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 fast and convenient payment solution for customers on Shopify stores. It securely stores payment information, shipping, and billing addresses, saving customers time during future purchases.

Key Benefits of Shop Pay:

• Quick Checkout: The express checkout system enables customers to complete transactions in seconds, increasing the likelihood of repeat purchases.
• Multi-Channel Integration: Shop Pay isn't limited to Shopify stores; it also supports payments on platforms like Google, Facebook, and Instagram.
• Maximum Security: Customer data is encrypted and stored on Shopify's PCI-compliant servers, ensuring that no information is stored directly on the store, reducing security risks.
• Flexible Options: In addition to payment processing, Shop Pay offers features like local pickup and home delivery options.

With Shop Pay, customers can sign up using just an email to save their details for future purchases. However, signing up via phone number has limitations as it doesn't allow for saving personal information. Shop Pay requires Shopify Payments or another third-party gateway to process transactions, offering merchants flexibility in payment method choices.

How Does Shop Pay Work?

Shop Pay simplifies the checkout process by securely storing customer information on PCI-compliant servers. This allows customers to complete their purchases with just one click, eliminating the need to enter their details each time they shop.

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

1. Selecting Shop Pay:

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

2. Account Verification (if needed):

If they haven't used Shop Pay before, customers will need to create an account by entering their email address and verifying it with a code sent via email or text.
Existing users can simply log in with their credentials. If using a new device, the customer may need to verify their account again for security.

3. Pre-filled Information:

Shop Pay automatically retrieves and fills in the customer’s saved shipping and billing information from previous transactions, so they don’t have to re-enter it.

Customers can review and edit their details if necessary.

4. Payment Selection:

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

5. 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.

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 essential tools on the Shopify platform, they serve distinctly different purposes tailored for different users. Here's a quick breakdown:

Feature	Shop Pay	Shopify Payments
Purpose	Streamlined checkout solution for customers.	Payment processing service for merchants.
Target User	Shoppers seeking a fast and convenient checkout experience.	Merchants managing transactions and payment processing.
Key Functionality	Saves customer details (credit card, email, address) for seamless future purchases.	Processes payments directly on your Shopify store.
Integration	Works on Shopify stores and external platforms like Google, Facebook, and Instagram.	Exclusive to Shopify stores.
Security	Encrypts and stores customer data securely on PCI-compliant servers.	Powered by Stripe for secure payment processing.
Notable Features	- Accelerated checkout - Installment payments - Order tracking - Carbon offsetting.	- No need for a third-party processor - Lower transaction fees - Supports multiple currencies.

Simplified Explanation

Shopify Payments is the engine that processes payments for merchants, while Shop Pay is the interface that makes the checkout process faster and easier for customers. Together, they create a seamless shopping experience for customers and efficient payment management for merchants.

How to Use Shop Pay

For Merchants:

• Ensure your Shopify store is active and enable Shop Pay in your settings.
• Customize the Shop Pay Button to align with your store's branding.
• Leverage its streamlined checkout features to reduce cart abandonment.
• Use Shop Pay’s marketing tools to engage with customers.

For Consumers:

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

Shop Pay vs PayPal vs Afterpay vs Apple Pay vs Google Pay

When choosing a payment method for your Shopify store, it’s important to understand how Shop Pay compares to other popular options. While Shop Pay offers a fast, secure checkout solution for customers, there are other payment methods like PayPal, Afterpay, Apple Pay, and Google Pay that offer unique features. In this section, we’ll compare these payment solutions based on key factors such as transaction fees, security, and customer experience.

Feature	Shop Pay	PayPal	Afterpay	Apple Pay	Google Pay
What Is It?	A fast checkout solution by Shopify that stores customer payment details for future purchases.	A digital payment service that allows payments via linked accounts or credit cards.	A “Buy Now, Pay Later” service that divides payments into installments.	A mobile payment and digital wallet service allowing payments via Apple devices.	A digital wallet that enables payments using Android devices and linked accounts.
Installment Payments	Yes, available with Shop Pay Installments.	Not available (except PayPal Credit in some regions).	Yes, allows customers to pay in 4 interest-free installments.	Not available.	Not available.
Transaction Fees for Store Owners	No fee for enabling Shop Pay; 5-6% fee on Shop Pay Installments.	2.9% + $0.30 for US transactions; fees vary by region.	4-6% + $0.30 per transaction, plus a 2% Shopify fee for Afterpay transactions.	No fees for merchants; subject to Apple’s terms for in-app purchases.	No fees for merchants; standard transaction fees apply through payment gateways.
Customer Experience	Fast, secure checkout with saved details for future purchases.	Convenient for users familiar with PayPal, offers buyer protection.	Flexible installment plans, encouraging larger purchases.	Simple and quick, especially for Apple device users.	Easy to use for Android users, integrates with Google services.
Global Availability	Primarily in the US and select countries.	Available in over 200 countries and widely accepted globally.	Available in select markets like the US, UK, and Australia.	Available in over 50 countries, primarily in regions with high Apple usage.	Available in over 30 countries, with growing acceptance worldwide.
Security	Strong security features, including two-factor authentication.	Advanced fraud protection and buyer protection for eligible transactions.	Secure payments with encryption, no interest charges, and buyer protection.	High security with Face ID, Touch ID, and encryption.	Uses encryption and biometric security features for secure payments.
Integration with Shopify	Fully integrated with Shopify, making it ideal for Shopify stores.	Available as a third-party payment method on Shopify.	Integrates seamlessly into Shopify for installment payments.	Can be integrated via payment gateways or apps on Shopify.	Can be integrated through supported gateways on Shopify.
Mobile Payments	Available through the Shop app and Shopify mobile.	Available on PayPal’s mobile app and website.	Available via the Afterpay app.	Works on all Apple devices with Apple Pay enabled.	Works on Android devices with Google Pay enabled.
Ideal For	Shopify users looking for fast, easy checkouts and installment options.	Customers who prefer using their PayPal account or linked credit cards.	Customers wanting flexible payment options without interest.	Apple users who prefer using their iPhone, iPad, or Mac to pay quickly.	Android users who want a convenient and secure mobile payment solution.

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.