Ecommerce | Updated February 28, 2021  

The Non-Technical Guide on Shopify Payments Gateway (2022)

by Kiril Kirilov

In an online store, how easy you make the purchase process for your customers significantly affects customer retention. A crucial part of online selling or purchasing is the payment process you set forth.

Shopify is a leading online selling marketplace that supports multiple payment options for sellers around the globe. But Shopify Payments is considered the most convenient option for sellers and customers. 

So, in this post, here is what you'll learn about the Shopify Payments gateway.

  • What is Shopify Payments?
  • How much do you have to pay for its Fees?
  • Is it better than other payment options like Stripe or Paypal?
  • Can you get a refund?

Let's get started. 

What is Shopify Payments?

Shopify Payments is the in-built payment method in the Shopify ecosystem. It is the best merchant-friendly payment gateway that works from receiving money from your customers to transferring it to your bank account.

Throughout the payment process, the Shopify payment platform will ensure that your customer makes a seamless transaction, PLUS you get your money safely in your bank account.

It comes with advanced features to protect your customer's private information and safe sellers from any payment scams.

How Does Shopify Payments Work?

If you have Shopify Payments enabled in your store, your customer will pay the money with it, and you will be able to receive it through Shopify Payouts at a specific pay period. For this, your account should be a Shopify Balance account, a full checking account, or a current one in the UK or Ireland.

For a payout, the funds should be more than $1, £1, or €1, depending on the currency you are running your store in. If the funds are below $1, £1, or €1, they will be added to your next payout, meeting this requirement.

The pay period is the total time it takes to receive the payment from your customers until the day those funds are sent to your bank account. Though the length of your pay period depends on the country where your store is based, you can set a payment schedule to receive payments at a specified time.

However, if you use a Shopify Balance account, you can receive your funds as early as one business day, excluding weekdays and US holidays. Moreover, it might take three days if you have the active status of Shop Pay Installments and your customer also uses it during checkout.

With Shopify payment service, you can receive payouts in a different currency than the currency you are selling in. However, the amount you receive in your bank account shall be subjected to a currency exchange rate and a conversion fee.

Steps to Setup Shopify Payments

To set up Shopify Payments, log in to your seller account, click on Settings > Payments > Choose a Payment Provider > select Shopify Payments. Then in the next step, you will be required to add your EIN or Employer Identification Number and bank account details.

You might have to provide some additional information depending on your country of origin. Once done, click Save.

How to View Your Payouts?

To view your payout details, go to Settings > Payments > Shopify Payments section > click on the View Payouts button.

You can find your previous and next payout details on this page. You can also see the details of the estimated date of the next payout, available balance, and reserved funds.  

To view details of a specific payout, you can click on the date or amount of the transaction. In the Transactions section, you will see details of each transaction.  

The payouts details will be mentioned in different statuses, including

  • In Transit: The funds are being sent to your bank.
  • Paid: When the funds are sent to your registered bank account.
  • Failed: When your bank has failed in successfully processing the payout.

The payouts will be processed, and the funds will be transferred to your bank on the same schedule, irrespective of their volume. However, sometimes you might receive a request for additional reserve when it is necessary.

How to Change Your Payout Statement Descriptor?  

To change your payout descriptor, log in to your Shopify admin account, and click on Settings > Payments > Shopify Payments > Manage. Under the Payout statement descriptor, edit the descriptor in the payout details area. Once done, click Save.

The payout statement descriptor is how your payout details appear on your bank account statement. By default, the descriptor will mark it as 'Shopify.' However, you can edit the descriptor and change the payout appearance from the Payment providers setting option.

Most countries can make such changes, excluding merchants in France. This change might take up to three business days to be visible in your bank account and would only change the future payout details.

How to Schedule Payouts with Shopify Payments?  

Log in to your seller account and go to Settings > Payments. Under the Shopify Payments section, click Manage. Locate the Payout Schedule box in the payout details section and set a payout schedule. Click Save.

If you schedule a payout on a weekend or a holiday, the payment will be sent to your bank on the next working day without any delays.

By default, the payout schedule is set for every business day as soon as you receive funds from your customers. Shopify doesn't charge you any additional cost to process your payments.

Once you change your payouts schedule, your pending payouts will be settled on the next applicable payout date. In selecting a recurring date for your payouts, you will receive the payout as per schedule per your bank might take additional time in payment processing.

Moreover, it typically takes 24 to 72 hours for funds to appear in your bank account.

How Shopify Payments Handle Failed Payouts?  

There are some times when a seller encounters failed payouts. It can be because of any issue with their bank account details, credentials, or other information.

In that case, you will be notified with a notification in the admin dashboard and the email. Until this issue is resolved, all payouts will be put on hold.

The details of the issue and how you can resolve it can be seen on the payout page. If there is any issue with your bank account details, then there will be a link to update them. However, if you are unsure about the reason for the payout failure, you shall contact your bank for details.

Once the issue is resolved, head to the payout page and click on the Retry Payout button. If the issue has been resolved, the payment will be done. However, the payout will fail again if the issue is not resolved.

Many times you can not locate the Retry Payout option. It is because the submitted account details are of a closed bank account. In this case, you can see a message suggesting adding a new bank account to resolve the issue.

Once the issue has been resolved, your payouts will be settled automatically. That's how Shopify handles failed payouts.

In certain cases, you might face that your Shopify Payments account has been put on hold. When the account is on hold, you will receive an email notification with further details of what you should do next.

For this, you need to reply to those specific emails with further details.

Requirements for Shopify Payments

To avail services of the Shopify Payments service, there are some requirements that you need to fulfill. If you meet the following criteria, you can seamlessly use this in-built payment method of Shopify.

  1. Your Country of Shopify Account: Shopify Payments option is available in 17 countries, including the United Kingdom, New Zealand, Australia, and Sweden. Here is the list of countries supported by Shopify Payments. If your country of account processing isn't on the list, you might have to look for any other third-party payment option.
  2. Restricted Businesses: If your business is about or related to investment services, debt reduction, or law firms, you wouldn't be able to use Shopify Payments because these businesses are prohibited from its use. Moreover, businesses related to or of gambling, and the sale of e-cigarettes, weapons, firearms, and explosives, are also prohibited.
  3. Bank Account Requirement: Your bank account must be a full checking account. However, a current account will also do the job if you are a business based in the UK or Ireland. The currency of your bank account should be the same as your country's currency and should be able to accept electronic money transfers. However, Shopify doesn't support accounts that only accept wire transfers.

Other accounts, for example, virtual accounts, flex-currency accounts, savings accounts, and services mimicking a bank account, can not be connected to Shopify Payments.

The Shopify Payments Fee

When using Shopify Payments to receive funds, you are entitled to pay two types of fees:

1. Credit Card Processing Fee

Shopify Payments setup charges you a fee for different steps involved in a transaction, including data transfer between the buyer and the seller, the issuing bank, and the acquiring bank. The total sum of this fee depends on the Shopify payment plan you are using, order value, and the total number of sales.

2. Transaction Fee

A transaction fee is a fee you pay for monetary transactions in your store. However, if you have activated Shopify Payments, you won't be required to pay this fee. Even if your customer or buyer selects any other payment method at the checkout, you won't be charged for the transaction fee.

Do Shopify Payments Fees Include VAT for Stores in Europe?

Shopify Payments fees do not include VAT or Value-Added Tax for stores based in Europe, except Ireland. If you want to file your VAT return, you may need to account for VAT at the local applicable tax rate.

Starting from March 1, 2021, for stores in Ireland, 23% of VAT would be charged, excluding the Shopify Payments fees.

Shopify Payments Refund

Refunds are common, especially if you sell something subjected to variations, i.e., size or color. If you use Shopify Payments and a customer requests a refund, the amount will be deducted from your next available payout.

If your payout doesn't have enough funds for the refund, then the issue will be handled based on your location. For example, if your store is located in

  • United States, Canada, and Australia, the balance would be debited from your bank account on the day of payout.
  • Austria, Belgium, Denmark, France, Germany, Hong Kong SAR, Ireland, Italy, Japan, Netherlands, Singapore, Spain, Sweden, New Zealand, and the United Kingdom, the remaining refund amount would be deducted from your next payouts until it is recovered completely.

How Long Does It Take to Get a Refund from Shopify Payments?

The complete process of the refund could take up to 10 business days to be credited back to the customer. If your account balance is negative, you might not be able to issue a refund, but once you make enough sales and increase it to a positive balance, you can issue a refund.

What are the Benefits of Using Shopify Payments?

Shopify Payments is the only merchant-oriented and in-built payment option specially designed for Shopify sellers. Though you can use several third-party options, each comes with different charges and features.

Here are some of the top-notch benefits of using Shopify Payments.

1. Quick & Easy Integration

Shopify Payments is the easiest option to integrate with your store as a merchant-friendly, in-built, and completely supported option. It works perfectly to offer a seamless experience on both ends, making it easier for your customers to make a successful purchase.

Your customers can also navigate through other third-party options offered by Shopify Payments on their end to make order purchase payments as easy as possible. This helps you avoid an unsavory instance and make it a perfect online purchase experience for your customers.

2. No Transaction Fee

Shopify Payments doesn't charge sellers a transaction fee, unlike other third-party payment options. The transaction fee depends on the number of sales, your method, checking and receiving accounts connected to it, and much more.

Based on these factors, your transaction fee can cost you a lot in the long run. With Shopify Payments, you don't have to pay a transaction fee, so you can focus on selling and making more.

3. Flexible Payment Methods for Customers

By enabling Shopify Payments, you can offer several other payment options to your customers when proceeding with the checkout. Your customers would be free to choose any popular payment option, including Paypal, Authorize.net, Stripe, or Amazon Pay.

This flexibility will ensure a successful checkout and purchase. This helps you avoid losing money out there.

4. Offline Sales

Shopify Payments is integrated with Shopify Point of Sales, where you can sell your products offline, in person. But still, all your offline and online sales data would be in one place. With this integration, you can offer a seamless checkout experience even while selling offline.

5. Fraud Detectors

Fraudulent transactions are those in which the customer doesn't authorize the payment. Such transactions are such a neck pain for both sellers and customers.

With Shopify Payments, you can easily prevent your business from such fraudulent transactions. It comes with two fraud detection or identification filters.

  • Address Verification System (AVS)

Address Verification System or AVS compares the customer's address with the customer's information in the credit card issuer's database.

  • Card Verification Value (CVV)

Card Verification Value or CVV is a type of data that no one stores in their database. If a fraudulent transaction is made, then it is most likely that the CVV is incorrect. This prevents unauthorized use of credit cards.

Other Best Shopify Payment Options

PayPal

Paypal is one of the most famous and most used payment options around the globe. If you want to use Paypal as the payment option in your Shopify account, you can add it through the third-party payments options section.

Though it supports more countries than Shopify Payments, I would still recommend using Shopify Payments. WHY?

Because it comes with more personalized features, no transaction fee, and you can offer several other payment options to your customers without changing it from the backend.

Stripe

Stripe is another widely used payment option you can use in your Shopify account. It supports credit and debit cards and 13+ currencies and is supported by 37 countries.

However, the transaction fee is 2.9% + $0.30 per transaction – which is again a negative point for Shopify Sellers. Because of two reasons: the Shopify Payments transaction fee depends on your Shopify plan and allows you to offer other payment options to your customers.

Does Shopify Payments Support 3D Secure?

3D Secure is an additional security layer for online payments through credit or debit cards. It redirects users to the card issuer's domain and then back to the online store's domain. This additional security and authentication step ensures that the payment is real and there is no fraud or scam.

Such payments are protected by a liability shift with which you can shift the fraudulent chargebacks or disputes from the merchant to the card issuer. This way, you won't be liable for the cost of a chargeback of the dispute.

Shopify Payments and Stripe automatically come with a 3D Secure checkout flow. Shopify Payments use 3D Secure Checkout only when it is necessary. For example, if required by the issuing bank to successfully authorize a transaction.

However, for sellers using a third-party payment gateway, the 3D Secure feature can still be used by Cardinal as a 3D Secure provider.

The Key Takeaway…

Shopify Payments is a payment gateway that makes it easy for customers to make an online transaction, receive funds from them, and send it to the seller's bank account. Though this cycle is small and simple, sellers and customers can face problems while making transactions depending on the currency and country.

Being an in-built payment gateway, Shopify Payments comes with everything a Shopify seller needs for a secure, seamless, and authentic transaction online.

With Shopify Payments, sellers can make it easy to transfer funds from their Shopify account to a bank account. Moreover, they can offer their customers a higher level of ease. Customers can select any payment option on their end to make a purchase.

You can choose from payment settings if you want to test any third-party payment gateway. But based on security, authenticity, ease, and transaction fee, Shopify Payments is the most suitable option for sellers.

Kiril Kirilov is co-founder at Rush - Increase sales and boost customer retention rates. Rush automates the shipment tracking process on all fronts so you can turn your loyal customers into "human ATMs"