Shopify Payments vs Stripe has been a big debate for some time. As the 2 most popular payment options for your Shopify store, you want to make sure you choose the “best” one.
What most people don’t realize is that Shopify payments are actually powered by Stripe. Essentially it is one and the same payment processor.
Even though they are essentially the same, there are good reasons for using the one over the other and this depends largely on what your store sells and what your long term goals are.
Your payment processor is a vital part of your eCommerce business. It allows you to accept payments and ultimately it is how you get paid.
Not only do you need a payment processor that is reliable but you need one that has a good level of fraud protection and most of all one that can accept a variety of cards.
If you are selling products to countries other than the one where you live then there will always be specific issues you need to understand.
Currency conversion between your store’s default currency, the currency you accept money in, and the currency in which Shopify Payments of Stripe pays you will be different for every country based on exchange rates and even the fees your customers will have to pay to vary greatly.
Let’s look at the main differences between Shopify Payments vs. Stripe and
The Differences Between Shopify Payments and Stripe
Even though Shopify payments use the Stripe payment processor it is still managed by Shopify. You sign up to Shopify Payments and they will manage your payments, collect the fees, and eventually pay you.
When you choose Stripe then tey will manage your payments, collect the fees, and pay you.
An important point to note here is that all refunds and chargebacks will be recorded by either Shopify Payments or Stripe. If you are dropshipping then this is super important.
A BIG reason why many dropshippers shy away from Shopify Payments is that a high chargeback rate on your account can cause Shopify to shut you down. The threshold is quite high but if you are selling crap or don’t deliver products within a reasonable time frame then you will be at risk.
If you have a Stripe account, Stripe can ban you but you still get to keep your Shopify store. This can save you from a lot of drama. In theory, all you need is a new payment processor and you are back in business.
I want to be very clear though: don’t sell crap.
Be responsible and make sure your customers get their products in a realistic time frame. If you intend to scam people you will get caught and blacklisted and you will deserve it.
Another big difference between Shopify Payments and Stripe are the countries in which it is available. Shoipify Payments is only available in a few selected countries while Stripe serves a much bigger pool of countries.
Depending on where you are located you may be forced to use Stripe instead of Shopify payments. At the time of writing, Shopify Payments only support 17 countries while Stripe supports 37 countries.
Dropshippers in India will be happy to know that Stripe is now available in India. I know that finding a decent payment processor to serve dropshippers in India was quite hard for some time.
Why Use Stripe Instead Of Shopify Payments?
Stripe and Shopify Payments does have a different fee structure. If you use Shopify Payments on your store then you won’t be charged a transaction fee when orders are placed on your store.
What it comes down to is that using Stripe instead of Shopify Payments will cost you an extra 2% per transaction if you are on the Shopify Basic plan and 1% if you are on a Shopify (standard) Plan. For the Advances Shopify Plan, the fee goes down to just 0.5%
On a basic Shopify Plan, the fee will be 2.9% + $0.30 per transaction if you use Shopify Payments (This goes down to 2.4% on a Shopify Advanced Plan).
If you use Stripe then it will also be 2.9% + $0.30 PLUS an additional 2% charged by Shopify.
So is it worth the extra 2% and switch to Stripe payments?
As I’ve already pointed out, using Stripe can help protect your Shopify store – especially if you are dropshipping. Recently, Shopify has started cracking down on dropshippers who they deem to be high risk.
What they deem high risk depends though. Having a high rate of chargebacks will definitely get your account flagged and you should do everything in your power to communicate with your customers to ensure there are no chargebacks.
Some product types tend to be on Shopify’s radar as well. There are Shopify dropshippers who get their accounts banned even if they have almost no chargebacks. This is mostly for known scammy products from China or products that infringe on Copyrights.
Stripe vs Shopify Payments seem to have different triggers and thresholds for instigating a ban or placing limits on your account (limits are usually when they freeze a percentage of your funds).
This leads me to the point I am trying to make which is that using Stripe instead of Shopify Payments can help protect your Shopify store and Shopify account.
If you have a thriving dropshipping business then I recommend you have a main Stripe account as well as a backup Stripe account.
If you do get banned from Stripe you are not out of business overnight. You can simply revert to your backup account. If you use Shopify Payments and you get banned then your business is gone overnight and getting it back up and running will take a huge effort.
This leads us to another point.
How can you use Stripe if you live in a country like the USA or the UK where Shopify Payments are accepted (and forced on to you by Shopify)?
If you do live in any of the 17 countries that accept Shopify Payments then Shopify will not allow you to connect a Stripe account to your store.
Fortunately, there is an easy workaround…
How To Add Stripe To Shopify
The first thing you should do is to go and get yourself a Stripe account. Make sure you use an email and bank account that is not associated with your current Shopify store (if you already have one).
You should also get your mom or your girlfriend to open a Stripe account in their own name. This will be your backup and you can just leave it on the backburner and use it as insurance for a rainy day.
If you live in any of the countries that accept Shopify Payments then Shopify will “force” you to use Shopify Payments.
This is a really great option because it is very easy to set up, everything is instantaneous and it really makes life super simple. Shopify Payments have a great anti-fraud system and it really is a great payment option for ease of use.
Using Stripe instead of Shopify Payments is all about having an extra layer of protection for your dropshipping business. It’s not just dropshippers who are at risk. Anyone store that sells “borderline” products needs to be cautious.
If you sell adult products, supplements or even certain digital products you could get caught in the crossfire and get your account banned – even if those products are allowed in the country you are selling them.
How To Add Stripe To Shopify From ANY Country
To add Stripe to Shopify is you are in a country where Shopify enforces its own payment processor you simply need to change the address of your Shopify Store to a country that does not accept Shopify Payments.
Set your store address to some random address in France. Go to Google Maps and find an address. Any residential address will do.
Click Settings >> General and change your store address to the one you just found on Google Maps and click Save
Once you’ve done this, the option to connect a Stripe account becomes available in Shopify.
Click Settings >> Payments
You will see that the options now look different. You have Paypal, Amazon Pay and Third Party Payments. Shopfy Payments is no longer available.
Click on Choose third-party provider. This will take you to a screen that prompts you to set up Stripe.
Click on Set up Stripe
If you already have a Stripe account, simply connect your Stripe account by logging in when prompted by Shopify.
Once your Stripe account is connected, you simply go back and reset your store address back to your real address.
This gives you a lot more options because now you have 3 chances to avoid being banned. You have 2 Stripe accounts and you still have the option of using Shopify Payments.
I will say this again.
This is not to be used to scam people.
This is pure to protect yourself from being banned wrongfully. It is easy to get caught in the crossfire when an algorithm starts banning accounts.
This is a way to protect yourself.
If you use Shopify Payments then you will be paid by Shopify. Your Shopify payouts will happen once or twice a week to the bank account that you provided to them. The frequency of your payments depends on the country you are in.
In the USA and Australia Shopify will pay you every 2nd day while most other countries it will be every 3 days.
This is super convenient and great for cash flow.
How fast you have access to the money however still depends on your bank and how fast they clear the payment.
Stripe payouts are very similar to that of Shopify Payments but its a bit more complicated. Your first payment from Stripe will typically take 7 to 14 calendar days.
This allows Stripe to access your business and if you are in what they deem a high-risk industry then they can kick back the regularity of your payments.
This initial setup period allows Stripe to manually review what you are selling and they will then sandbox you if you are in a high-risk industry or if you sell products that they deem a high risk to chargebacks and fraud.
Essentially they do this to protect themselves and the integrity of their payment processor.
While dropshipping as a general business is not deemed high risk, many “famous” dropshipping products can get you sandboxed.
I would recommend you always start your Stripe account with a great looking store that sells great products – even if it is from China.
The problem with payment processors is never the fact that you dropship. The issues that people encounter is with the WAY in which they dropship.
If everything checks out, Stripe payouts will happen every 2 days if you are in the USA and Australia and every 3 days if you are in most other countries.
How To Protect Your Payment Processor Account
Protecting your accounts is an important part of running a successful eCommerce business. Your online store relies on a lot of 3rd party apps and services and all of them carry their own levels of risk.
They need to protect themselves and if you are found (by a human or an algorithm) to violate any rule then you will have one of the cogs in your business not working and that can bring the whole machine to a grinding halt.
In short, these are the things you need to do to protect yourself.
- Offer great customer support and communicate with your customers
- Have robust shipping, returns and refunds policies
- Make sure your customers know what to expect in terms of delivery times and even where your products ship from (there is a strong anti-China sentiment amongst certain shoppers).
- Deliver your products and ensure you maintain a level of quality
- Give refunds and returns when customers request it
- Don’t pick fights with customers. They are always right (otherwise they simply file a chargeback)
- Make sure you comply with Shopify’s policies – especially on what you are allowed to sell in different countries.
Late deliveries and slow responses to support tickets are the biggest reasons for chargebacks.
Make sure you have a robust refund and return policy. Make sure you create a realistic expectation for delivery times and make sure your customers know how long they should expect to wait.
Never let a support ticket sit for more than 24 hours. Ideally, you want to respond to all support tickets on the same day. This gives customers peace of mind and will greatly reduce the risks of chargebacks.
Charge-backs and Fraud
Charge-backs are a big problem. Not only will you be out of pocket the costs pf the transaction but you will also be out of pocket for the costs of acquiring the customer (advertising costs).
On top of that, you will be charged a fee by Stripe vs Shopify Payments when you lose the appeal. This is about $15 per chargeback.
There are also fraudsters who will file a chargeback as soon as they receive their products. You can’t do much about this.
Fortunately, both Shopify Payments and Stripe are building a database of these fraudulent transactions and will either block them or warn you of the potential risks.
There are also third-party apps that can help you reduce fraud but I would only recommend this once you start seeing a large percentage of fraudulent orders.
If a customer requests a refund, give it. If a customer sounds angry and starts threatening with all sorts of agro, just refund them.
It’s not worth the fight.
Fighting chargebacks takes a lot of time out of your day. You need to provide a lot of really good evidence if you were to stand a chance of winning a dispute.
From my experience, fighting a dispute if you shipped via ePacket is not worth your time. Nine out of ten times you will lose even if the tracking shows the parcel was delivered.
There is one more line of defense you have at your disposal and that is making sure that you do not sell products you are not allowed to sell through Shopify.
This varies quite a bit from country to country so make sure you are compliant with Shopify’s policies at all times. It is probably the biggest reason why you could get your account banned.
Shopify Payments Vs Stripe – Conclusion
Using Stripe instead of Shopify payments will mean that you need to cough up an extra 1% to 2% per transaction depending on your Shopify Plan.
Shopify payments make it very easy to get set up, to get paid and to start doing business.
The big risk is that you can lose your entire Shopify account and your entire business if Shopify Payments (and their algorithm) decide they don’t like what you are selling and/or the way you sell and run your online store.
If you are doing anything dodgy like not delivering products and not fulfilling orders or honouring refund requests then you deserve to be banned.
If you get caught up in the crossfire of an algorithm update then using Stripe can give you a lot of protection. You can lose a Stripe account without losing your entire Shopify account and Shopify store.
You can just plug in a backup Stripe account or even just use Paypal and keep your business afloat while you try and figure out what the problem was.
Using Stripe also gives you a lot more options because they allow you to use their API. You can develop custom apps or even just use one-click upsells through Carthook, Smarketly or Candy Rack.