What is Shopify Payments and How Does It Work?

Shopify Payments is an integrated payment processing solution designed to simplify the payment process for merchants using the Shopify platform.

Key Points

• Integrated Solution: Streamlines payment processing for Shopify merchants.
• Multiple Payment Methods: Accepts various payment methods including credit cards, Apple Pay, and Google Pay.
• Lower Fees: Competitive transaction fees compared to other payment processors.
• Seamless Integration: Easy to set up and manage within the Shopify platform.
• Enhanced Security: Advanced security measures to protect against fraud.
• Real-time Reporting: Comprehensive analytics and reporting tools.

Understanding Shopify Payments

What is Shopify Payments?

Shopify Payments is a built-in payment processor that allows Shopify merchants to accept online payments directly through their store. Launched in 2013, it was developed to offer a seamless and efficient way for merchants to handle transactions without needing third-party payment gateways. By using Shopify Payments, businesses can manage their payments and orders in one place, reducing the complexity and potential issues associated with external payment processors.

Features of Shopify Payments

Multiple Payment Methods

One of the standout features of Shopify Payments is its ability to accept a wide range of payment methods. Merchants can receive payments from major credit and debit cards, as well as alternative payment methods like Apple Pay and Google Pay. This flexibility ensures that customers have a variety of options when making a purchase, which can enhance the overall shopping experience and reduce cart abandonment rates.

Competitive Transaction Fees

Shopify Payments offers competitive transaction fees, which can be lower than those of third-party payment processors. For instance, Shopify’s transaction fees start at 2.2% + 20p for online credit card rates on the Basic Shopify plan, and go as low as 1.6% + 20p on the Advanced Shopify plan. By using Shopify Payments, merchants can save on transaction costs, particularly if they process a high volume of sales.

Seamless Integration and Setup

Setting up Shopify Payments is straightforward and can be done directly through the Shopify admin dashboard. Merchants simply need to provide their banking information and follow the setup instructions. This seamless integration means that there is no need to deal with the technicalities of connecting external payment gateways, making the process smoother and more efficient.

Enhanced Security

Security is a critical concern for online transactions, and Shopify Payments provides robust measures to protect both merchants and customers. It is PCI DSS compliant, ensuring that payment data is handled securely. Additionally, Shopify Payments includes built-in fraud analysis to help detect and prevent fraudulent transactions, providing peace of mind to merchants.

Real-time Reporting and Analytics

Shopify Payments offers comprehensive reporting and analytics tools that allow merchants to monitor their sales and financial performance in real time. These tools provide insights into transaction history, payout schedules, and chargeback alerts. By having access to detailed financial data, merchants can make informed decisions and manage their cash flow more effectively.

How Does Shopify Payments Work?

Shopify Payments simplifies the payment process by integrating directly with the Shopify platform. Here’s how it works:

1. Customer Checkout: When a customer makes a purchase on a Shopify store, they are presented with various payment options powered by Shopify Payments.
2. Payment Processing: The payment information is securely processed and verified.
3. Order Confirmation: Once the payment is approved, the order is confirmed, and the merchant is notified.
4. Funds Transfer: The funds from the transaction are transferred to the merchant’s bank account. The payout schedule can be managed through the Shopify admin dashboard, with payments typically deposited within 3 business days.

Case Study: Gymshark’s Transition to Shopify Payments

Gymshark, a leading fitness apparel brand, provides a compelling case study for the benefits of using Shopify Payments. Founded by Ben Francis in 2012, Gymshark rapidly grew to become one of the fastest-growing global fitness and apparel brands. Initially, the company used Adobe Commerce, but due to several operational challenges, including a costly and time-consuming setup and a major site crash on Black Friday, they decided to switch to Shopify Plus.

Key Challenges with Adobe Commerce

• Lengthy Setup Time: It took six to eight months to build the Adobe Commerce site, by which time Gymshark had already outgrown it.
• Operational Failures: The site crashed on Black Friday, leading to an estimated loss of £100,000 due to eight hours of downtime.

Transition to Shopify Plus

In response to these challenges, Gymshark replatformed to Shopify Plus, benefiting from its scalable and reliable infrastructure. This move enabled Gymshark to handle significant traffic spikes and support international expansion.

Advantages of Using Shopify Payments

• Seamless Integration: Gymshark’s site on Shopify Plus integrates seamlessly with Shopify Payments, providing a smooth checkout experience.
• Enhanced Customer Experience: The use of Shopify’s POS system facilitated immersive online-offline experiences, such as world tours where customers could meet fitness idols and make purchases in person.
• Customisation with Shopify Scripts: Gymshark uses Shopify Scripts to customise the checkout process, offering customers complimentary gifts with certain purchases, enhancing customer loyalty.

Impressive Results

Since migrating to Shopify Plus and utilising Shopify Payments:

• Sales Growth: Gymshark achieved £41 million in sales in 2017.
• Social Media Presence: The brand garnered 5.1 million social media followers across 131 countries.
• Global Expansion: Became one of the fastest-growing global fitness and apparel brands.