Oct 23,2019

Shopify API

The best payment gateways for Shopify

The best payment gateways for Shopify

After all the hours designing, developing and refining your online store, there’s one thing that ties it all together: your payment gateway. 

A payment gateway is a service that processes credit card payments for both ecommerce sites and traditional brick-and-mortar stores. Put simply, it’s the feature you need for your customers to check out with their orders. Common options include PayPal, Amazon Pay and Stripe, but there are dozens more to choose from, with recent years seeing a sharp rise in stores offering pay-later checkout options.  

In the uber-competitive world of ecommerce, anything that improves your bottom line is a win. But with so many options, it can be hard to know where to start. That’s why we’ve laid out our favourite payment gateways for Shopify stores, including their pros, cons, and how much they’re going to cost you. 

Things to consider when choosing a payment gateway

The cost: Aside from Shopify’s own transaction fees, which apply to any order placed through a third-party payment provider, payment gateways come with a set of different costs. All providers charge an online credit card rate (sometimes called a transaction fee), so you’ll need to compare these rates before you make your final decision. For premium options, such as PayPal Pro, you’ll also be charged a monthly fee. Other costs can include things like the initial setup, additional features and chargeback fees. 

The features: Different providers offer different features, so think about what you want your customers’ journey to look like. Will you have a customised checkout? Are you happy for the customer to be redirected to a third-party site (such as PayPal)? Do you need to take payments in-person as well as online? Have a look at what options different gateways offer and whether they charge an additional fee. 

The familiarity: Having a niche payment provider might save you a bit of money, but it can also be off-putting to your potential customers. When parting with their cash, users want a payment method they’re familiar with, such as PayPal or Amazon Pay. By offering them an option they’ve used before and they know is reputable, visitors will trust your site – which means you’re more likely to convert them into customers. 

The best Shopify payment gateways

Shopify Payments

Unsurprisingly, Shopify Payments is one of the best payment gateway options for Shopify stores. The software is powered by Stripe, which means you’ve got a secure, trusted provider handling your funds behind the scenes. 

Aside from its ease of use, it’s by far the most cost-effective option for Shopify merchants. While Shopify charges up to 2% in transaction fees for payments received through third-party providers, Shopify Payments incurs no additional fees – effectively halving the cost of each transaction. 

The only cost for using the gateway is a 2.2% + 20p online credit card rate, which reduces to 1.6% + 20p with Advanced Shopify plans. You also get a free Shopify POS card reader, meaning you’ll be able to take payments in person. 

Getting set up with Shopify Payments is completely free, and can be done by filling in a form on the payment providers page in your Shopify admin. What’s more, you can keep track of your funds in the Shopify dashboard – meaning you won’t need to log into another platform to see your revenue. 

Here’s a quick round-up of the key Shopify Payments pros and cons: 

Pros: 

  • Lower credit card rates for advanced plans
  • No additional transaction fees
  • No setup or monthly fees
  • Seamless integration with your Shopify store
  • Powered by Stripe
  • Free card reader
  • Can be used alongside other payment gateways 
  • Supports multiple currencies (Shopify Plus only) 

Cons: 

PayPal

Arguably the most popular payment gateway around, PayPal has almost become a must-have for businesses. Not only does it come with an unrivalled name recognition – which helps put first-time customers at ease – but it also saves users time. Rather than entering their card details, customers can simply log in to their PayPal account, reducing the amount of time it takes to complete their purchase. And with 179 million active PayPal accounts worldwide, the odds that your customer has one are fairly high. 

One thing to take into account is PayPal’s credit card rates, which are higher than some other third-party providers (coming in at 2.9% + 30p per transaction). On top of this, you’ll be charged a third-party fee by Shopify, which can be anywhere up to 2%. However, for name recognition alone, PayPal is a valuable gateway option.

PayPal doesn’t have to be used instead of Shopify Payments – it works well alongside Shopify’s gateway, offering your customers a checkout process they recognise and they know they can trust.  

 Here’s a quick round-up of the key Paypal pros and cons: 

Pros: 

  • Worldwide name recognition, with over 179 million active accounts
  • Available in 190 countries 
  • No setup or monthly fees for standard plans
  • Advanced plans with additional features available
  • Can be used alongside Shopify Payments

Cons: 

  • Redirects customers to the PayPal site to complete their purchase
  • Higher fees than some other providers, with additional fees for converting currencies and cross-border payments
  • No volume discounts for online payments
  • It can take up to four days to withdraw money from your account
  • Similarly to Shopify Payments, your funds can be frozen at any time

Amazon Pay 

Similarly to Paypal, Amazon Pay comes with the benefit of worldwide name recognition. Despite the fact that Paypal has become somewhat ubiquitous with ecommerce, there are more Amazon users worldwide than Paypal users, meaning you can offer even more customers the option for a faster checkout process, saving them the hassle of inputting their card details. 

As with Paypal, you’ll have to deal with the transaction fees that Shopify adds to any order placed through a third-party provider. However, unlike Paypal, your customers won’t be redirected to a third-party site to complete their purchase, meaning they’ll stay on your site throughout the checkout process. 

Although Amazon Pay’s base credit card rate is higher than Paypal’s (coming in at 3.4% + 20p), they also offer volume discounts for merchants processing over £1500 through Amazon Pay. For brands with high order volumes, the credit card rate can be as low as 1.4% + 20p. 

Here’s a quick round-up of the key Amazon Pay pros and cons: 

Pros: 

  • Volume discounts if you process over £1500 a month through Amazon Pay 
  • Worldwide name recognition, with over 300 million Amazon accounts
  • No setup or monthly fees 
  • Transactions are completed on your site
  • Can be used alongside Shopify Payments

Cons: 

  • Additional fees for converting currencies and cross-border payments
  • High fees for brands with small monthly order volumes
  • It can take up to five days to get paid
  • Only available in selected countries

Pay later options 

Klarna

Klarna is a wildly popular pay-later checkout option, with over 100,000 merchants using the service worldwide – including names like ASOS, Topshop and H&M. Designed to act as an alternative payment option, Klarna works alongside your other payment gateways to offer more flexible ways for customers to pay. 

Unlike some other popular pay-later options, Klarna has three different ways customers can delay their payment: pay later in 30 days, pay later in three instalments, and ‘slice it’. With the exception of ‘slice it’, these pay-later options are interest-free, resulting in no additional charges for the customer.

Pay-later checkout options like Klarna have been shown to have a massive positive impact on both conversion rates and average order value. By giving customers the flexibility they need to shop before payday or spread out their payments, Klarna allows shoppers to splurge without checking their bank account. 

Here’s a quick round-up of the key Klarna pros and cons: 

Pros: 

  • Increase conversion rate and average order value
  • Lower credit card fees for ‘Slice-It’ payments (1.9% + 20p) 
  • No setup or monthly fees
  • No contract, cancel anytime 
  • Risk-free – you get paid upfront, even if your customer pays late

Cons: 

Clearpay

Following their overwhelming success in Australia and the US, Aussie payment provider Clearpay launched in the UK at the end of 2018. Although newer than Klarna in the UK, Clearpay has landed some huge merchants over the last year, including Urban Outfitters, Free People and Anthropologie. 

Like Klarna, Clearpay offers customers a flexible, interest-free payment option, with no risk to retailers. However, unlike Klarna, Clearpay only offers one option for customers to delay their payments: splitting the cost of the order into four instalments, due every two weeks. 

Here’s a quick round-up of the key Clearpay pros and cons: 

Pros: 

  • Increase conversion rate and average order value
  • No setup or monthly fees
  • No contract, cancel anytime 
  • Risk-free – you get paid upfront, even if your customer pays late

Cons: 

  • Currently only available in the US, UK, Australia and New Zealand 
  • No volume discounts
  • Transaction fees not stated on the Clearpay website
  • Some customers may be refused credit 
  • Only one way to delay payments

Choosing your gateway

There are hundreds of Shopify payment gateway options available. But, after over a decade designing and building ecommerce sites, these are some of our favourites. The best thing you can do for your customer is to offer them a choice of Shopify Payments, an alternative provider and a pay-later option. That way, whatever their preference, you’ll be able to make sure you don’t lose them at the checkout. 

Now you know a little more about the different Shopify payment gateways, check out our guide on improving your average order value.

Up next: Increase your average order value

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