What Is Shopify Payments? Why Every Shopify Store Should Use It

Shopify Payments is a powerful integrated payment gateway designed to simplify transactions for any Shopify store. Whether you're launching a new store or optimizing an existing one, understanding this tool is key to maximizing efficiency, reducing costs, and enhancing customer experience. In this guide, Nextsky offers a thorough exploration of Shopify Payments to help you make informed decisions for your e-commerce business.

What is Shopify Payments?

Shopify Payments is Shopify’s built-in payment gateway, allowing stores to accept credit cards, debit cards, digital wallets (like Apple Pay, Google Pay), and local methods like Sofort or iDEAL. Integrating directly into the platform, all transactions are automatically synchronized with orders, inventory, and sales reports. Without the need for a third-party account, Shopify Payments reduces fees, increases security (PCI compliance, fraud protection), and provides a seamless checkout experience for both buyers and sellers.

How does Shopify Payments work?

When a customer purchases from your online store, Shopify Payments handles the entire transaction process, from collecting payment details to transferring funds to your bank account. Here's how it works:

• Customer checkout: Customers select their preferred payment method at checkout, including credit cards (Visa, Mastercard, American Express, Discover, etc.), digital wallets (Apple Pay, Google Pay, Shop Pay), or local methods such as iDEAL or Sofort.
• Transaction processing: Shopify Payments secures payments, verifies details automatically, and complies with PCI DSS standards.
• Fund transfer: After approval, funds are deposited directly into your linked bank account, typically within 1–3 business days in the U.S.
• Tracking and analytics: Transaction data syncs directly to your Shopify dashboard, simplifying revenue management, refund tracking, and cash flow monitoring.

Read more: What is Shopify? All Information About The Platform from A-Z

Key features of Shopify Payments

Shopify Payments stands out with a robust set of features tailored for modern e-commerce businesses. Below is a detailed breakdown of its core capabilities:

1. Diverse payment method support

Shopify Payments supports a wide range of payment options to meet varied customer preferences:

• Credit and debit cards: Visa, Mastercard, American Express, Discover, Diners Club, JCB, and Elo.
• Digital wallets: Apple Pay, Google Pay, Shop Pay, and Amazon Pay.
• Local payment methods: Sofort (Germany), iDEAL (Netherlands), Bancontact (Belgium), and more.
• Buy now, pay later: Options like Shop Pay Installments and Klarna.
• Manual payments: Cash on delivery (COD) and bank transfers.

2. Multi-currency support

Shopify Payments enables merchants to accept payments in multiple currencies, ideal for international markets. Customers can pay in their local currency with automatic conversions and competitive fees (approximately 1.5% in the U.S. and 2% elsewhere), ensuring seamless global shopping and easy cross-border transactions.

3. Seamless Shopify POS integration

For merchants with physical stores, Shopify Payments integrates with Shopify Point of Sale (POS), unifying online and offline sales data. This allows businesses to accept payments at pop-up shops, brick-and-mortar locations, or events, with all transactions tracked in a single dashboard.

4. Advanced security and fraud protection

Shopify Payments adheres to PCI DSS Level 1 standards, ensuring the highest level of data security. It includes:

• Address Verification System (AVS): Matches customer billing addresses with issuer records to detect potential fraud.
• Card Verification Value (CVV): Requires the three- or four-digit security code on the back of the card for legitimate transactions.
• Two-step authentication: Mandatory for all Shopify Payments accounts to prevent unauthorized access. These measures minimize chargebacks and fraudulent orders, safeguarding your revenue.

5. Fast payouts

Shopify Payments offers quick payouts, typically within 1–3 business days in the U.S., making it easy to manage and customize payout schedules via the Shopify dashboard.

6. Test mode

Shopify's test mode allows merchants to simulate transactions without processing real payments. Use test credit card numbers (available in Shopify's documentation) to verify checkout flows before launching your site.

7. Shop Pay Installments

This "buy now, pay later" option lets customers split payments, increasing affordability and potentially boosting sales.

8. Tax reporting (e.g., Shopify 1099-K)

For U.S. merchants, Shopify Payments automatically generates 1099-K forms for tax purposes if you meet IRS thresholds (e.g., $20,000 in sales and 200 transactions annually). These forms can be downloaded from the Shopify admin panel.

Read more: Shopify Features: The Complete Guide for Optimizing Your Store

Shopify Payments fees and pricing

One of Shopify Payments' standout benefits is its cost-effectiveness, especially for merchants on premium Shopify plans. Below are the details of associated fees:

Credit card processing fees

Fees vary based on your Shopify plan and whether transactions are online or in-person:

Transaction fees

Shopify Payments waives transaction fees for orders processed via Shopify Payments, Shop Pay, Shop Pay Installments, or PayPal Express. However, using third-party gateways incurs fees based on your plan:

• Basic: 2%
• Grow: 1%
• Advanced: 0.6%
• Shopify Plus: 0.15%–0.3% (varies by region)

Currency conversion fees

For international transactions, Shopify Payments charges currency conversion fees:

• U.S.: 1.5%
• Other supported countries: 2%

Chargeback fees

Chargebacks occur when customers dispute transactions. Shopify Payments charges a fee per chargeback, refundable if the dispute resolves in your favour:

• U.S.: $15
• Canada: $15 CAD
• U.K.: £10 GBP
• Australia: $25 AUD
• Other supported countries: Varies (e.g., €15 in Europe)

Additional fees

• Shopify POS Pro: $89/month per location for advanced POS features.
• Manual payment methods: No transaction fees for cash, COD, or bank transfers.

By choosing Shopify Payments, merchants can save significantly on transaction costs compared to third-party processors, especially with higher-tier plans.

Read more: Shopify Pricing: Find the Right Plan for Your Business

Eligibility requirements for Shopify Payments

To use Shopify Payments, your business must meet specific eligibility criteria:

Supported countries

Shopify Payments is available in 23 countries, including:

• United States
• Canada
• United Kingdom
• Australia
• Germany
• Japan
• Singapore
• Hong Kong SAR

This list is subject to change. For the most up-to-date information on supported countries and any specific requirements for each region, visit Shopify’s official page: Shopify Payments Supported Countries.

Bank account requirements

Your bank account must:

• Be a full checking account (savings or virtual accounts are not supported).
• Accept electronic transfers in the region’s payout currency (e.g., USD for U.S. merchants).
• Be held at a physical bank in your country (for U.S. merchants, the account must support ACH transfers).

Prohibited businesses

Certain business types are restricted from using Shopify Payments, including:

• Financial services (e.g., investment or debt relief services).
• Gambling, firearms, or e-cigarettes.
• Adult content or counterfeit goods.
• High-risk businesses like multi-level marketing.

Merchants must review Shopify’s terms of service to ensure compliance before activating Shopify Payments.

Account security requirements

To use Shopify Payments, you need to enable two-step authentication (2FA) to prevent unauthorized access and financial fraud. If you don't enable it, your account may be at risk and payments may be held. Enabling 2FA is simple:

• Go to your Shopify admin panel.
• Navigate to Settings > Security.
• Enable Two-Step Authentication using SMS, an authentication app, or another secure method.

By meeting these eligibility requirements and security measures, you can ensure smooth transactions and secure payouts with Shopify Payments.

How to set up Shopify Payments

Setting up Shopify Payments on your Shopify store is very easy. Follow these steps:

Step 1: Go to the Shopify Store admin homepage, and select "Settings" in the bottom left corner.

Step 2: After opening "Settings", choose "Payments" > click the "Activate Shopify Payments" button to activate.

Step 3: Select the "Business type" options. Then, fill in all necessary verification and personal information in the form including details, address,..then click "Submit for verification"

Step 4: Finish by entering the routing number and account number from your bank account.

Step 5:  Click the Complete Account Setup button to complete the process.

If you want to get started with Shopify and Shopify Payments, you can follow our full Shopify Tutorial: How to Start a Shopify Store for Beginners

Pros & Cons of Shopify Payments

Shopify Payments vs. Third-party payment gateways

Shopify does not require you to use Shopify Payments. You can choose from over 100 different payment gateways, offering flexibility in accepting payments. Below is a comparison of Shopify Payments and popular alternatives:

Payment gateway comparison

When to use Shopify Payments?

• Avoiding additional transaction fees
• Seamless Shopify integration
• Fast payouts (especially with Shopify Balance)
• Businesses in supported countries

When to choose a third-party payment gateway?

• Businesses in unsupported Shopify Payments regions
• Selling restricted products under Shopify Payments policies
• Accepting specific payment methods not available in Shopify Payments
• Using the same payment provider across multiple platforms

Read more: How Does Shopify Pay You? A Complete Guide to Shopify Payouts

Shopify Payments is a powerful, hassle-free solution for handling transactions on Shopify. By eliminating third-party fees and offering seamless integration, it helps merchants streamline their operations and maximize profits. However, eligibility restrictions and regional availability may require some businesses to explore alternative gateways. If you're looking for expert guidance on optimizing your Shopify store, Nextsky is here to help.