Shopify Payments: These payment options can be offered by Shopify merchants

According to a Statista survey from 2018, 59% of online customers abandon purchases if their preferred payment method is not offered. So it's no wonder that Shopify has upgraded significantly since then and now boasts an impressive range of payment options for its merchants.

So if you're an online store owner who wants to accept credit card payments from customers, for example, you can use Shopify Payments or an external payment provider. However, you can also offer your clientele to pay via Paypal, Facebook Pay, Amazon Pay, or Apple Pay, for example.

What is Shopify Payments?

Shopify Payments is the official payment gateway of Shopify. It is fully integrated with all Shopify stores and its features allow managing all payments from one dashboard. With this in-house alternative, customers can pay reliably and securely using the following payment methods:

Purchase on account with Shopify Payments: Klarna

One of the most popular payment methods in the D-A-CH region - especially in this country - is purchase on account. With Shopify Payments, this is possible with Klarna.

PayPal

PayPal is also very popular. It allows payments by credit card, bank account, buyer credit or PayPal account balance. Once you open your store, you'll get a PayPal Express Checkout account with the email address you registered with your Shopify store. You need to set up your PayPal account before you can receive payments for orders placed through PayPal.

Amazon Pay

Amazon's own payment service is particularly useful for customers with an Amazon account, since they don't have to register with another one. Because many people have an Amazon account these days, it can also make sense for online shop operators to offer this method.

Facebook Pay

Similar to Amazon Pay, it is often easiest and quickest for customers who have a Facebook profile to pay via the associated payment system, Facebook Pay.

Instant bank transfer

Customers in Germany often pay using the instant bank transfer (Sofort GmbH/Klarna) payment method. To complete the payment process when shopping online, they use their online banking access data.

Credit card payments

Online purchases are rarely paid for by credit card in Germany. Quite different from Austria - where it is the most popular payment method. Shopify supports VISA, Maestro, MasterCard and American Express.

Bank transfer with eps

Transfers from Austria via eps are similar to instant transfers. Sensitive buyer data is not disclosed in the process.

Google Pay and Apple Pay

In the D-A-CH region, Google Pay and Apple Pay are currently hardly used. Nevertheless, it can have a positive impact on your business if you offer the payment options of these strong brands. Younger people in particular might find the option of paying via Apple Pay appealing. So your range of payment options should also be geared to your target group.

Shop Pay

Shop Pay is Shopify's own payment method. This allows regular customers to speed up the checkout process in their Shopify online store. That way, they don't have to keep re-entering their payment information, such as email addresses, credit card numbers, and shipping information, which the assistant stores in advance, at checkout.

External payment providers for credit card payments

If you don't use Shopify Payments and prefer to accept credit cards instead, you can choose from over 100 credit card payment providers for your Shopify store.

Shopify supports two different types of credit payment processors: direct providers and third-party providers. If you use a direct provider, your customers can complete purchases directly on your online store without having to pay through an external checkout. If you use an external provider, your customers must complete their purchases on a checkout page hosted outside the online store.

Manual payment method

Some customers do not like the payment method of credit card payment - especially in the online area. If you offer manual payment methods, these customers can also pay by cash on delivery, money order, prepayment or bank transfer.

Orders that are paid manually are marked as unpaid on the order page. After you receive a manual payment, you can mark the order as paid on the order detail page and complete the order as if it was paid online.

For manual payments, you can use the suggested payment method or create a custom manual option.

SEPA direct debit

Direct debit is particularly useful for subscriptions. Customers deposit their bank details and allow you to debit payments from this account. However, the SEPA direct debit procedure is not offered directly on Shopify, but can be used via the payment service providers Mollie, Slimpay or SEPAone, for example. The prerequisite is always the creditor identification number, which you can obtain from the Bundesbank. Depending on the provider, you may also need a direct debit mandate that entitles you to receive money from your customer's account. It is best to ask the relevant provider for this.

Alternative payment options

Beyond the ones described so far, you can also set up alternative payment methods on Shopify. For example, cryptocurrency is a popular option that allows your customers to make payments without a bank or other institution.

Payment solutions that Shopify does not supportt

Unfortunately, despite the wide selection, there are still payment options that you can't use on Shopify. Among them are the following:

• Paydirect

• Billpay

• EC

Whether these payment solutions will be available soon is difficult to predict. Shopify currently seems to focus mainly on its own Shopify Payments. Therefore, expanding the scope of alternative payment solutions may not be a focus. However, this does not mean that payment solution providers will not develop their own integrations if they want to support as many store systems as possible.

Shopify Payments Accounting

Transaction fees: Shopify Payments offers lower fees than many third-party providers. Of course, these must also be properly accounted for. It is crucial to record the net payments (after deducting the fees) correctly and to document the fees separately.

Value added tax (VAT) and taxes: Shopify Payments automatically calculates VAT based on the settings in your store. These tax amounts must be accurately recorded in your accounting and regularly paid to the relevant tax authorities.

Currency conversion: If you sell internationally and accept payments in different currencies, it is necessary to carefully document the exchange rates and the resulting conversion differences. This can have an impact on your profit and loss statement.

Payouts: Payouts from Shopify Payments to your bank account are made at regular intervals. It is important to accurately track these payouts and ensure that they match the transactions recorded in the system.

Refunds and chargebacks: Each refund or chargeback must also be accurately documented. This applies to both the original sale and the corresponding refund in order to keep the accounting correct.

Reports and reconciliations: Shopify offers various reports that are useful for your accounting, such as the payment report and the sales report. Regular reconciliations of these reports with your bank statements are essential in order to detect and correct errors at an early stage.

Immutability of data

An important aspect of accounting is the immutability of data. All transactions must be recorded in such a way that they cannot be changed retrospectively. Data must be traceable and audit-proof so that external auditors can verify the accuracy of the accounting at any time.

DATEV and tax consultancy

DATEV is a central tool for accounting and tax consulting in Germany. It enables the central recording of all financial transactions and the preparation of monthly and annual financial statements. For Shopify merchants, it is often necessary to correctly integrate the data from Shopify Payments and other payment providers into DATEV. This is where automated solutions and specialized apps, such as those from Pathway Solutions, can make the process much easier.

Advantages and disadvantages of Shopify Payments

Everything has its pros and cons - Shopify Payments is no exception. We provide you with an overview of the most important pros and cons.

Advantages:

• ✅ Easy to set up: The payment methods can be set up quite straightforwardly and within a few minutes.

• ✅ Additional payment providers possible: Even additional payment providers such as Paypal do not have to fall by the wayside here and can be easily integrated.

• ✅ Transparent fees: All transaction fees are specified by Shopify and can be viewed at any time. When using Shopify Payments, transaction fees are waived when paying via external payment gateways.

• ✅ Separate payments window: If problems occur during payment, the purchase is often cancelled if payment processing takes place in the same window. Shopify opens a separate window for payments with Paypal, so customers can stay in the online store.

• ✅ Express checkout: Because customers don't have to manually enter their information for payment methods like Apple Pay or Google Pay, the checkout process is shortened. This can help you increase your conversions.

• ✅ Fast payout: Payouts to your account are made within a few business days.

Disadvantages:

• Reversal fee: Banks charge a fee of €15.00 for reversals within Germany. If there are frequent chargebacks, this fee quickly adds up. It is worth mentioning here, however, that the chargeback fee is in line with the industry standard and that Shopify will refund it if it is decided in the merchant's favor.

• Limitations: Shopify Payments cannot be used with every product or with every industry. Some industries such as gambling providers or financial service providers are excluded here.

  You can read which other industries are excluded in the Shopify Payments T&Cs.

• Account frozen: In the event of chargeback errors or suspicious account activity, Shopify may temporarily freeze your account while it is reviewed.

Shopify Payments Fees

Usually, when making payments through external payment gateways, you have to pay transaction fees in addition to the payment provider's fee. We have listed these for you here:

If you use Shopify Payments, transaction fees are waived.

In which countries are Shopify Payments available?

Shopify Payments can currently be activated in 22 countries:

• Australia

• Belgium

• Denmark

• Germany

• Finland

• France

• Great Britain

• Ireland

• Italy

• Japan

• Canada

• New Zealand

• Netherlands

• Austria

• Portugal

• Sweden

• Switzerland

• Singapore

• Hong Kong Special Administrative Region

• Spain

• Czech Republic

• United States of America

How do I activate Shopify Payments?

To enable and set up Shopify Payments, it's best to follow these steps:

1. Go to "Settings" in the Shopify admin area. Click the gear icon in the lower left corner to go to "Settings".

2. Select "Payment providers" to open the payment settings.

3. Enable Shopify Payments. In the list of available payment providers, you will find "Shopify Payments". Click "Edit" to activate Shopify Payments.

4. Enter your store information. Shopify will now ask you to enter some information about your business, such as your business address, bank details, and tax information. Fill in the required fields and click "Continue".

5. Verify your information. Before the final activation of Shopify Payments, Shopify will ask you to verify the information you entered. Make sure all the information is correct and click "Activate Shopify Payments".

6. Wait for confirmation. After you activate Shopify Payments, Shopify will review your information and notify you by email within a few days about the activation or any next steps.

How to test your set up Shopify Payments

To check if the payment with Shopify Payments works smoothly, you should perform a test order. To do this, proceed as follows:

• Credit card: At least two letters

• Valid until: At least two digits

• Card verification number: Any three digits

• Card number: Use the following combinations:

You also have the option to simulate failed transactions.

If you want to see what error messages are displayed to customers in each case, you should use the following credit card numbers:

How Shopify Payments work

Shopify Payments offers numerous benefits, including lower transaction fees for Shopify store owners, seamless integration with your store, and a user-friendly experience for your customers. It's a great option to streamline the payment process and increase conversion rates. We've summarized exactly how it works for you:

1. customers place orders: Your customers visit your Shopify online store, select products and place their order.

2. payment method selection: at checkout, your customers have the option to choose from different payment methods. If you have enabled Shopify Payments, it will be displayed as an option.

3. entering payment information: When a customer selects Shopify Payments, they enter their payment information, such as credit card details, directly into your Shopify checkout form. Shopify ensures that this information is processed securely.

4. payment authorization: Shopify Payments verifies the information entered and requests authorization from the customer's credit card. This step is used to verify creditworthiness and security.

5. payment processing: if the payment is approved, the amount is charged to the customer's credit card. Shopify Payments processes the transaction automatically.

6. order confirmation: The customer receives an order confirmation, and your Shopify store receives a notification of the order.

7. payment processing and payout: Shopify Payments collects the transactions and pays out the amount to your bank account at regular intervals (usually every 2 days). This period may vary depending on your location and specific settings.

8. chargebacks and refunds: Shopify Payments also provides features to manage refunds and chargebacks to ensure a smooth process in case of customer returns or disputes.

9. security and compliance: Shopify Payments meets all current security standards and is PCI DSS (Payment Card Industry Data Security Standard) compliant, which means that sensitive credit card data is processed securely. Shopify also performs regular security updates and audits to ensure that all systems meet the latest security standards and are protected against current threats. This includes the continuous monitoring of security protocols and the implementation of new security measures.

10. reporting: you can view reports on transactions and payments in your Shopify dashboard to monitor the financial performance of your business.

Conclusion

Shopify Payments is Shopify's native payment method. It saves you from setting up an external payment provider or merchant account and entering the credentials in Shopify. However, the e-commerce platform also has other payment options available for merchants, which were presented in the above post. Which one you choose is, of course, up to you. We recommend providing customers with a wide selection of different payment methods. This way, you give them a free choice, so they can choose exactly the method they are used to shopping with. This way, you don't risk customers bailing out while they're still in the shopping cart because they're not satisfied with the choice of payment options.