Shopify Payments guide: How it works, setup, fees, pros & cons

In the dynamic world of eCommerce, the process of accepting payments can often become a hurdle for many online retailers. Shopify Payments seamlessly integrates payment processing with the Shopify eCommerce platform, streamlining the transaction process for both merchants and customers. The integration also consolidates various financial operations under one roof, simplifying the management of online stores.

Ahead, our comprehensive guide will delve into Shopify Payments as an eCommerce payment gateway, examining its features and evaluating alternatives like Airwallex, giving you the insights to enhance your online payment processes.

What is Shopify Payments?

Shopify Payments is Shopify's proprietary eCommerce payment system, designed to effortlessly integrate with your Shopify store. This in-built service enables merchants to accept payments directly through their online storefront without the need for a third-party gateway, thereby reducing third-party transaction fees and potential integration complexities.

How does Shopify Payments work?

When a customer purchases a product from your Shopify store, they proceed to the checkout page where they can select from various eCommerce payment methods enabled by Shopify Payments, including credit and debit cards, Apple Pay, and Google Pay.

Once the customer enters their payment details and confirms the purchase, Shopify Payments securely processes the transaction. The funds are then deducted from the customer's account and transferred to the merchant's Shopify Payments account typically within a few business days.

The merchant can monitor these transactions in real time through the Shopify dashboard, which provides detailed insights into sales, refunds, and payment disputes, all in one centralised location.

What are Shopify Payments features?

Shopify Payments isn't just about processing credit and debit card transactions. It comes packed with a variety of features designed to optimise your eCommerce website.

• Payment processing:  Shopify Payments streamlines the checkout process by supporting a broad range of eCommerce payment methods, including major credit and debit cards, Apple Pay, and Google Pay. This allows merchants to offer their customers a seamless shopping experience with quick and secure transactions directly on their online store.

• Order management: Through Shopify Payments, merchants gain access to an integrated order management system. This system allows for efficient tracking of orders and payments from the Shopify dashboard. Merchants can easily manage refunds, cancel orders, and handle customer inquiries directly, without the need to toggle between different platforms.

• Fraud prevention: Shopify Payments incorporates advanced fraud prevention tools that are designed to protect both merchants and customers. These tools include fraud analysis features that help merchants identify and mitigate fraudulent transactions. This proactive approach ensures the integrity of the transaction process, providing peace of mind and reducing the risk of chargebacks.

• Reporting and analytics: The eCommerce platform offers comprehensive reporting and analytics features, enabling merchants to gain valuable insights into their sales and payment activities. Through detailed reports on the Shopify dashboard, merchants can track their financial performance, understand customer purchasing behaviour, and make informed decisions to optimise their sales strategy.

Shopify Payments extends its capabilities beyond basic processing with advanced features designed to accommodate the evolving needs of global eCommerce. Merchants can leverage multi-currency support, allowing customers to shop and check out in their local currency.

Furthermore, Shopify Payments offers chargeback protection to safeguard merchants against fraudulent chargebacks. This system utilises Shopify's extensive dataset and algorithms to automatically review and respond to chargeback claims on behalf of the merchant, contesting unjust chargebacks effectively.

Shopify Payments pricing and fees

Shopify offers various monthly pricing plans designed to suit businesses and eCommerce websites of all sizes. Additional costs may be incurred for currency conversion or when using third-party payment processors. Check out the table below for the different rates:

Sources: Shopify and Airwallex as of 20 April 2024.

To encourage Shopify customers to use Shopify Payments, Shopify waives any third-party transaction fees for purchases made through Shopify Payments. Here’s a more detailed breakdown of what it looks like: 

• Payment processing fee: Shopify Payment applies a fee in your payout currency to cover the costs of payment processing. This fee fluctuates depending on the credit card used and the country or region where the card is registered. Domestic processing fees are applied for credit cards issued within the same country or region as your store. Conversely, for credit cards issued outside of your store's country or region, cross-border processing fees are incurred.

• Third-party transaction fee: Unlike traditional payment gateways, Shopify Payments eliminates the need for third-party providers, thereby reducing transaction fees and extra costs.

• Currency conversion fee: Accepting payments in a currency different from your payout currency involves conversion. Your customer's local currency is converted to your payout currency at the market rate, with no markup. However, a 2% currency conversion fee is applied and is incorporated into the price your customer pays to help offset your costs.

• International transaction fee: Shopify Payments supports multi-currency transactions, which may be subject to additional fees depending on the currency and country of the transaction. For instance, if your business is based in Singapore and a Malaysian customer makes a purchase, their bank may levy an international transaction fee even though the charge was processed in Malaysian Ringgit. These fees vary and are set, as well as collected, by the customer's bank or credit card issuer, not by Shopify.

Shopify offers various monthly pricing plans designed to suit businesses and eCommerce websites of all sizes. Additional costs may be incurred for currency conversion or when using third-party payment processors. Check out the table below for the different rates:

Should you use Shopify Payments? Pros & cons

By choosing Shopify Payments, merchants benefit from a range of key benefits including:

• Seamless integration with Shopify Stores: Shopify Payments is fully integrated into the Shopify platform, offering a streamlined experience that eliminates the need for third-party payment gateways. This integration simplifies the setup process, as merchants can manage their payments directly through their Shopify dashboard.

• Simplified fee structures: Unlike many payment processors that impose varying fees, Shopify Payments has a transparent fee structure that eliminates confusion and helps merchants plan their expenses more accurately. There are no additional third-party transaction fees, which can lead to significant cost savings for merchants. 

• Enhanced security measures: Shopify Payments provides merchants and their customers with a secure transaction environment, including PCI compliance and advanced fraud detection tools, which collectively work to protect sensitive financial data and reduce the risk of fraudulent activities.

However, Shopify Payments faces limitations like restricted country/region availability and industry support, especially for high-risk businesses. Merchants should review Shopify's supported countries and industries to ensure compliance. For those in unsupported regions or industries, alternative payment gateways compatible with Shopify are recommended. Shopify supports many third-party processors, enabling merchants to find eCommerce payment system that suits their geographical and business needs.

Shopify Payments alternatives

Now, let's explore some alternatives to Shopify Payments, such as Stripe and Airwallex, examining their differences and how they stack up against each other.

Shopify Payments vs Stripe

• Fees: Shopify Payments and Stripe both offer a clear, pay-as-you-go pricing structure, charging a fee per transaction without any hidden setup or subscription costs. Shopify Payments removes third-party transaction fees, but payment processing and currency conversion fees may still be applicable. Stripe, on the other hand, offers different pricing models including a fixed per-transaction cost option as well as variable pricing influenced by the card interchange fee.

• Features: Shopify Payments is seamlessly integrated into the Shopify platform, offering an all-in-one commerce solution that includes payment processing, order management, fraud prevention, and reporting. This integration allows for real-time tracking of orders and payments within the Shopify dashboard. Stripe boasts a robust set of features, including subscription billing models, invoicing, and payment gateway. Stripe's API and developer tools are also highly customisable, catering to complex business models and tech-savvy merchants.

• Ease of use: Shopify Payments offers a turnkey solution for Shopify store owners, with no separate integration required. Stripe requires more technical knowledge to fully leverage its powerful API and extensive customization options. However, it rewards the effort with greater control over the payment process and checkout experience, making it attractive for eCommerce websites with development resources.

• Global reach: Shopify Payments is available in a limited number of countries, which might restrict its use for businesses aiming for a global market presence. Stripe has a broader global reach, supporting eCommerce websites in many countries around the world and boasting the capability to accept over 135 currencies. This extensive coverage makes Stripe a more compelling choice for businesses with an international customer base or those looking to expand globally.

Choosing between Shopify Payments and Stripe hinges on your business needs. Shopify Payments suits those running a Shopify store, valuing simplicity and integration within their eCommerce platform. On the other hand, Stripe is ideal for businesses needing extensive customization, operating globally, or across multiple platforms, offering more flexibility and advanced features for companies who have the resources to hire developers.

Airwallex payment gateway

Airwallex supports multiple currencies and accepts 160+ local payment methods. Some of its key benefits include:

• Like-for-like settlement in 11+ currencies: Merchants can accept and hold customer payments in any of the major currencies supported by Airwallex (AUD, CAD, CHF, EUR, GBP, HKD, JPY, NZD, THB, SGD and USD) without having to convert them to SGD. This allows them to avoid the hassle of currency conversion entirely and save on FX fees, a feature that platforms like Stripe and Shopify currently lack. They can also avoid double currency conversion fees when they pay suppliers in that same currency.

• Robust global network: Unlike Shopify Payments' geographical presence in only 23 countries and Stripe's broad but sometimes complex global operations, Airwallex seamlessly bridges the gap with a simplified yet extensive global network. It enables businesses to accept online payments from 180+ countries in 160+ local payment methods, such as Apple Pay, Google Pay, AliPay, and PayNow.

• Affordable pricing: Airwallex offers competitive payment gateway pricing, with transparent fees and no hidden costs. It also provides the option to negotiate custom rates for high-volume transactions, making it a cost-effective choice for growing businesses. 

• Customizable payment experiences: Airwallex offers a no-code solution for businesses looking for a user-friendly set-up, as well as a versatile API for developers to build a customised checkout experience. Businesses without a website can also leverage Airwallex’s payment links to collect customer payments with ease. See how Wine Kin integrated Airwallex's payment gateway with their WooCommerce store to create seamless, centralised financial operations.

• Advanced payment security: Airwallex employs authentication protocol and network tokenization methods to ensure the highest levels of transactional security. By prioritising the protection of sensitive payment information, Airwallex instil confidence in businesses and their customers alike, aiming to improve payment acceptance rates and minimise the cost of payment disputes more effectively than its competitors.

• Shopify integration: With Airwallex's easy-to-use Shopify integration, businesses can start accepting payments internationally in a matter of minutes, without the need for coding or technical setup. The integration supports over 60 local payment methods while allowing settlement in 11+ currencies directly into your multi-currency account.

As an end-to-end fintech provider, Airwallex goes beyond what other payment gateway solutions have to offer. At its core, Airwallex helps businesses streamline their global payments, with key offerings that include the Global Accounts, which allows businesses to receive and hold foreign currencies. This feature is particularly helpful for businesses with a global presence, as it eliminates the need to convert currencies and pay costly fees. See how Igloohome saves SGD100+ per overseas SWIFT transfer by switching over to Airwallex.

Moreover, through its partnership with local payment networks in over 110 countries, Airwallex facilitates international transfers by bypassing the traditional SWIFT network. As a result, 70% of transfers are completed as quickly as within one business day and businesses can avoid hefty SWIFT fees for their transactions. Beyond payments, Airwallex also offers features such as virtual cards and multi-currency wallets that can streamline expense management.

Overall, Airwallex offers businesses a secure and efficient payments solution, outperforming Shopify Payments and Stripe by providing a comprehensive fintech platform for companies aiming to streamline their global payments. Learn how you can set up the Airwallex payment gateway and complete your KYB process.

Conclusion

Shopify Payments streamlines the process for eCommerce businesses operating within the Shopify ecosystem, offering integrated payment solutions that allow them to simplify operations and reduce costs. However, limitations in its geographic availability and platform customization may restrict its applicability for certain businesses. In comparison, Airwallex presents a compelling alternative with its extensive global network, high customizability, and access to a comprehensive fintech solution, catering to a broader spectrum of global eCommerce needs. Learn how you can optimise your payment operations by signing up for Airwallex today.

Frequently asked questions

1. How long does it take to receive payouts with Shopify Payments?

After the payout is issued, it usually takes several days for the funds to be deposited into your bank account.

2. What happens if a customer disputes a charge?

Shopify Payments handles customer charge disputes with a resolution process protecting both merchants and consumers. On dispute filing, merchants can respond with evidence like transaction details or proof of delivery. Shopify Payments then reviews this evidence and decides. If the merchant wins, withheld funds are returned; if the customer wins, they get a refund and the merchant might face a chargeback fee

3. Is Shopify Payments secure?

Yes, Shopify Payments is designed with a high level of security to protect both merchants and consumers. It complies with the highest standards of Payment Card Industry Data Security Standards (PCI DSS). This means that all transactions processed through Shopify Payments are encrypted and safely processed to prevent unauthorised access and ensure data integrity.

Sources:

1. https://help.shopify.com/en/manual/markets/pricing/fees

2. https://www.shopify.com/sg/pricing

3. https://stripe.com/en-sg/pricing

***Note: This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations/warranties/guarantees regarding content accuracy, completeness, or currency.