What Is Shop Pay And Should You Use It In Your Business?
Did you know that the shopping cart abandonment rate across industries is up to 69.80%? Take one guess where most shopping carts are abandoned. If you said, “during checkout,” your answer is correct.
No wonder small business owners are constantly looking for ways to streamline and expedite the checkout process. While some of them may be wondering about the benefits of using Shop Pay, others may be weighing the pros of Apple Pay, PayPal, and other similar solutions.
In this article, we’ll take a closer look at Shop Pay and cover what it is, how it works, how it differs from Shopify Payments, and whether it can be a viable solution for small businesses.
Let’s get started.
What Is Shop Pay?
Shop Pay is an eco-friendly payment option that speeds up the checkout process. It saves customer data and billing information for faster checkout. Like PayPal, Shop Pay stores the customer’s credit card information for a quick, one-button checkout.
Shop Pay offers an accelerated checkout experience for small and medium-sized businesses. It works pretty similar to one-touch payment options like Apple Pay, PayPal One Touch, Amazon Pay, and Google Pay. With a few important caveats, of course. Shopify’s own study found that checkouts through Shop Pay have a 1.72X higher order rate than traditional checkouts on its eCommerce platform.
It’s worth noting that Shop Pay used to be known as Shopify Pay, but it is not the same as Shopify Payments. Yes, it’s a head-scratcher. Worry not, we will delve into the details and services offered in just a bit.
How Does Shop Pay Work?
We live in a world where 18% of online shoppers abandon their carts if the checkout is too long or complicated. One-click checkout solutions like Shop Pay can increase conversion rates and reduce cart abandonment.
For customers, setting up a Shop Pay account is pretty intuitive. They simply need to enter their payment information once to save it to the platform. It then offers them one-click checkout across all stores on Shopify. This makes it faster and easier for customers to shop with Shopify merchants.
At checkout, the customer just has to hit the Shop Pay button that surfaces on the page. From there, Shop Pay sends them a code via SMS. The code will autofill if the customer is checking out on mobile, otherwise, the customer will manually enter it.
Once they enter the code, Shop Pay drops them on a checkout page hosted by Shop Pay itself. This page is auto-filled with the shipping and payment details so the customer only needs to hit a confirm button.
Once the transaction is processed, the customer is brought back to the order tracking page hosted by the shop. It’s a fast and completely seamless experience end-to-end and most customers won’t even notice they’ve been sent to a Shop Pay checkout page.
Shop Pay expedites the checkout experience for eCommerce retailers. By offering it as a payment option, you have a good chance of reducing your cart abandonment rates.
Shop Pay comes with built-in security that sends a unique 6-digit code to the customer’s mobile phone number via text. The customer then enters the code from their iOS or Android device on the retailer’s website to verify their identity.
Shop Pay is also working to offset carbon emissions. The Shopify team tracks carbon emissions from each delivery and plants trees to offset them. They’ve pledged to plant 4.6 million trees by the year 2022.
How Does Shop Pay Differ from Shopify Payments?
Remember that we talked about the fact that Shop Pay used to be known as Shopify Pay, but that Shopify Payments is a totally different thing? Let’s break down all three services in a little more detail:
Shopify Payments is a backend payment processor merchants use to take a shopper through the checkout process. Shopify Payments acts as the online payment gateway, facilitating the sale between the payment providers and the merchant. Ultimately, your customers won’t know really know the difference between a Shopify Payments experience and another payment processor’s experience. All they know is that you were able to take their credit card information.
Shopify Pay is the old name for Shop Pay. It was probably shortened to Shop Pay because it sounds so similar to “Shopify Payments.”
Shop Pay is an opt-in payment platform and Shopify app that utilizes Stripe’s technology to process payments. Customers save their credit card information (similar to PayPal or Apple Pay) and verify their identity by entering a code (sent via SMS) to process payments.
Ultimately, Shop Pay is an additional payment experience that you can add on for your customers, rather than backend technology. In fact, you must be using Shopify Payments on the backend in order to enable Shop Pay. Shop Pay allows you to offer customers checkout conveniences like Buy Now, Pay Later and express checkout stored payment and customer information.
There are no additional fees or late fees for the Shop Pay service. Shop Pay is actually the only way that retailers can avoid transaction fees when processing transactions on a Shopify website.
Another benefit for SMBs using Shop Pay? The platform offers installment payment options, which we will delve into in the next section.
Shop Pay Installments with Affirm
Online stores have the option to offer an installment payment option through Shop Pay’s collaboration with Affirm. Customers save their credit or debit card information and email address. Shop Pay then debits their account at a certain time each month until the balance is paid off. It’s an easy way for online stores and small businesses to enable “Buy Now, Pay Later.”
Shop Pay installments are popular because they work without a rigorous credit score check to determine eligibility. There are no transaction fees to add extra cost, either. The installment payments are interest-free, unlike with traditional credit card companies that add on interest until the balance is paid off. Also, unlike traditional credit cards, Shop Pay takes the first payment at checkout and typically payment is only split into four interest-free installments, spread across two months, rather than traditional monthly payments.
Shop Pay installments also have no impact on a customer’s credit score. So, they can utilize the “Buy Now, Pay Later” option without worrying about how it might impact their financial opportunities down the line.
Benefits of Offering Shop Pay at Checkout
There are three major benefits for merchants who utilize Shop Pay at checkout:
1. Buy Now, Pay Later is becoming a very important feature to consumers at checkout. In 2021, 55.8% of shoppers used BNPL functionality at checkout. It’s shifting from being a differentiator for online businesses to an expectation.
2. Express checkout increases customer convenience, decreasing cart abandonment. Shop Pay works through the Shop app or online checkouts. Customers enter their shipping address and payment details just once. Then the Shop Pay button shows up every time that they get to the checkout page of a Shopify store.
3. Shop Pay’s carbon offsetting initiative adds a feel-good element to every customer purchase and allows small businesses to participate in environmentally friendly initiatives even if they don’t have the money to do much.
Shop Pay can help small businesses make products accessible to consumers through its Affirm partnership. It’s one of the ways small business retailers can incentivize customers to follow through with their intended purchase.
In truth, there’s not much of a downside for retailers looking to add Shop Pay. You can offer it alongside other payment methods––giving customers the option to “Buy Now, Pay Later” without impacting their credit score.
Should You Use Shop Pay in Your Business?
There’s really no reason for SMBs not to use Shop Pay in their business. It’s simple and intuitive to use. The single caveat is that customers will need their mobile phones to receive the text code that authenticates their online purchases. However, even that is often a boon. 72.9% of all eCommerce sales now take place on a mobile device and the Shop Pay text code automatically fills when texted to the mobile device the customer is shopping from. Shop Pay’s mobile-first experience is smooth as butter.
Shop Pay’s carbon offsetting initiative is an added incentive for retailers looking to help the planet in creative ways. Retailers that choose to add Shop Pay should make their customers aware of its green initiatives to incentivize purchasing. We also recommend adding delivery options such as rush shipping and free shipping if customers meet purchase minimums. Adding gift cards can also help you increase the average transaction amount.
Small businesses looking to save money on payment processing should check out Payment Depot’s offerings. Payment Depot’s membership-style payment structure helps retailers save an average of $400 a month on credit card processing.
Utilizing Shop Pay and Payment Depot can help you give your customers the best checkout experience––for the best possible price. Contact Payment Depot today to learn how we can help you save hundreds of dollars on credit card payment processing every month.