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Shopify Payments vs. Third-Party Software

8 min read Last Updated: April 20, 2021
Shopify Payments vs third party software

Written by Michael Trang

Michael Trang is a Managing Partner at SKU Agency - the e-commerce agency focused on growing your business through strategy, technology & design. Michael loves fishing, playing guitar, and learning about the latest & greatest technologies.

Shopify Payments lets store owners accept a range of payment options from their customers. Its ease of use and versatility make it appealing to many businesses.

But, as you may have noticed, there are tons of other payment tools out there competing for your business.

In this article, we will examine Shopify Payments and compare it with its third-party competitors. That way, you’ll know once and for all what Shopify Payments has that others don’t, and vice versa.

Are there better payment processing apps out there for you, or does Shopify Payments give them all a run for their money?

Read on to learn how Shopify Payments fares against third-party payment tools.

Why Does It Matter What Payment Software I Use?

When you’re setting up your payment process, you probably already know you’ll accept the most common credit and debit cards.

But you might not know what other forms of payment to accept.

It’s a big decision!

The payment software you choose will affect your online store as well as your customers. You’ll never go wrong if your payment strategy prioritizes the customer experience.

So Should I Accept Multiple Payment Options?

Yes!

When you offer multiple payment gateways, it gives shoppers more reasons to shop with you. In fact, accepting a range of payment options helps boost conversions, which means more sales and less cart abandonment.

And since it’s simple to add payment options to your Shopify store and adding new ones does not affect existing gateways, there is really no reason not to.


An Overview of Shopify Payments

Shopify Payments is powered by Stripe and is the unbranded “Add to Cart” button your customers will see on product pages. It takes mere moments to set up and has nice features.

To get Shopify Payments up and running in your store:

    1. Log into your Shopify admin account.
    2. Click Payment Providers under Settings.
    3. Fill in the blanks under Complete Your Shopify Payments Setup.

To get Shopify Payments up and running in your store:

    1. Log into your Shopify admin account.
    2. Click Payment Providers under Settings.
    3. Fill in the blanks under Complete Your Shopify Payments Setup.

Make sure you have your business details handy, like your banking information and Employer Identification Number (EIN).

On to its features …

Shopify Payments Features

Your Shopify Payments account can do the following:

    • Provides you with financial reports, instantly updated with every purchase on your admin dashboard
    • Shows complete payout information for each transaction
    • Does not charge you transaction fees on orders
    • Automates order reconciliation and chargebacks if needed

A few other things to keep in mind:

    • If you sell subscription products, you must use Shopify Payments as your default payment gateway.
    • Because Shopify Payments activity is processed through Stripe, merchants must agree to Stripe’s terms of services and not provide services like those in its Restricted Businesses document.
    • If you opt to *not* use Shopify Payments, you will be charged a 0.5% to 2% fee with every sale you make.

What Payment Types Does Shopify Payments Accept?

Stateside businesses can accept the following debit and credit cards:

    • Visa
    • Mastercard
    • American Express
    • Discover
    • JCB
    • Elo
    • Diners Club

These payment gateways are also accepted:

Shopify Payments offers accelerated payment options, called Shop Pay, to customers who choose to store their bank account and address information. This means they can enjoy a quick checkout process every time they shop your store.

If you only want to accept cards, you must use Shopify Payments or a third-party option, like:

    • Authorize.net
    • Direct credit card payment providers (one that is included in your checkout and managed without redirects)
    • External credit card payment providers (ones that integrate with your store but redirect customers to their payment portals to complete transactions

Shopify Payments Fees

Shopify payments pricing

Shopify is very clear about its monthly fees:

 

With a Basic plan, you can accept online credit card payments for 2.9% + $0.30 per transaction. For other types of payment, you pay only 2.0%.

These rates get lower with higher-tier plans, with the lowest credit card rates being 2.4% + $0.30 as part of the Advanced plan.


The Benefits of Shopify Payments

What sets most third-party software apart from Shopify Payments are things like transaction fees, accelerated checkouts, and accepted payment types.

Shopify Payments is included with your Shopify plan and offers merchants zero transaction fees. Though, as you can see in the chart above, you will have to pay a monthly fee based on your plan.

But, all payment platforms charge a monthly fee, so Shopify Payments is not unique in that regard. Not to mention, Shopify takes an additional .05%-2% transaction fee for all purchases not made using their payment gateway (which certainly adds up over time!).

FAQ: Selling in Multiple Currencies With Shopify Payments 

There is a lot of confusion about how to sell your products in different currencies and how that will be paid out.

Here are the answers to some questions we hear a lot:

Q: How Does Shopify Handle Foreign Currency Transactions?

A: Customers pay in their home currency. The payment is converted into the currency your store accepts, either automatically or manually.

Q: How Many Different Currencies Does Shopify Payments Accept?

A: It currently accepts more than 100 foreign currencies, which are listed here.

Q: How Are Currency Exchange Conversions and Fees Paid?

A: These fees are automatically applied when payments are made or a refund is paid out.

Want help building out your Shopify store? Learn about our Shopify development services!


Third-Party Alternatives

Third party alternatives to Shopify payments

Although Shopify Payments is one of the most popular options, it’s not the only payment processor. Here are a few popular alternatives:

PayPal

About 27 million merchants rely on this e-commerce platform as their POS provider.

You will, of course, need to set up a PayPal account to use it with Shopify, but your customers do not have to — if they don’t have a PayPal account, they simply have to enter their payment info as they would with any other payment processor.

If they do have a PayPal account, however, shopping is even easier. All they have to do is click the PayPal button, then click Continue when they get to the PP page.

Transaction Fees

PayPal has flat-rate merchant fees of 2.9% + $0.30 per card transaction.

Fast Checkout Option?

Yes, if the customer has an existing PayPal account.

Pay Later Option?

Yes, merchants can add a pay later option to the checkout page to let customers pay in four equal installments.

Payments Accepted 

    • PayPal, of course
    • Credit and debit cards
    • 10+ local payment methods
    • More than 100 different currencies

Setup Features 

    • Copying and pasting pre-built code means you can get your PayPal checkout set up in minutes.
    • You can customize your PayPal checkout button’s alignment, color, and shape to better match your brand.
    • PayPal can integrate with your product, cart, and payment pages.

Shopify Payments vs. PayPal

Having PayPal as a payment processing gateway is smart for Shopify merchants, as it’s trusted by many shoppers.

But it can be a waste of time to choose PayPal over Shopify Payments.

Why?

Because you are automatically given a PayPal Express Checkout account when you join Shopify Payments!

If you use your Shopify Payments account as your primary payment gateway, you will not be charged PayPal transaction fees.

Amazon Pay

Any U.S.-based Shopify business can open an Amazon Pay merchant account to accept customer payments.

Along with mobile and web checkouts, Amazon Pay also lets your customers shop by voice using its Alexa service.

It has fraud-protection services built in to detect high-risk activity, which is a bonus for any e-commerce store.

Transaction Fees

Pricing starts at 2.9% + $0.30 per U.S.-based transactions.

Pay Later Option?

No, Amazon Pay does not have a pay later option.

Fast Checkout Option?

Yes, as long as your customer has an Amazon account, which, let’s face it, is highly likely.

They will simply be redirected to log in to their Amazon account and not have to add new card or shipping information.

Cards Accepted

  • Visa, Mastercard, American Express, Discover, Diners Club, and JCB credit cards
  • Merchant gift cards, though not Amazon gift cards

Setup Features

After registering with Amazon Pay, it’s a simple step-by-step process.

Shopify Payments vs. Amazon Pay

Similar to PayPal, you will not be charged transaction fees using Amazon Pay if it is under your Shopify Payments umbrella.

Skrill

Skrill is a digital wallet service that is popular with younger shoppers.

It outsources its payment processing services to Visa and Mastercard and provides merchants detailed reporting and analytics.

They offer chargeback protection for fraudulent orders and are fully PCI compliant for your security needs.

Transaction Fees

  • 2.9% + $0.29 per transaction up to $3,000 per month
  • 2.8% + $0.29 per transaction for businesses that make $3,000-$10,000 per month

Fast Checkout Option?

Yes, they offer a quick checkout option so your customers can enjoy fast checkouts without creating a Skrill account.

Cards Accepted

  • Visa and Mastercard debit and credit
  • Klarna installment payments
  • 40 currencies accepted

Setup Features

Skrill has a simple, one-step integration process on a single API.

Shopify Payments vs. Skrill

Skrill may be a good choice for your business if your brand appeals to shoppers who are millennial-aged and younger, as it’s quite popular with those demographics.

But most Shopify stores will benefit from sticking with Shopify Payments, especially if no transaction fees are important to you.

WorldPay

WorldPay offers a Shopify plugin that lets your customers pay right on your cart page without redirects.

It includes fraud screening and provides reporting tools.

Transaction Fees

According to Fundera, WorldPay is not super upfront about their fees; you need to speak with their sales team for specifics.

But you can expect to pay monthly, transactional, and credit card processing fees.

Fast Checkout Option?

Yes, fast checkouts are available with the platform’s digital wallet payments.

Your customer will need an Amazon or Apple Pay account for accelerated checkouts.

Cards Accepted

  • Visa, Mastercard, American Express, and JCB
  • Corporate and gift cards
  • Non-card payments like transfers and checks
  • Digital wallets like Apple Pay and Amazon

Setup Features

You will need Shopify Experts to help you integrate WorldPay as your Shopify payment provider.

It’s a quick process that gets you up and running in no time.

Shopify Payments vs. WorldPay

Unlike WorldPay, Shopify Payments is included with your merchant account and is transparent about its fees.

As mentioned earlier, you’ll need to contact WorldPay directly to work out pricing.

Check out our Shopify Cheat Sheet

Paya (formerly Sage Payment Solutions)

Paya is an independent sales organization, or an ISO, and can therefore connect merchants with third-party payment partners.

It boasts fraud-prevention services that eliminate high-risk transactions to keep your money safe.

Transaction Fees

Like WorldPay, Paya keeps their fees private until you contact their sales team.

Fast Checkout Option?

Yes, with Paya Connect, your customers can store their information for accelerated future checkouts.

Cards Accepted

Paya accepts checks, transfers, and all major credit cards.

Shopify Payments vs. Paya

We have the same reservations about Paya that we do about WorldPay — they are not transparent about their fee structure.

Paya is also quite limited in its customer payment options.

Sezzle

Sezzle is a buy now, pay later option that is especially popular with younger shoppers. When customers shop with you and choose Sezzle as their payment choice, they will pay four equal installments over six weeks, without interest, directly to Sezzle.

What’s so great about it?

After adding Sezzle as a payment option, specific e-commerce stores:

  • Increased average order values by about 30%
  • Increased conversion rates by about 16%
  • Increased sales by about 20%

Transaction Fees

Sezzle charges 6% plus $0.30 per transaction

Fast Checkout Option?

  • Yes, if your customer has or opens a new Sezzle account, their details will be saved for faster checkouts.
  • Sezzle users can sign up for their own Sezzle Virtual Card that can be used on partner merchant sites.
  • Sezzle runs soft credit checks on customers, so they have to be approved first.

Cards Accepted

Sezzle accepts credit and debit cards, bank cards, and prepaid/benefit cards on installment payments.

Setup Features

  • Seamless integration with Shopify POS
  • Full customer service support
  • Step-by-step setup walkthrough for all new merchant accounts

Shopify Payments vs. Sezzle

As with Shopify Payments, Sezzle pays merchants the full amount of the transaction. Customers then make their recurring payments to Sezzle.

There is little risk to store owners using a service like Sezzle, and as mentioned, it is shown to increase conversions.

The major downside to using Sezzle is the merchant fees. It’s a more expensive service than competitors, especially when compared to Shopify Payments, which does not charge its merchants any transaction fees.

Get a jump on Cyber Monday! Read Preparing Your Shopify Store for BFCM


Conclusion

Shopify Payments has a lot going for it. It might be the best payment gateway for your Shopify store.

You can always consider covering your bases by working with multiple payment processors — Shopify Payments and a third-party payment provider. But always consider your business needs and budget before making a decision.

If you have other questions and concerns about making your e-commerce store highly functional and profitable, consider hiring Shopify Experts like SKU Agency. We design and develop custom Shopify stores from the ground up every day!

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