What is Shop Pay? How to use it

Panna Kemenes

26.08.22 (updated more than 1 year ago)

3 minute read

Shop Pay is an accelerated checkout that makes the buying process easier and quicker for your customers.

It’s currently the go-to choice of over 500,000 live websites.¹

Read on to discover what Shop Pay is used for and how it can help your business.

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🔍 In this article:
What is Shop Pay? How does Shop Pay work? What are Shop Pay installments? Shop Pay fees How to activate Shop Pay Shop Pay vs. Afterpay Is Shop Pay right for your business?

What is Shop Pay?

Shop Pay has the ability to save your customers’ shipping and billing information. All that’s required is their email address and consent.²

This means that customers don't need to re-enter their information every time they pay, speeding up the checkout process. It also saves them from having to verify themselves every time they buy your products.³

Shop Pay also comes with a Buy Now Pay Later (BNPL) option. This feature is called Shop Pay installments.

What is a Shop Pay account?

When your customer opts into Shop Pay, an account is automatically created. Here is where your customer’s payment details are stored for future payments.

What is Shop Pay checkout?

This simply means that Shop Pay is an available payment method at the online checkout portal. Shop Pay is a type of accelerated checkout, as it automatically fills out your customers’ information for them.

What is a Shop Pay code?

A Shop Pay code is the verification code first time users receive when authorizing a payment.

Once your customers opt in to Shop Pay, they’ll no longer need to enter a verification code for payments - as long as they’re using the same device.³

How does Shop Pay work?

When your customer checks out with Shop Pay, they’re redirected to the order review page. They will then receive a unique six-digit code via SMS to verify the purchase.

Once they’ve entered this code, their order will be processed.

If your customer opts into Shop Pay, their billing information will be saved for the next time they make a payment using the same device.³

The ecommerce company Shopify owns Shop Pay.

If your payments are processed through Shopify Payments, you won’t be charged any third party transaction fees - only credit card processing fees.

If, however, you use a third-party payment processor, you may be charged third-party fees when processing payments - in addition to credit card fees.⁴

What are Shop Pay installments?

Shop Pay offers your customers two options at the checkout.

Either, they can pay the full price for a product at the checkout. Or they can pay in installments for orders ranging between $50 to $17,500 USD. Installment payments are supported by Affirm.

There are two types of installment payment options to choose from:

For orders between $50 to $999.99 USD, customers can make four biweekly, interest-free payments.
For orders between $150 to $17,500 USD, customers can make monthly payments over either three, six or twelve months (price dependent). Monthly payment installments charge an interest rate between 10-30% APR.⁵

Shop Pay Installments can attract customers by allowing them to pay in increments.

Shop Pay fees

For the most part, Shop Pay is relatively fee free. For existing Shopify and Shopify Payment users, Shop Pay is free to use.

It also doesn’t charge any late fees on Shop Pay installments. Though failure to pay can prevent customers from using installment payments in the future.⁶

That said, Shopify charges 5.9% + $0.30 USD per installment order.⁷

Similarly, installment fees are decided on a case-by-case basis and can therefore vary from business to business.⁸

How do I activate Shop Pay?

To activate Shop Pay for your customers, you need to:²

Go to your Shopify admin area
Select Settings
Select Payments
Click Manage
In the Shop Pay section, select Shop Pay
Click Save

If you’re using a third-party payment provider, the steps to active Shop Pay are slightly different:²

Go to your Shopify Admin
Select Settings
Select Payments
Click Manage
Select to Enable Shop Pay in the Shop Pay section
Click Save
Select Complete Set Up in the Shop Pay Section
Enter your banking information and the necessary details for your online store
Click Save

What is the difference between Shop Pay and Afterpay?

Afterpay is exclusively a Buy Now Pay Later (BNPL) service. Customers can buy products and pay over four interest-free installments.⁹

Retailers can add Afterpay as a payment method at their checkout. This can attract new customers, giving them payment flexibility.

Shop Pay, on the other hand, is primarily an accelerated checkout. It allows for seamless repetitive purchases. It also comes with a BNPL option - Shop Pay installments. Shop Pay charges between 10-30% APR on monthly installment payments.

Is Shop Pay right for your business?

If your business has frequent return customers, Shop Pay simplifies the checkout process. This has the potential to increase customer loyalty.

The less friction there is when it comes to making a payment, the more likely the customer is to complete the purchase.

The Buy Now Pay Later (BNPL) option from Shop Pay can benefit businesses selling high value items. This is because of the ability to pay in installments which makes for easier purchases.

Also, as a BNPL service provider, Shop Pay takes on all the risk involved in installment payments. Shop Pay pays you in full and your customer pays the installments to Shop Pay.

That being said, the option of BNPL for small items can produce impulse buying - so it’s worth considering if it benefits your business model.

Sources:

All sources checked August 26, 2022.

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