E-commerce is one of the largest growing sectors of the economy at the moment. With the continuous growth of online shopping, it’s no wonder that there are many payment gateways out there that want a piece of the cake.
Believe it or not, payment options are a big factor in conversion rates for online shoppers. That’s why it is always beneficial to have the right set of payment options for your customers. Hence, if you want to boost your sales, you should look closely at the payment methods you’re offering.
In this blog, we will take a look at the key differences between the two payment processing solutions – Shop Pay vs. PayPal, highlighting their respective pros and cons.
So, if you are still undecided about which one is best for your business, make sure to read on for a comprehensive comparison of Shop Pay vs. PayPal.
Sound goods? Let’s dive in!
A quick comparison table of Shop Pay vs. PayPal
Here is a quick overview table between Shop Pay vs. PayPal based on supported countries and currencies to consider. This way, it will be easier to reference back when you need it.
Besides, if you feel like one of them suits your needs, then simply scroll down to learn more about its overview, pros, cons as well as its transaction fees!
>> On the sidelines: We understand that there might be some confusion when it comes to “Shop Pay” and “Shopify Payments,” so we want to pause a moment to spell out the differences between the two.
Shopify Payments is the default payment method for Shopify stores, while Shop Pay works with Shopify Payments to speed up the checkout process. In other words, Shopify Payments is the foundation that Shop Pay is built on.
|User Object||Only for Shopify merchants||For both online and brick-and-mortar retailers|
|Categories||Payment processors||Payment processors
Software as service
Support 22 countries:
Support ALL countries EXCEPT:
Support 13 currencies
AUD, EUR, CAD, USD, CZK, DKK, HKD, JPY, NZD, SGD, SEK, CHF, and GBP.
Support 25 currencies
AUD, BRL, CAD, CNY, CZK, DKK, EUR, HKD, HUF, ILS, JPY (do not support decimals – per transaction limit: 1,000,000), MYR, MXN, NOK, NZD, PHP, PLN, GBP, RUB, SDG, SEK, CHF, TWD, THB, USD.
Without further ado, here is a comprehensive comparison of the two platforms that every serious entrepreneur should know!
Shop Pay Overview – Overall Score: 4,5/5 ⭐
Shop Pay (formerly Shopify Pay) is a fast and secure checkout solution from Shopify, introduced in 2017. The system is designed to be used by businesses of all sizes, from small shops to large retailers.
This amazing checkout solution can store customer payment information entered on a store’s checkout page, so you don’t have to re-enter your billing or other details many times for your next purchases.
That is also why Shop Pay can allow customers to check out 70% faster than a standard checkout process and has resulted in 1.72 times higher conversion rate. As a result, this makes for a better customer experience, which promotes customer loyalty.
Shop Pay securely saves the following payment details:
- Email address
- Shipping information
- Billing information
- Credit card details, such as the CVV code, card number, and expiration date (all information is encrypted for maximum security)
Additionally, Shop Pay not only saves customers time during the check-out process but also helps you to expand your shipping methods by offering local delivery and pick-up options.
More so, Shop Pay can accept payments on other platforms your business might be present on, such as Facebook, Google, and Instagram.
- Reduce cart abandonment rate: According to Baymard Research, 17% of customers abandon their shopping carts because the checkout process is too long or complicated.
But with Shop Pay enabled, prospective buyers, can bypass the lengthy process of filling out personal information and jump right to completing their purchase. This simple convenience is sure to make a world of difference for your business.
- Secures and encrypts customer information: By using Shopify to encrypt and store customer information, you are releasing yourself from the burden of handling sensitive payment information while also adhering to PCI compliance.
This means that Shopify will manage and store all customer information securely so you can focus your attention on other aspects of running your business.
- Offer a “going green” business: Over 52% of consumers say they prefer green businesses, which is why Shopify is committed to offsetting carbon emissions. And this is also an open-up chance for your business to stand out from the crowd.
From 2022, Shopify will work with WeForest to restore the Casamance Mangroves in Senegal, Africa. Offering Shop Pay is an easy way to help the environment and make a difference.
- Offer “Buy Now, Pay Later” (BNPL) installment payments: This program applies to orders between $50 and $17,500.
This is a great way to help your customers spread out the cost of their purchase without incurring any extra charges for orders from 50 USD to 999.99 USD (but need to pay in four and biweekly).
- Easily set up within 5 mins: There are only a few steps involved in setting up Shop Pay, and it’s almost as easy for your customers to create an account.
Once that’s done, Shopify will take care of all the hard work involved in creating the buttons and processing the transaction information.
- Need Shopify Payments to survive: Shop Pay ONLY works with Shopify stores. So, if you don’t use Shopify Payments to accept credit card payments online, you won’t be able to use it.
- Not work with every language supported by Shopify: if your store doesn’t make international sales or isn’t in one of the 22 supported languages and 22 supported countries (mentioned above), you also won’t be able to use Shop Pay.
- Higher fees for Shop Pay Installments: For orders from $150 to $17,500, Shop Pay offers monthly installments with interest rates from 10 to 36% APR (annual percentage rate).
The length of the installment plan depends on the purchase amount and can be 3, 6, or 12 months.
- Shop Pay Installments are only available in the US: You can only use Shop Pay Installments if you’re based in the United States, selling in USD, and have both Shopify Payments and Shop Pay activated.
PayPal Overview – Overall Score: 4/5 ⭐
Forbes has rated PayPal as one of the top 10 point-of-sale systems for 2022 – it’s also one of the top 10 credit card processing platforms. PayPal is a platform that customers trust, and it enables small business owners to process payments easily and effectively.
PayPal offers a variety of services that can be helpful for business owners, but the range of options can be confusing if you’re just getting started with payment processing.
In general, PayPal allows you to accept payments on a website – for example, an eCommerce store. You can also use this checkout solution to accept in-person payments, whether you’re selling at a retail store, a holiday fair, or any other event.
Moreover, PayPal makes it easy for merchants to accept all major credit cards, pay-later options, Venmo, and cryptocurrencies. The fees for each type of transaction vary (we will mention it later).
Needless to say – as one of the leading online payment platforms for decades, PayPal is a great alternative to Shop Pay for Shopify store owners.
Besides, for Shopify merchants who are looking for a payment gateway that is both convenient and trustworthy, the answer is definitely PayPal. Fortunately, Shopify does accept PayPal as a form of payment, and it is effortless to integrate the two platforms.
- A well-known secure, and trusted platform: A recent study found that 69% of online shoppers in the United States feel more confident making purchases online from merchants who accept PayPal.
Because PayPal is famous for its security, businesses accepting it as a form of payment can help lower their cart abandonment rate and increase conversion.
- Integrates seamlessly with Shopify store: As a default, Shopify offers its users PayPal as one of the payment options.
- Strong invoicing features: PayPal’s invoicing features are perfect for businesses that need to bill their customers after making payments.
There’s no monthly or setup fee, and PayPal comes with a bunch of handy tools for small businesses to help manage their billing easily.
- Mobile-friendly: Customers can log in to their PayPal account to make payments without the seller’s website, whether the business has its own store app or a mobile-first/mobile-optimized website.
- Instant deposits into your PayPal account: As a dropshipping business on Shopify, quick access to funds is essential to keep operations running smoothly.
With PayPal, you can get immediate access to your sales proceeds through a PayPal balance. Plus, you can use your PayPal balance to pay your suppliers and contractors.
- Support multi currencies, including crypto: PayPal is available in more than 200 countries/regions and supports 25 currencies.
No matter where you are standing in the world, PayPal makes it easy to transact and convert your PayPal balance into any of these currencies with just a 1.5% transaction fee.
>>> Discover more about Shopify vs. PayPal!
- Expensive chargeback fees: A chargeback happens when a customer asks their card issuer (i.e., Visa, Mastercard, etc.) to reverse a transaction after they’ve made a purchase.
This usually occurs because the customer is dissatisfied with the product they received, it was lost in transit, or there was a delay in receiving the item.
Chargebacks can be costly – especially for businesses using PayPal. If you use PayPal to process payments and a customer initiates a chargeback, you will be charged a $20 penalty per transaction on top of returning the customer’s payment.
- Expensive for international payments: PayPal imposes a 1.5% surcharge on all international payments, including donations and charitable contributions.
In addition, PayPal also applies an average 3-4% markup on top of the current exchange rate for any transactions involving currency conversion.
- Unsuitable for high-risk merchant accounts: PayPal has been known to freeze funds without explanation for extended periods – which can be extremely frustrating for users.
Additionally, PayPal doesn’t work with high-risk merchants, so bear that in mind if you’re thinking of using it for your business.
- Confusing transaction fees: PayPal’s transaction fees widely vary depending on the use case, with rates differing from one category to another.
They offer two different categories of transaction fees for commercial transactions – 1.90% + 10 cents per transaction and 3.49% + 49 cents per transaction.
For online card payments, the fees range from 2.59% to 3.49% per transaction, plus 49 cents per transaction.
- Unpredictable fund freezing: If either the buyer or seller files a dispute, PayPal may restrict the merchant’s account as a result. This means that the account could be frozen and that refunds or returns may be delayed until the dispute is resolved.
Shop Pay vs. PayPal: Which one is better for your business?
As a business owner, there are many factors to consider when evaluating Shop Pay vs. PayPal as a payment option for your customers.
But how about flexibly offering both Shop Pay and PayPal on your online website?
That’s really a good idea you can have right now!
You can easily integrate both Shop Pay and PayPal into your eCommerce website – doing so will give your customers fewer reasons not to click that all-important “order now” button and complete the transaction.
Additionally, by offering multiple payment options, you’re giving customers the ability to choose the option they’re most comfortable with, building great rapport and relationships with your customer base from the get-go.
However, we understand that every business has unique needs that could impact our recommendation to use both payment options. While they are all easy payment methods for customers, you must take into account the fees associated with using Shop Pay or PayPal, as well as the potential risks involved with accepting online payments.
At the end of the day, you know your business better than anyone else. So use your best judgment to decide what’s best for you. Below we’ve compared Shop Pay vs. PayPal in a few key areas that are important to online businesses.
Let’s take a look!
1. Processing speed (aka checkout customer experience)
Shop Pay’s best feature is its ease of use and simple integration process, which takes only 5 minutes. Essentially, all you need to do is turn on the option to use Shop Pay at your checkout.
In contrast, setting up PayPal is a little more complex and time-consuming. First, you’ll have to set up a PayPal payment gateway on your website.
Besides, PayPal will redirect your customers to their own website to complete the payment. This not only annoys your customers but could also decrease your overall conversion rate because of the extra step involved!
But with Shop Pay, customers can directly do their checkout all on one page without any redirection.
2. Cost of transaction
Shop Pay fee:
As mentioned earlier, Shop Pay only works with Shopify Payments, which means that every credit card fee charged on every order is the SAME as Shopify Payment.
Shopify Payments is the most cost-effective option because it eliminates the need for a third-party provider.
- For transaction fees: Shopify charges a fee of 2.15% to 2.9% + $0.30 (based on the currency) per transaction for all online purchases depending on your Shopify plan.
- The basic plan costs $29 per month, with an additional 2.9% + 30¢ per online transaction.
- The main Shopify plan costs $79 per month, with an additional 2.6% + 30¢ per transaction.
- Advanced Shopify costs $299 per month with an additional 2.4% + 30¢ per transaction.
- Shopify Plus, the most comprehensive of the four plans, costs $2000 per month with a 2.15% + 30¢ per transaction.
- For physical purchases: the fee is 2.7% per transaction.
>>> Curious more about Shopify vs. Shopify plus
- Inside the US: PayPal charges 2.9% of the transaction amount plus a US$ 0.30 flat fee (based on the currency).
For example, a payment of $50 USD will incur a $1.75 USD processing fee ($1.45 + $0.30). This means that, in the end, your payout will be $48.25 for the transaction.
- Outside of the US: PayPal charges 4.4% of the transaction plus a fixed fee (based on the currency).
But with Shop Pay, you’re only charged 3% of the transaction amount plus a fixed fee (based on the currency).
In general, using the Shop Pay checkout solution from Shopify is the better option for your budget as it will help your business save 0.5% to 2% in transaction fees compared to using PayPal.
3. Payout Schedule
On average, Shop Pay processing time is relatively quick compared to other payment methods – only 3 business days for US accounts. This is much more efficient than PayPal, which requires a 5-7 business day waiting period.
4. Dispute a purchase
No exception to any payment method, Shop Pay is committed to preventing fraud and protecting customers, too. Their review process usually takes 65-75 days after a transaction. In some cases, the review may take longer than 75 days.
Moreover, you need to be careful of the chargeback rules and fees – each chargeback will cost you $15. If a dispute is raised repeatedly, your store and money may be locked indefinitely.
Just like Shop Pay, PayPal also has strict rules for the protection and prevention of fraud. If any claim or dispute arises, you can prove your innocence and provide evidence within 10 days until then, and your fund will be placed on hold.
PayPal can take up to 75 days to resolve an issue between the merchant and the customer. The amount of money will also be charged considering its chargeback fees of $20. Like with Shopify Pay, recurring disputes can lead to PayPal locking your account once and forever.
In general, Shop Pay and PayPal need a long process of up to 75 days to resolve the dispute. However, with Shop Pay, the chargeback fee is only $15 compared to PayPal, which is $20. This can add up quickly, especially if you also have to cover the costs of shipping, documentation, and transaction fees.
5. Round-the-clock heroic support
Both Shop Pay and Paypal pride themselves on offering high levels of customer support. With efficient teams working around the clock, you can expect a response to your inquiry within 24 business hours. Not to mention, both companies work quickly to resolve any issues you may have encountered.
Having a platform with excellent customer support is vital for any business owner. You’ll be glad for the support when something goes awry on the operational side. Besides, it will also allow you to respond to customers quickly, giving your business the ability to provide outstanding customer service.
6. Safety and security
Shop Pay protects customer information using end-to-end encryption and stores it on its certified Level I PCI DSS-compliant servers. Shop Pay is also SOC 2 Type II and SOC 3 compliant and GDPR and CCPA compliant, meaning it meets and exceeds industry standards for data security.
If you’re looking for another payment processor to help you meet PCI compliance requirements, look no further than Paypal.
Whether you use PayPal for business or personal transactions, they help keep you and your payments safe. With data encryption, real-time transaction monitoring, and buyer and seller protection policies, you can rest assured that your payments are in good hands.
>>> Check more articles from our Shopify comparison series!
How to integrate PayPal into Shopify?
All in all, it’s apparent that Shop Pay and PayPal are both beneficial online payment methods for eCommerce businesses.
By using Shop Pay and PayPal together, you’ll provide your customers with various convenient payment options. Offering your customers a choice between ShopPay and PayPal will make them feel comfortable. And whatever comes will come, your potential customers are likely to invest in your store.
So, if you’re considering connecting your Shopify account to PayPal, you may wonder how to do so.
To accept PayPal payments, you’ll need to set up a PayPal Business Account using the same email address as your Shopify account. Once you have a PayPal Business Account, you can connect it to your Shopify account and start accepting PayPal payments!
This process may seem complex, but our guide will walk you through it so that you can do it in just 5-10 minutes.
Here is how to do it:
- Step 1: First, you will need to log in to your Shopify admin, Then go to “Settings” > “Payments.”
- Step 2: Under the “Supported payment methods” section, you will see PayPal.
- Step 3: Click on “Activate PayPal.”
- Step 4: Click on “Active PayPal Express checkout.”
- Step 5: Now, you will be directed to a new tab Paypal. Simply enter your PayPal account’s email address, and click on “Next.”
- Step 6: Enter the password for your PayPal account, and then click on “Log In”
- Step 7: On the PayPal permissions page, click on “I Give Permission.”
- Step 8: Now, on the PayPal confirmation page, click on “Go back to Shopify.”
- Step 9: Finally, don’t forget to make a test transaction to ensure that everything is set up correctly.
Congrats! You have completely connected Paypal to your Shopify store. It’s so easy, right?
FAQs about Shop Pay vs. PayPal
- What is Shop Pay on Shopify?
Shop Pay is a faster and more secure way to check your favorite sites. When you use Shop Pay, your payment information is stored on a secure server, so you can check out without having to re-enter your credit card information every time. Plus, Shop Pay is accepted at millions of online stores, so you can use it almost anywhere.
- Can I use Shop Pay without a Shopify store?
Absolutely NO! Shop Pay needs a Shopify store and Shopify Payment to be active.
- Is Shop Pay the same as PayPal?
Shop Pay can be a more cost-effective option than PayPal, depending on your budget. PayPal charges a flat fee of 2.9% of the transaction amount plus US$0.30 per transaction. With Shop Pay, you’ll pay credit card fees for each transaction as a percentage of your plan: 2.4% to 2.9% plus 30 cents.
However, if you are a Shopify Plus store owner, you only need to pay 2.15% + 30¢ per transaction.
Besides, as a certified Shopify partner, BssCommerce specializes in helping large eCommerce brands design and develop integrated eCommerce solutions on Shopify Plus. So if you’re looking for Shopify Plus store design and development experts, get in touch with us now.
- Is Shop Pay or Paypal better?
Sadly, there is no clear response to this query. Shop Pay is a unique checkout option offered by Shopify that is similar to PayPal in terms of speed.
However, one key difference is that Shop Pay can store credit card information, which PayPal cannot do. Therefore, you can offer both options to your customers so they can choose which one they prefer.
The bottom line…
Shop Pay is a newer option on the market, but it has quickly become a popular choice for many online shoppers. One of the main reasons for this is its ease of use. Shop Pay is designed to be as user-friendly as possible and integrates seamlessly with many popular online stores.
PayPal, on the other hand, has been around for longer and is a more established payment processor. It’s accepted by more online retailers than ShopPay, but it can be more complicated to use.
We hope you enjoyed this article about the Shop Pay vs. PayPal debate. The two payment services are very similar in some ways, but they also have some key differences that may make one more useful to you than the other.
Ultimately, it’s up to you to decide which payment service is best for your business, but we hope this comparison has helped you to make an informed decision.
If you have any further questions about Shop Pay and PayPal, please contact us anytime at Bsscommerce. Thank you for reading!