What Is Shop Pay & How Does It Work? (Is It Like Afterpay?)

Looking for more information about Shop Pay?

You may be wondering if it's worth adding to your ecommerce store and whether it can boost your conversions.

And you might be curious if it's anything like Afterpay.

In this article, we'll answer both of those questions and more! We'll go over what Shop Pay is, how it works, its pros and cons, its requirements, and how it compares to Afterpay. We'll also present some alternatives to consider!

While there is already a significant amount of information available about Shop Pay, it remains a bit mysterious for many ecommerce businesses.

Our aim is to provide some clarity with this article. To start, let's discuss what exactly Shop Pay is!

Tip: Have you already created your Shopify account? If not, sign up by clicking this link here to get a free 3-day trial + pay $1/month for the first 3 months!

What is Shop Pay?

Shop Pay is an online checkout service developed by Shopify that allows customers to save their email addresses, credit card information, and shipping and billing addresses so they can fill out the checkout fields automatically on their next purchase.

This means, as a seller, you can expect to see more repeat purchases from customers, as the streamlined checkout process enables faster payment processing, thanks to Shop Pay.

Since its inception in 2017, Shop Pay has exploded in its popularity.

Even Google Trends demonstrates this:

As you can see, it has been on the rise since its launch.

To be honest, we don't find the huge popularity of Shop Pay surprising because it solves a big problem that ecommerce business owners face: a slow checkout process.

Shop Pay's primary goal is to solve this issue. Its best-selling features include:

• Fast checkout process (reportedly four times faster, according to Shopify)
• Increased conversion rates resulting from swift checkouts
• Easy order tracking for customers via the Shop app

And you know what's cool? The financial solutions team at Shopify even did a study comparing Shopify merchants using regular checkouts versus Shop Pay.

The results of the study completely proved the effectiveness of Shop Pay:

Stores that used Shop Pay experienced nearly double the conversion rates compared to those using regular checkouts.

If you ask us, that's just nothing short of impressive.

How does Shop Pay work?

Now that you have a clear understanding of what Shop Pay is, let's understand how it works.

The question, 'How Shop Pay works,' is quite simple to answer. Here's a step-by-step breakdown:

1. When a customer proceeds to the checkout, they'll first see this 'Shop Pay' button (if it's available for the store.)

2. If the customer wants to use Shop Pay, they simply need to click on the 'Shop Pay' button and will be prompted to log in or sign up.

3. To sign up, the customer needs to fill in these details:

• Email
• Phone number (and SMS confirmation)
• Delivery details
• Shipping method
• Payment details

4. Once the customer signs up for Shop Pay, their details will be saved for fast checkout in the future.

5. If the customer doesn't want to create an account for Shop Pay, they can add their mobile phone number to enable faster checkouts.

And the saved information is not exclusive to your store alone; it's saved for any store that uses Shop Pay.

In a nutshell, that sums up how Shop Pay works from the customer's perspective!

According to Shopify, 43% of buyers already use Shop Pay, which is an impressive statistic every ecommerce owner should consider if they are contemplating activating Shop Pay for their store.

Important note: Before we dive more deeply into the features of Shop Pay, it's good to know that Shop Pay only works with Shopify and Shopify Plus plans. If you are using a different ecommerce platform like BigCommerce, you'll either need to switch to Shopify, or you won't be able to activate Shop Pay for your online store.

You can also use Shop Pay with third-party payment providers on Instagram, Facebook, and Google Shops, and within the Shop app if you have an existing Shopify subscription.

Since Shop Pay is not available on ecommerce platforms other than Shopify, we have listed some alternatives for Shop Pay in the 'Shop Pay alternatives' section below!

The pros and cons of Shop Pay

Now that we've covered the basics of how Shop Pay works, let's look at the pros and cons of the platform.

We will also highlight some key features of Shop Pay here, so be sure to read through them!

The pros

Let's start with the pros!

1. Speeds up the checkout process

It's a fact that the easier the checkout process is for customers, the better it will convert.

According to Shopify, Shop Pay makes the checkout process four times faster, which is quite impressive.

This speed is achieved by having customers submit their payment information only once, which allows Shop Pay to recognize their profile for future use.

Plus, customers can see any of their past orders from the Shop app if they want to look them up in the future.

2. Secure checkout system for both merchant and customer

For merchants concerned about security, know that Shop Pay offers a safe and secure checkout experience for both customers and merchants.

This is what Shopify states about Shop Pay's safety: 'Shop Pay is safe and secure. Your customer’s information is encrypted and securely stored on Shopify’s PCI-compliant servers. And, the SMS verification codes ensure that only the account owner can check out using Shop Pay.'

So, Shopify's PCI-compliant servers keep your customer's information safe.

And when the customer checks out, they'll have to fill in a six-digit SMS verification code to complete their payment. In addition, SMS verification ensures that only the account owner can complete a transaction using Shop Pay.

In a nutshell, Shop Pay's safety will not be a problem!

3. Customer can spread their purchase into multiple payments

The 'buy now, pay later' model is becoming increasingly popular among ecommerce stores.

And the good news for merchants is that they can activate the 'buy now, pay later' model with Shop Pay.

It's known as 'Shop Pay Installments' on Shop Pay.

When you activate Shop Pay Installments, your customers can:

• Pay in four interest-free payments every two weeks
• Pay monthly payments for up to 12 months

As you can see from the image, customers can split the purchases for both small and big orders (when the total order amount is between 50 USD and 17,500 USD.)

And you know what's cool? Once you add the Shop Pay Installments to your online store, you'll be able to add tabs like this to your product pages:

This can significantly boost your conversions, as not all customers are ready to pay the full amount right away.

To manage split payments, customers can install the Shop app (we will discuss its features shortly).

4. Marketing automation tools for better conversions

One of the most interesting features for merchants is Shop Pay's marketing automation tools.

You can add marketing automation messages before, during, and after the customer goes through a transaction process.

Examples include:

• Notifications of trending products
• New product arrival messages
• Post-purchase offers for customers
• Tracking info notifications with product recommendations
• New product deals

These marketing automation tools open new doors for Shopify merchants like you to customize their checkout experience.

5. Available mobile app for buyers (Shop app)

The Shop app, Shopify's mobile application, is closely connected to Shop Pay.

How exactly?

When customers place orders, and Shop Pay is active in your store, they can conveniently track their orders within the Shop app.

Shopify encourages customers to download the Shop app by providing a 'Download Shop app' button on the merchant's order status page.

You can turn this on and off from your Shopify settings:

Not only can customers track their orders from the Shop app, but they can also contact the seller from there.

6. Using Shop Pay gets your products listed in the Shop app

Do you know the significance of activating Shop Pay for your store?

Once activated, Shopify will automatically start showing personalized product recommendations from your store in the Shop app.

And what's best about that is it doesn't cost you anything!

This also highlights the need for sellers to manage their Shop app presence, including controlling which products Shopify showcases to potential customers.

To assist sellers with this, Shopify has developed an app called Shop Channel.

While the app is not directly related to Shop Pay, it allows you, as the seller, to optimize your Shop app presence effectively.

And, if you just got started with Shop Pay, you can see the status of various things from the Shop channel app's settings, such as whether Shop Pay is active in your store.

7. Shopify app for managing customer messages

As mentioned earlier, Shop Pay customers can contact online stores through the Shop app.

So, you might wonder, where do the customer messages go?

To solve that, Shopify has created an app called Shopify Inbox, where merchants can respond to customer messages.

This app enables merchants to respond to customer messages received via the Shop app. For that reason, it's critical to you as a seller to have Shopify Inbox installed.

The app is free for all Shopify users, so you shouldn't worry about the cost.

Once installed, it will appear on your Shopify admin dashboard:

Note: As a merchant, you can turn the inbox feature off, so customers can't send messages from the Shop app. It's up to you if you want to use it! For more information, download the 'Shop channel' app and head to the settings of the 'Shop chat' section.

The cons

Now let's look at the cons of Shop Pay, despite its numerous benefits for merchants.

1. Limited to Shopify users

As mentioned, Shop Pay is exclusively available for Shopify users with a basic plan or above.

If you use another ecommerce platform, like BigCommerce, you can't use Shop Pay. If that's the case, you should consider alternative solutions that we will discuss soon.

2. Not available for all Shopify users

Before you get too excited about adding Shop Pay to your brand-new Shopify store, it's important to understand its requirements.

To enable Shop Pay, your store must meet the following criteria:

• Compliance with Shopify's Acceptable Use Policy
• An active Shopify Payments account
• A subscription to Shopify's basic plan or a higher-tier plan
• A chargeback rate of under 1% in the past six months

While most of these requirements can be easily met, having an active Shopify Payments account can be a dealbreaker for some store owners.

That is because Shopify Payments is not available in all countries. Currently, Shopify Payments supports transactions in only 23 countries.

Shop Pay Pricing

Now, you may be wondering, if Shop Pay is free, then what do I need to pay for?

While Shop Pay itself is free to use, you need to have Shopify Payments enabled and an active subscription with Shopify to get access to Shop Pay.

You may be curious about the costs involved. Let's take a closer look at them:

1. Shopify Payments. The good news is that Shopify Payments is free to use. You only have to deal with Shopify's transaction and payment processing fees, which are minimal. If you want to learn more about them, check out our definitive guide on Shopify Payments.
2. Shopify subscription. You must have an active subscription to one of Shopify's three basic plans: Basic, Shopify, or Advanced. The enterprise plan, Shopify Plus, also grants you access to it. If you want to learn more about what pricing plan is right for you, check out our guide on Shopify's pricing.

So, while Shop Pay is free, consider these two costs.

Shop Pay vs. Afterpay: What's the difference?

While both Shop Pay and Afterpay offer a 'buy now, pay later' model for merchants, there are several significant differences between the two platforms.

The main distinctions include the following:

1. Availability. Shop Pay is specifically designed for ecommerce stores using the Shopify platform, while Afterpay is more widely available across various ecommerce platforms.
2. Cost of use. Shop Pay and Afterpay both charge fees to merchants, although the specific fee structures vary depending on the platform. However, for customers, there are no fees on either of the platforms unless they fail to make timely payments.
3. Effectiveness. Shop Pay's checkout process is much more streamlined, and customers only have to log in with their login details. With Afterpay, customers have to select a payment method every time they make a purchase.

These are the main differences. Overall, we feel like Shop Pay is the better solution for anyone using Shopify.

But if you have an online store built with another ecommerce platform like WooCommerce, you should consider Afterpay.

How to get started with Shop Pay?

Are you ready to get started with Shop Pay? This is an exciting part!

We will go through how you can install Shop Pay in your online store.

Let's begin!

1. Sign up for Shopify

The first step in getting started with Shop Pay is to create an account on Shopify.

We have made an in-depth tutorial on how to start a Shopify store, so check that if you want a more comprehensive look at that.

Head to Shopify's homepage and click on one of the 'Start free trial' buttons.

On the signup, Shopify asks you some simple questions, so they can tailor the store creation process better for you:

This process shouldn't take more than five minutes, as you can skip most of the steps and even avoid adding your credit card details.

After this, you will have access to the Shopify admin dashboard and be one step closer to enabling Shop Pay for your store.

2. Activate Shop Pay from the settings

Now that you have access to the Shopify admin dashboard, you can go ahead and activate Shop Pay.

To do that, navigate to 'Settings' from the left sidebar:

Next, click on the 'Payments' settings:

To use Shop Pay, you need to activate Shopify Payments by clicking 'Activate Shopify Payments.'

Shopify asks you to fill in information about your business, such as an address, postal code, and whether it's registered.

The business details you provide here must be the same as in any business registration documentation you have previously filled in.

Then secure your account with a two-step authentication system.

Next, click on 'Manage' in the 'Shopify Payments' section:

If you scroll down a bit, you will see the Shop Pay listed. It should be activated by default; if not, click and activate it.

Once you click on it and save, you will have Shop Pay activated on your Shopify store.

You'll still need to provide additional information to Shopify before you can actually use Shop Pay, which we will go through in the next step.

3. Provide additional information to Shopify

Shopify requires additional details to verify your identity before you can start accepting payments with Shop Pay.

So, how can you prove your identity to Shopify?

If you click on the bell icon on the top right corner of the Shopify dashboard, you should see this alert:

As you can see, the alert talks about Shopify Payments. However, you need to enable it for Shop Pay to function.

So, click on the alert to see this tab open.

To use Shopify Payments and activate Shop Pay, you must submit your driver's license, passport, or another form of government-issued identification.

Shopify wants to know these details to ensure there is a real person accepting the payment and that the customers' information will be kept safe.

You must also verify the address you entered during the previous step.

After this, just by clicking on 'Submit,' Shopify will review the information you provided and get back to you as soon as possible with the answer if everything is correct.

Once you get accepted, you are ready to use Shop Pay!

4. Install 'Shop channel' to Shopify

To fully control different elements of Shop Pay, you should install the 'Shop channel' app to your Shopify.

This step is not necessary, but we still recommend it so you can access Shop Pay settings, customize your store, and list it on the Shop app.

Head into the home page, and click on the search bar:

Select ' Sales channels ' from the search bar, type in 'Shop channel,' and click on 'Search for.'

You should see the 'Shop channel' appear as the first option (or close to the first).

Click on it, and once you're on the app page, click 'Add app' and go through the app's installation process.

While not necessary, you can design your Shop store presence during the installment process.

You can also skip this step at this point.

Next, Shopify tells you what's required to sell your products on the Shop app.

These are basically the same requirements as there are for Shop Pay.

Once you click on 'Continue,' you can access the Shop channel dashboard.

FAQs of Shop Pay

Now that you understand what Shop Pay is let's go through several frequently asked questions.

3 Shop Pay alternatives

Now that you know more about Shop Pay and what it has to offer, let's discuss a few of its alternatives.

Let's start!

1. Stripe

The most popular alternative to Shop Pay is Stripe.

Stripe is a platform for businesses to process online payments and credit cards. Once you add it to your online store, your customers can easily make purchases with it using various payment methods.

Just like with Shop Pay, you can enable the buy now, pay later model for your online store using Stripe. This allows your customers to pay for their purchases over time.

Tip: For more information about using Stripe, check out our dropshipping with Stripe guide here!

2. Afterpay

Afterpay is a payment platform that allows online shoppers to pay for their purchases over time. For example, shoppers can pay for their purchases in four different payments.

As long as the shopper pays on time, Afterpay doesn't charge any interest from online shoppers. However, it has fees for merchants that offer it, but they're quite minimal compared to how much it can impact the conversion rates.

Unlike Shop Pay, Afterpay integrates with all major ecommerce platforms, including Shopify, BigCommerce, and Wix.

Tip: For more information about using Afterpay, check out our how to add Afterpay to Shopify guide!

3. Klarna

Like Shop Pay and Afterpay, Klarna offers businesses a buy-now-pay-later payment model to increase conversion rates.

For example, you can enable a payment model of 'Pay in four' or 'Pay in 30 days,' giving your customers more flexibility to shop.

According to Klarna, businesses that use their service have seen a 41% increase in average order value, which is quite significant.

Klarna is available as a checkout solution on all major ecommerce platforms, whereas Shop Pay is exclusively designed for Shopify.

Taking action

Reading and absorbing information and knowledge is great (definitely if it’s free!), but do you know what’s even better?

Taking action!

So, to help you with taking action with what you have learned in this article, take a look at the bullet points:

• Before adding Shop Pay, consider your own situation. Are you a brand new store owner, or do you already have a consistent sales flow? If you don't have any sales, we recommend you get consistent sales flowing in before adding Shop Pay, but if you already have consistent sales, we recommend Shop Pay for that extra conversion boost.
• Before adding Shop Pay to your store, compare it to its alternatives. We've listed them in the alternatives section of this article, so be sure to check them out!
• Check if you can apply for Shop Pay. If you're not sure, scroll up to the section titled 'Not available for all Shopify users' and verify if you meet all the requirements stated for Shop App.
• Look into our tutorial and add Shop Pay to your online store. We went through the process of adding it to your Shopify store, so check it out if you want to add Shop Pay.

If you just want to get yourself familiar with Shop Pay, we recommend you download the Shop app to your phone, so you can understand its capabilities better.

Conclusion

That's it!

The most impressive thing about Shop Pay is the large increase in conversions that other ecommerce stores experienced when they started using it.

And that Shopify even proved it with a study.

However, the main drawback is that Shop Pay is currently unavailable in all countries and exclusively limited to the Shopify platform.

If you have any questions about Shop Pay, remember that Shopify has 24/7 customer support, where you can ask any questions about it. Or you can always leave us questions down below.

Good luck!

Want to learn more about ecommerce?

Ready to move your online store to the next level? Check out the articles below:

• 9 Checkout Examples From Ecommerce Stores | Inspiration
• 6 Ecommerce Business Model Types: Explained and Compared
• The 7 Best Payment Gateways for Dropshipping Stores in 2024