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Shop Pay vs. PayPal: Which One is Better for Your Business?
Updated:
15
minutes read
Your store’s payment options impact the customer experience and conversions.
Different customers may have different preferences about how they’d like to pay for their orders. However, as a store owner, you also need to see which payment provider is better for your business.
One of the best things about selling with Shopify is that you get many payment options to offer to your customers. However, you might also find it hard to decide which to use.
In this blog post, we’ll walk you through a detailed comparison of two of the most popular express checkout solutions on Shopify — Shop Pay vs PayPal.
Overview of Shop Pay and PayPal
First off, let’s briefly cover the basics.
What is Shop Pay?
Shop Pay is a payment solution that helps customers with a seamless and faster checkout experience on Shopify stores. It lets customers securely save their email, billing, and payment information for future checkouts on any Shopify store.
Thus, customers who have already opted in to Shop Pay through a Shopify store in the past can autofill the information. It helps them save a significant amount of time to complete their checkout.
What is PayPal?
PayPal is an online payment processor that enables merchants and customers to make secure payment transactions. Many customers prefer to use PayPal during online shopping because it allows them to make a payment without sharing their credit card or bank information with the online store or website.
In the context of Shopify, PayPal is one of the default payment providers. When you sign up for a Shopify store, you get a PayPal Express Checkout account linked to your email address used for the signup. However, you do need to activate your PayPal account before you start collecting payments for any orders placed through PayPay by your customers.
Learn more: Shopify Payments vs. Paypal: What's Best for You in 2023?
Shop Pay vs PayPal: What is The Main Difference?
Shop Pay is designed exclusively for Shopify stores, providing a seamless checkout experience. PayPal is a versatile third-party payment app accepted on various platforms, enabling secure money transfers and online purchases.
Here are some crucial factors to keep in mind:
|
Key Points |
Shop Pay |
PayPal |
|
Service Functionality |
Customers can securely save their email, shipping, billing, and payment details for faster checkouts on Shopify stores. |
Customers can pay from their PayPal account or via credit or debit card without sharing those payment details with the merchant. |
|
Number of Users |
60 million |
435 million |
|
Eligibility & Requirements |
|
|
|
Transaction Fees |
Enabling Shop Pay does not cost additional fees; however, it has the same transaction fees for credit card payments as Shopify Payments. Also, if you’re offering Shop Pay Installments, you need to pay a 5-6% fee for each transaction. |
Depends on the region. In the US, it's 2.9% of the transaction + a flat fee of $0.30 USD. Outside of the US, 4.4% of the transaction + a fixed fee depending on the currency. |
|
Safety & Security |
Yes—it’s completely safe. |
Yes—it’s completely safe. |
|
Customer Experience |
Seamless and faster checkout experience. |
A slightly lesser smooth customer experience but not a deal-breaker. |
|
Installment Payments Service |
Yes—Shop Pay Installments allows customers to pay with installment payments. |
Yes—PayPal has also introduced its “Buy now, pay later” service recently. |
|
Dispute Resolution Process |
Once a dispute is raised, the merchant and the customer have 15-calendar days to share evidence for the claim. |
Once a dispute is raised, the merchant and the customer have 20 days to come up with a resolution. |
|
Merchant Support |
Excellent |
Good |
|
Payout for Merchants |
3 business days |
5-7 business days |
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Detailed Comparison of Shop Pay vs PayPal
Now, let’s walk you through all these key points in a detailed manner. This will help you get more precise insights into the key differences between Shop Pay and PayPal.
Service Functionality
How Does Shop Pay Work?
When a customer goes to your Shopify store’s checkout page, the customer has two options: Express checkout and Manual checkout by inserting all the details (contact info, shipping, and payment details).
If you’ve enabled Shop Pay on your store, the customer can see the Shop Pay payment option under Express checkout. When clicking on the Shop Pay button, if the customer has never used it before, it’ll ask them to sign up using their email and phone number. Then, the customer can insert the credit card details, save it with Shop Pay, and complete the checkout.
Here's an example taken from one of the biggest Shopify brands that uses Shop Pay. Olaplex is an independent and popular hair care brand globally.
Once signed up with Shop Pay, whenever the customers need to buy anything from any Shopify store, they just need to enter the email address and insert an SMS verification code to complete the checkout—no need to insert all the shipping and payment details again.
Learn more: Shop Pay vs Afterpay: A Side-by-side Comparison of Features and Functionality
How Does PayPal Work?
When you have enabled PayPal on your Shopify store, PayPal’s payment option appears in the Express checkout options. By clicking on the Paypal option, the customer will be redirected to PayPal’s checkout page.
If the customer already has a PayPal account, they can just fill in their email or mobile number and password to log in and complete the payment. If not, the customer needs to sign up and create a PayPal account first.
Customers can also pay via their debit or credit card using the ‘PayPal Guest Checkout’ option. By doing this, the customer can complete the payment through a debit or credit card without sharing any of its detail with the merchant.
Number of Users:
Shop Pay Active Users:
According to Shopify, Shop Pay has 60 million users that are highly active and engaged with the brand. This means that there are already millions of customers who’re paying for their orders via Shop Pay.
PayPal Active Users:
Without a doubt, PayPal is one of the most widely-used payment solutions across the world. According to Statista, as of the 4th quarter of 2022, PayPal has around 435 million active users.
Eligibility and Requirements
Shop Pay Eligibility Criteria
To enable Shop Pay on your store, you need to have Shopify Payments. All merchants with Shopify Payments get Shop Pay in their payment settings automatically.
However, Shopify Payments is supported in certain countries only.
You can also activate Shop Pay for third-party gateways if your online store is in the United States and meet all the Shopify Payments requirements.
Overall, this makes Shop Pay limited to certain merchants in a very limited number of countries.
PayPal Eligibility Criteria
As mentioned, all Shopify store owners get a PayPal Express Checkout account by default. And the best thing about PayPal is that it’s available in more than 200 countries/regions.
Check out the complete list of counties/regions supported by PayPal.
Thus, if we look at all Shopify merchants globally, PayPal is relatively more accessible to most countries.
Transaction Fees
Shop Pay Transaction Fees
Enabling Shop Pay does not cost you any additional fees. However, it is essential to note that Shop Pay has the same transaction fees for credit card payments as Shopify Payments because it uses the same payment processor. These fees vary depending on your Shopify plan.
When using Shopify Payments, you won’t be charged third-party transaction fees for any orders processed through Shop Pay.
General details about the standard rates of Shopify Payments can be found in the Shopify Payments setting.
Important note: When customers use Shop Pay Installments, you (store owners) will be required to pay a 5-6% fee on each transaction.
PayPal Transaction Fees
PayPal’s transaction fees depend on where you’re selling. For US sales, there is a 2.9% transaction fee plus a $0.30 USD flat fee. For international sales, there is a 4.4% transaction fee plus a fixed fee based on the currency.
Safety and Security
Is Shop Pay Safe?
Yes, absolutely. Shop Pay is a secure payment method for you and your customers.
Shopify pays serious attention to the safety and security measures for its platform. Here are a couple of key aspects that make Shop Pay safe:
- Shopify’s PCI-Compliance:
Shopify is Level 1 PCI DSS compliant. PCI DSS stands for the Payment Card Industry Data Security Standard—a security standard for companies that deal with customers’ credit and debit card information.
All Shopify stores are automatically PCI-compliant, by default. As a result, when your customers opt-in to save their payment information, it is encrypted and stored securely on Shopify’s PCI-compliant servers.
- SMS Verification:
Customers are required to provide SMS verification codes before completing the payment, which ensures that only the account holder is making the payment via Shop Pay.
Is PayPal Safe?
Yes, PayPal is completely safe and secure for you and your customers.
PayPal has been around for more than two decades. And it’s widely used around the world mainly because of the safety and security it provides to the sender as well as the receiver of the money.
Key takeaway: In a nutshell, both of these payment options are safe and secure.
Customer Experience
Shop Pay’s Faster and High-Converting Checkout Experience
Shop Pay is considered to be one of the fastest and best-converting checkout experiences. It increases the checkout speed by 4 times as compared to regular checkouts.
In a study of the 10,000 largest Shopify stores with Shop Pay activated, Shopify found that stores using Shop Pay have an average checkout-to-order rate 1.72 times higher than those with regular checkouts.
On mobile, Shopify stores with Shop Pay have a 1.91 times higher conversion as compared to regular checkouts. This shows that Shop Pay provides a seamless experience to customers and helps store owners with higher conversion rates.
PayPal’s Customer Experience
With PayPal, the customer experience is somewhat different than Shop Pay. When customers go for the PayPal option, it redirects them to their website. And then, customers can complete the purchase with their PayPal account or with a debit or credit card.
Overall, it’s a slightly lesser smooth customer experience, but it’s certainly not a deal-breaker.
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Installment Payments Service
Shop Pay Installments
One of the great advantages of Shop Pay is its installment payment service. Shop Pay Installments enables customers to make payments in installments.
Shop Pay Installments lets you offer a “Buy now, Pay later” option to your customers.
Customers have two different options at checkout:
- Customers can pay 4 bi-weekly interest-free payments for any orders that range from US$ 50 to US$ 999.99.
- Customers can also make monthly payments for any orders ranging from US$150 to US$ 17,500. But keep in mind that monthly installments are interest-bearing with 10 to 36% APR (Annual Percentage Rate). Customers can make installment payments in the 3, 6, or 12 months based on the purchase amount.
PayPal’s “Buy Now, Pay Later” Service
PayPal has recently introduced its “Buy now, pay later” service. The installment payment options are somewhat similar to Shop Pay Installments. Customers can either choose to pay 4 interest-free payments (bi-weekly) or pay monthly with 6, 12, or 24 payments.
Here are the details of the different options provided by PayPal:
PayPal’s “Buy now, pay later” payment options
Dispute Resolution Process
Shop Pay Dispute Resolution Process
For any issues with a purchase, if the customer is not able to get a resolution from you (the store owner), Affirm, which is powering Shop Pay, can open a dispute on the customer's behalf.
To open a dispute, the purchase must be made in the past 60 days. You and your customer have 15 calendar days to share evidence that supports your claim regarding the dispute after that point.
After reviewing the evidence from both parties, Affirm will notify you and your customer about the decision within 15 calendar days (or up to 90 calendar days in case of virtual card transactions).
PayPal Dispute Resolution Process
If a customer doesn't receive a product after paying for it or if the item is significantly different from the given description, the customer may open a dispute. In case of such a dispute, PayPal notifies the merchant and places a temporary hold on the funds involved in the transaction.
Then, you can review the dispute and reply to it with your explanation as to what happened and share your suggestions for dispute resolution. You and your customer are given 20 days to figure out a resolution.
If the dispute cannot be resolved, you or your customer can escalate the dispute to a claim and PayPal will investigate the issue and make the final decision.
Merchant Support
Shopify’s Excellent Merchant Support
For any issues related to Shop Pay, merchants can contact the Shopify support team. Shopify offers an excellent merchant support with 24/7 live chat and other support options such as email, social media, and community.
PayPal’s Merchant Support
On the other hand, PayPal Support is good; however, Shopify is better. If you want to reach out to the PayPal support team, you can send a message but you will need to wait a few hours for the response from their support team expectedly. Meanwhile, you can still get in touch with other support options such as the community and social media.
Payout for Merchants
Here comes the most interesting part of the process for any Shopify merchant.
Shop Pay’s Payout Schedule
Shop Pay's payout schedule is quicker than PayPal's; typically, it may take only about three business days.
PayPal’s Payout Schedule
Usually, the transfer from PayPal may take 5-7 business days to be credited to your bank account.
Final Thoughts on Shop Pay vs PayPal: Which One Should You Choose for Your Business?
Choosing the right payment providers is crucial. But remember — you don't need to think about what's "your preference" and what's beneficial to you. It would be best to think about "what are your customers' preferences" and what is exceptionally helpful for them.
If most of your customers prefer to pay only via PayPal and you don't offer that option, you might lose business from those customers. Thus, provide some options to your customers so that they can choose based on what they prefer.
Lastly, our final recommendation would be to offer both options - Shop Pay and PayPal - on your store.
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FAQs about Shop Pay vs PayPal
Is Shop Pay better than PayPal?
Shop Pay is relatively better than PayPal when it comes to speed and checkout experience. Also, Shop Pay has lesser fees than PayPal. However, if you consider the wider availability, PayPal is available for merchants in more countries than Shop Pay.
Is Shop Pay like PayPal?
Shop Pay and PayPal differ. Shop Pay is tailored for Shopify users, offering a seamless checkout experience within the Shopify ecosystem, with lower transaction fees. On the other hand, PayPal is a more versatile option accepted on various platforms, including Shopify. So, Shop Pay is more Shopify-centric, while PayPal offers broader usability.
Is Shop Pay safe to use?
Yes, Shop Pay is completely safe to use. When customers opt-in to save their payment information, it is encrypted and stored securely on Shopify’s PCI-compliant servers. On top of that, customers are required to provide SMS verification codes before completing the payment.
Is Shop Pay free?
Using Shop Pay does not cost you any additional fees; however, Shop Pay has the same transaction fees for credit card payments as Shopify Payments because it uses the same payment processor. These fees vary depending on your Shopify plan.
Is PayPal trusted or not?
Yes! PayPal is one of the most trusted payment solutions in the world which has been used for more than two decades.
Is it free to use PayPal?
Creating a PayPal account is free but you incur transaction fees when customers use PayPal to purchase anything from your store.
