What is Shop Pay and how does it work? A Full Guide (2024)

Shop Pay aims to streamline the customer journey and boost sales by simplifying the checkout process. It's a convenient payment button seamlessly integrated into your checkout flow.

Powered by Stripe, Shop Pay securely manages payment information for your Shopify store, trusted by numerous large enterprises for handling transactions.

Now, let’s explore the benefits of Shop Pay with Nextsky and why it's a valuable addition to your online store.

What is Shop Pay?

Shop Pay is a convenient payment method and checkout solution for customers in a Shopify store. It allows them to securely store credit card details and other relevant information like shipping and billing addresses. This saves time during future purchases.

With Shop Pay's accelerated checkout system, customers can process payments quickly, leading to increasing repeat purchases. Accessing Shopify Pay is as simple as entering an email address, although using a phone number for checkout has limitations as customers cannot save their information.

You can also accept payments using Shop Pay on various channels, such as Google, Facebook, and Instagram.

In addition to facilitating faster checkouts, Shop Pay provides features like local pickup and delivery options. Both customers and businesses can trust that their information is kept secure and private on Shopify's PCI-compliant servers.

Since no information is stored in the store itself, merchants reduce the risk of compliance issues, offering peace of mind to all parties involved.

Note that Shop Pay need Shopify Payment or another third-party gateway in order to process a transaction.

How Does Shop Pay Work?

Shop Pay streamlines checkout by securely storing customer data on PCI-compliant servers. Customers can complete purchases with just one click, eliminating the need to re-enter their information each time.

Here’s how it works from the customer’s end:

Selecting Shop Pay:  At checkout on a participating Shopify store or within the Shop app, customers can choose Shop Pay as their payment method. 

Account Verification (if needed):

• If they haven't used Shop Pay before, they'll need to create an account by entering their email address and verifying it with a code sent via email or text message.

• Existing Shop Pay users can simply log in with their credentials. If the user uses a new device, he or she still needs to verify the account again.

Pre-filled Information:

• Shop Pay automatically retrieves and fills in the customer's saved shipping and billing information from their previous Shop Pay transactions, eliminating the need for manual entry.
• Customers can review and edit this information if necessary.

Payment Selection:

• Customers can choose their preferred payment method linked to their Shop Pay account, such as a credit card, debit card, or stored balance (if available).

Authorization and Order Confirmation:

• Once the payment method is selected, Shop Pay securely transmits the information to the payment processor for authorization.
• Upon successful authorization, the order is confirmed, and the customer receives a notification.

Using Shop Pay as a customer is incredibly easy. Here are some key points to remember:

• Saved Customer Information: Shop Pay securely encrypts and saves customer data for future purchases, including email, shipping addresses, credit card details (up to 10 cards), and mobile phone numbers.
• Payment Flexibility: Customers can choose to pay in installments (if enabled) and select delivery or in-store pickup options.
• Data Management: Customers have the ability to update their information or opt out of Shop Pay at any time through the platform.
• Multilingual Support: Shop Pay offers support in multiple languages to accommodate diverse customer bases.
• Supported Payment Methods: Shop Pay accepts activated credit or debit cards for online purchases, provided the billing address matches the information on the card. Some prepaid cards may not be supported, and Capital One cards are not accepted for Shop Pay Installments.
• Easy Integration for Merchants: Merchants can seamlessly enable Shop Pay through the app, allowing for a smooth checkout experience alongside other express options.

Shop Pay Pros And Cons

 Overall, Shop Pay offers numerous benefits in terms of convenience, security, and environmental responsibility, but users should consider its limitations and potential drawbacks when evaluating its suitability for their business needs.

Shop Pay Key Features

Shop Pay offers several key features that enhance the checkout experience for both customers and merchants:

• Accelerated Checkout: Customers can complete purchases quickly by using saved payment and shipping information.
• Optimized Conversions: Shop Pay can increase conversions by as much as 50% compared to guest checkouts, thanks to its fast and convenient checkout process.
• Customizable Settings: Merchants can customize settings such as shipping options, delivery preferences, and payment methods to align with their business needs.
• Order Tracking: Customers can track their orders in real-time and receive updates on shipment status, improving transparency and trust.
• Compliance and Security: Shop Pay adheres to PCI compliance standards and employs robust security measures to protect customer data and transactions.
• Customer Support: Shop Pay offers comprehensive customer support to address any queries or issues that may arise during the checkout process.
• Verified Purchase: Customers verify purchases on the Shop app or via a texted code to prevent fraudulent transactions, reducing chargeback risks.
• Local Pickup or Delivery: Shop Pay enables customers to choose between local pickup or delivery options during checkout, enhancing convenience.
• Green Business: Shopify allocates a percentage of Shop Pay transactions to support carbon removal projects, appealing to eco-conscious consumers.
• Shop Pay Installment: Shop Pay Installments allows customers to split payments for orders, with no hidden fees.
  For orders between $50 and $999.99, customers can pay in four interest-free biweekly installments, while for orders between $150 and $17,500, they can pay in up to 12 monthly installments with 10% to 30% APR.
  However, there are limitations: customers cannot use certain card types or pay with virtual currencies like gift cards.

These key features collectively contribute to a streamlined and efficient checkout experience, enhancing customer satisfaction and driving sales for merchants.

How to Add Shop Pay to Your Online Checkout

Previously, Shop Pay was only available to merchants using Shopify Payments. However, it has now expanded compatibility to include third-party payment providers.

It can be integrated into your Facebook or Instagram store, which supports users with limited finances.

Here are instructions on how to enable it:

Enable Shop Pay for Shopify Payment

Integrating Shop Pay into your Shopify store is simple. If you're unsure whether it's enabled or not, follow these steps.

• Step 1: Go to Settings in your Shopify Admin.
• Step 2: Click on the Payments setting -> Click on Manage inside the Shopify Payments section.

• Step 3: Enable Shop Pay as your payment method.

Enable Shop Pay for Third-party Payment Providers

You can enable Shop Pay for Third-party Payment Providers with the following steps:

• Step 1: From your Shopify admin, go to Settings > Payments.
• Step 2: Instead of Shopify Payments, click on Manage and find the Switch to a Third-party Provider section.

• Step 3: Select the Third Party Payment Provider you want.
• Step 4: In the Shop Pay section, check Enable Shop Pay.

• Step 5: Click Active.
• Step 6: In the Shop Pay section, click Complete set up.
• Step 7: Enter the required details about your online store and banking information, and then click Save.

Once activated, you'll need to provide your business details and banking information for setup and payment. Failure to complete setup within 21 days of receiving payment via Shop Pay will result in a customer refund.

Enable Shop Pay for Facebook or Instagram Shops

Shop Pay is available to Facebook and Instagram shops in the US on a limited basis. To enable Shop Pay for Facebook or Instagram Shops, follow these steps:

• Ensure that you have a Facebook or Instagram Shop set up and connected to your Shopify store.
• Navigate to your Shopify admin dashboard.
• Go to the "Settings" section and select "Payment providers."
• Under the "Third-party providers" section, click on "Manage" next to the provider you're using for your Facebook or Instagram Shop.
• Look for the option to enable Shop Pay and toggle it on.
• Follow any additional prompts or instructions to complete the setup process.
• Once enabled, customers will be able to use Shop Pay as a payment option when checking out on your Facebook or Instagram Shop.

Enable Shop Pay installments

To use Shop Pay Installments, ensure the following criteria are met:

• Your Shopify store is based in the United States.
• You're selling in USD.
• Both Shopify Payments and Shop Pay are activated.

Once eligible, activate Shop Pay Installments in your Shopify Admin:

• Navigate to Settings > Payments in the Shopify admin.
• Click Manage in the Shopify Payments section.
• Check Shop Pay Installments in the Shop Pay section.
• Click Save after accepting the terms and conditions.

Shop Pay vs Shopify Payments

While both Shop Pay and Shopify Payments are integrated tools on Shopify, they serve different purposes. 

Shopify Payments is a payment processing service that allows retailers to manage online transactions and accept payments, powered by Stripe. 

Shop Pay, on the other hand, is a checkout option for customers, enabling them to store their credit card, email, shipping, and billing information for faster and more convenient future checkouts. 

In simple terms, Shopify Payments does the actual work of processing your information and making the transaction while Shop Pay is just the front for customers to start that process more quickly.

How to Use Shop Pay as a Merchant

• Ensure your store is on Shopify and enable Shop Pay in your settings.
• Customize the Shop Pay Button to match your store's branding.
• Ultilize Shop Pay's streamlined checkout to reduce cart abandonment and use marketing automation for customer engagement.

How to Use Shop Pay as a Consumer

• Look for the Shop Pay Button at checkout and sign in or create an account.
• Complete purchases with a few clicks without re-entering payment info.
• Download the Shop Pay app for order updates and tracking notifications.

Who Should Use Shop Pay

People who should use Shop Pay include:

• Frequent Shopify shoppers: Simplify checkout with pre-filled information and one-click purchases.
• Mobile shoppers: Optimized for seamless checkout on smartphones and tablets.
• Customers interested in financing options: Offers split payments with In-Store Installments (powered by Affirm).
• Businesses that primarily sell online
• Businesses that have customers making frequent, repeat purchases

Additional considerations:

• Limited quantity: Currently only available in the US, Canada and Australia.
• Requires merchant acceptance: This can only be used at stores that have integrated Shop Pay as a payment option.

Is Shop Pay Right for You?

For merchants, the primary benefit of Shop Pay is its potential to drive regular future sales from loyal customers. By simplifying the payment process and ensuring high levels of security, Shop Pay encourages repeat purchases and fosters customer loyalty. Additionally, merchants can leverage Shop Pay's carbon offsetting strategy to demonstrate their commitment to environmental responsibility, which can further enhance customer loyalty and prompt more purchases.

For customers, Shop Pay offers a convenient and centralized platform for managing payment details and tracking orders. With a quick verification code required for checkout and robust security measures in place, customers can enjoy a seamless and secure shopping experience.

When to Choose an Alternative

Use instead of Shop Pay in the following cases:

• Unavailable Region: If Shop Pay isn't accessible in your region, you'll need to explore other payment solutions to accommodate your customers.
• Customer Preference: Some customers may prefer alternative payment methods such as digital wallets (e.g., Apple Pay, Google Pay) over Shop Pay.
• Advanced Features: If your business requires specific features or functionalities that Shop Pay doesn't offer, you may need to consider alternative payment gateways that better suit your needs.
• Transaction Fees: Evaluate whether the transaction fees associated with Shop Pay align with your budget and financial goals. If not, you might find better pricing options with alternative payment providers.
• Compatibility: If your business relies on existing systems or platforms that aren't compatible with Shop Pay, you'll need to explore alternative payment solutions that integrate seamlessly with your current setup.