App store.
  • Go to Settings > Payment settings.
  • In the Default Payment Types section the credit/debit card option should read “Accepted”.

What are Shopify Payments Cons?

1. Shopify Payments is not available in every country:

Shopify Payments is currently available in only 22 countries . Please check the list of Shopify Payments supported countries we have mentioned above.

Shopify is expanding this list constantly. However it takes time to create a Shopify Payments version that is compliant with the regulations of the specific country.

2. Shopify and Shopify Payments require you to follow their products T&Cs

According to Shopify Terms and Conditions, there is a list of prohibited products and services that won’t be supported on Shopify (as well as Shopify Payments).

Please check if your online business fall into these categories:

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
  • Gambling
  • Intellectual property or proprietary rights infringement
  • Regulated or illegal products or services
  • Sanctions

Products or services that are otherwise prohibited by law or Shopify’s financial partners

  • Aggregation
  • 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

For every chargeback, Shopify Payments will charge you with $15 - which is considerable while you have already loss due to hidden costs including operation, marketing, etc. costs.

Normally, chargebacks cost from $20 to $100. However, while some acquiring banks charge merchants as low as $5 for a chargeback, some banks might cost a high-risk merchant $250 per chargeback.

4. Sudden account frozen

Shopify can always freeze your payment whenever there is a chargeback or when they suspect fraudulent practice.

Until the problem is solved, you will not be able to receive your payout - which is really controversial among sellers in the Shopify Community.

Sam Nguyen is the CEO and founder of Avada Commerce, an e-commerce solution provider headquartered in Singapore. He is an expert on the Shopify e-commerce platform for online stores and retail point-of-sale systems. Sam loves talking about e-commerce and he aims to help over a million online businesses grow and thrive.