Comprehensive Guide to Shopify Payments in 2020

Comprehensive Guide to Shopify Payments in 2020

If you sell your products on Shopify, credit card processing is essential. An eCommerce credit card processor can significantly impact the sales that you make and the customers that you win in the long-term.

While third-party card payments processing is beneficial in many ways, it can be complex and expensive.  

Customers may need to go through another dashboard, and they may be charged extra fees. Be that as it may, all these inconveniences depend on the eCommerce credit card processor that you work with.

Taking advantage of Shopify Payments is one way to accept credit card payments without integrating third parties. We’ll help you understand the pros and cons of Shopify Payments so you can assess if using it can be beneficial for your business or not.

What is Shopify Payments

Shopify Payment is a payment provider that fulfills the role of the in-house credit card processor and integrated payment gateway. As a processor, it acts like a third-party service that will manage the step-by-step process that users undergo to input and verify their credit card information.

Since the process happens right within the Shopify Dashboard, consumers no longer have to access any other platform to see where their money is going. They can simply use the Shopify admin to view them.

For this reason, businesses will no longer be required to create a merchant account. Shopify Payments accepts the payments directly through Shopify Payouts. Be that as it may, you can still access third-party payment gateways for your transactions. Shopify Payments isn't excluding their services but making them purely optional instead.

Pros and Cons of Shopify Payments

The Shopify Payments process comes with its fair share of advantages and limitations. Whether you think it's worth the risk or not will be dependent on your business’ requirements.

Pros of Shopify Payments

● Lack of Transaction Fees – Shopify Payments' main incentive is its exclusion of transaction fees. We’ll explain further in the next section.

● Multitude of Third-Party Payment Options – Shopify accepts payment from over 100 different merchants, although this will require a fee with every transaction.

● All-in-One Dashboard – You can do everything that you need to from Shopify's Dashboard, from payment to info-gathering.

Drawbacks of Shopify Payments

● Restrictive T&C's – As a seller, you can get caught by the fine print. Shopify may also decide to overturn your merchant status without warning at any time.

● Significant Chargeback Fee Requirement – As a merchant, you can get billed $15 with every chargeback fee if the cardholder bank decides it needs to.

● Availability Issues – Right now, Shopify payments is limited to 14 countries, only two of which are in Asia.

● Smooth Liquidity Problems – Depending on how long an investigation takes should issues arise, the loss of liquid may hamper your business.

Shopify Payment Fees

Making sense of Shopify's Payment Fees is relatively simple. During the Shopify Payment process, you can expect to see the removal of the accompanying commission fee that is usually charged on top of the known Gateway fees.

This commission is usually charged as follows:

● 0.5% for Advanced Shopify

● 1% for Shopify

● 2% for Basic Shopify

Now that they've been removed, you still need to pay a certain amount for each transaction. If the user subscribes to a plan, they can take advantage of cheaper rates through Shopify Payments.

Here's how the monthly breakdown appears with each plan:

● 26- 29$ for Basic Shopify

● 71-79$ for Shopify

● 266-269$ for Advanced Shopify

For monthly online credit card transaction fees it looks like this:

1. 2.9% + 30¢ for Basic Shopify 

2. 2.6% + 30¢ for Shopify

3. 2.4% + 30¢ for Advanced Shopify

With monthly in-person credit fees these are the charges:

1. 2.7% for Basic Shopify

2. 2.5% for Shopify

3. 2.4% for Advanced Shopify

Can Everyone Use Shopify Payments?

As of the time of writing, no. We mentioned in the list of drawbacks that Shopify has yet to be made available in every country. Despite this, the number of countries allowed to use Shopify Payments has been growing every year and is constantly being updated on the site.

Even so, it isn't just geographic restrictions that limit usage of Shopify Payments in businesses across the globe. Government regulations prevent products and services in certain areas. Germany does not allow government services to be sold, while Australia takes a similar view with virtual currencies.

Shopify has multiple supported currencies that are subject to the rounding rule and currency rate. The rounding rule centers around you dictating the precise number that prices will end on.

Setting Up Shopify Payment Fees

For customers to make payments on your merchant service, you need to set up Shopify Payments. This is a simple process that you can finish very quickly.

Please note that before you start the process, you need: 1) Your banking information and; 2) Your Employer Identification Number. Depending on where you're located, your Shopify Payment account may require additional information.

Step 1: Create an account to login to your Shopify merchant account.

Step 2: Go to the Settings page. Click on the “Payment Providers” button.

Step 3: Click on “Add a provider”.

Step 4: Select “Complete your Shopify Payments Setup”.

Step 5: Complete all the necessary information, including your banking and product details. 

Step 6: Click “Complete Account”.

Once you complete this process, you will need to wait for approval from Shopify as they review your application.

Step-by-step of Shopify Payments Processing

Step 1: Check Out and Purchase

The customer will input all the relevant credit card details into the payment provider.

Step 2: Processing the Payments

Shopify's Payment Provider will validate the payment. It will determine if there is enough money in the account. This process may take several days to process.

Step 3: Merchant Account Receives Payment

Your customer's payment will enter your merchant account. It can take the form of a PayPal Account or any other virtual account provided for merchant use.

Step 4: Your Personal Account Receives Payment

Your merchant account transfers the funds into your personal account, completing the process.

How Shopify Payments Process Funds

Shopify Payments can be monitored directly from your Shopify Dashboard. Depending on geographic location, it can take somewhere between 3-7 days to reflect the incoming amount to your account.

There is one drawback: If suspicious activity is detected in your accounts, they may be frozen pending an investigation.

Shopify Payment VS Other Payment Processors

There are several other Payment Processors that might serve as good alternatives merchants and users. Naturally, these will be subject to different transaction and processing fees depending on their guidelines.

● Stripe – Their pricing and restrictions are very similar to Shopify's. Compared to Shopify, they offer more customization alternatives, but this will also require more developer input.

● PayPal – Premium transaction fees will be charged for users. Unlike Shopify, you'll be forced to leave their website to make the payments on this third-party platform.

● Square – Square provides a Point of Sale system that charges no monthly fees. The only fees they charge are flat-rate fees when processing credit cards. Shopify has a similar arrangement.

Shopify Payments FAQ

Can you get the incoming amount faster?

This all depends on your account's pay period. Shopify Payments can't reduce the time for just one account, but they're working on reducing the pay period for all accounts.

How will you get your compensation?

You can get them via the bank account on your Payment provider's page. Be sure to open a full checking account.

Why have no funds come into my account, despite my Payout registering as "Paid"?

Banks will only transfer on business days. So even if Shopify sends it every day, the amount will only start reflecting two or business days after if it is paid out on a weekend or holiday.

Transfer failures can also happen. These usually take 3-5 business days for banks to report.

What would you do if your payout failed?

On your Payouts Page you will find a set of instructions in the "Transfer Failed" section. Follow these and be sure to update your bank status.

If the problem persists after several tries, contact your bank. You can also check the "Getting Paid" section in Shopify Payments for more info. 

Shopify Payments in a Nutshell

As of this moment, Shopify now has over 1,686,817 Shopify businesses that are part of its customer base. It's not hard to imagine that most of these businesses are using Shopify Payments.

It’s a fact that payment gateways can be overly complicated. Navigating those details isn’t something that’s really desirable, especially for first-time merchants. That's why Shopify Payments can be a good alternative. It offers a straightforward step-by-step process that's simple and easy to install.

Of course, Shopify also has its own downsides. Geographic and government policy restrictions aside, chargeback fees and account-freezing are not something you want. 

One could argue that these drawbacks are something you see in most payment processing gateways too. The main difference is that Shopify's offerings outweigh those drawbacks.

The fact that you have an in-house gateway while having the security of those third-party payment platforms makes for a unique combination that adds to Shopify Payments’ desirability.

Do you have any questions? Comment below!

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