What is Shop Pay and How Does it Work? (May 2022)

Everything You Need to Know about Shop Pay.

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Shop Pay, owned by Shopify, offers a simple, one-click payment solution for online shoppers to save their payment information for faster checkouts in the future. Not only that, but it provides a way for online merchants to offer another payment method to their customers, and they can sell from multiple platforms like on Facebook, Google, or an online store. The merchant doesn't even need to have a Shopify store. In addition, Shop Pay promotes local businesses, plants trees for all transactions completed, and lets customers split their payments into multiple transactions. So, what is Shop Pay? Keep reading to learn all about it.

What is Shop Pay? The Basics

what is Shop Pay

Shop Pay has two primary functions: it's a wallet for online consumers to save payment details and speed up transactions in the future, but it's also a payment method that merchants can add to their stores, giving customers this option and providing additional benefits.

To use is as a wallet, a customer would download the app, fill in their payment information, then save that on their device to make online checkouts faster. This way, they don't have to take out their credit card, or even type in personal information, every time they want to make a purchase.

Shop Pay stores the following payment information:

  • Mobile phone number
  • Credit card details like the number, expiration date, and CVV code (all encrypted and PCI compliant for security)
  • Billing details like the customer's address
  • Shipping details like the customer address

Overall, Shop Pay is a convenient payment method and checkout solution for online consumers. As long as the merchant allows for Shop Pay payments, customers can take advantage of its benefits. In fact, Shop Pay is available for any online seller, not just those that use the Shopify ecommerce platform; merchants can also accept payments through the payment solution when selling on websites like Facebook and Google.

The accelerated checkout system from Shop Pay ensures that customers can process payments faster. For merchants, it provides the opportunity for more conversions, particularly repeat purchases.

It comes with a bundle of exceptional features to explore. Aside from saving customers heaps of time when they check out, Shop Pay also comes with features like local pickup and delivery options. And all information is safe and private; billing and shipping data stays on Shopify’s PCI ready servers and merchants don’t save any information on their servers, so they're at less risk of issues with compliance regulations.

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How Does Shop Pay Work?

The basic Shop Pay features make for a rather intuitive shopping experience, but there's much more to it. To answer the question of “how does Shop Pay work?” it's best to go over all of its features.

Here are the primary features (for online shoppers) to give you an idea of how it all works:

A Cart Filler

auto fill

The whole point of Shop Pay is to speed up the checkout process for all online customers. Therefore, users only have to type in payment information once; after that, the tool automatically recognizes your profile when visiting a participating online store.

All previously entered billing information is encrypted and saved so that customers only have to click one Buy Now button to fill in a checkout form, eliminating the need to pull out a credit card or even type in your name.

Paying in Full or with Shop Pay Installments

Perhaps one of the most exciting features from Shop Pay is how the customer can choose to either pay in full at the moment of purchase or spread it into multiple payments.

Here's how it works:

  1. The customer picks Shop Pay Installments.
  2. They get to choose to make four equal installments instead of one full payment.
  3. The customer selects a debit or credit card to pay the first payment and future installment payments.
  4. The account walks customers through a brief identity verification process to pay later. Eligibility is more about preventing fraud. They don't check credit scores.
  5. The customer agrees to terms, authorizes the payment through Shop Pay (Affirm handles their installment processing).
  6. For security, the app texts the customer a 6-digit verification code to complete the process.
Shop Pay installments

What about late fees?

Shop Pay installments don't work like a credit card. There are no fees, penalties, or additional charges to break a payment into installments. It's possible to make early payments through the same checkout page but, unlike credit card payments, they don't charge a fee if you miss a payment. However, you may get restricted or banned from Shop Pay installments if you make a partial or late payment.

What Qualifies a Transaction for Shop Pay Installments?

In order to have the option for Shop Pay Installments (where you pay four equal installments instead of one lump sum) the transaction must be between $50 and $3,000 USD. This amount includes taxes, shipping, and discounts.

Transaction Auto Logging for Past Orders and Receipts

logging past orders

Shop Pay logs all past orders. That means online consumers can go back in their history to see the items they've bought, how much it all cost, and where the products came from.

The history module also organizes orders and gives users quick search and filter tools to find things immediately. Not only that, but you can find detailed receipts as well.

Returns and Customer Support with the Click of a Button

Shop Pay is primarily designed to help online shoppers. So, it's not directly connected to any store you visit. However, it recognizes the store you're currently shopping on and links you directly to online resources, FAQs, customer support links, or whatever the merchant provides. You can ask the seller a question with a quick chat, ask for a return, or view a shipping policy from the convenience of the app.

Customized Shopping Recommendations

shopping recommendations from Shop Pay

Online shopping recommendations tend to come with a lot of baggage (like how Google tracks everything you do online then sells stuff to you). That doesn't seem to be the case with Shop Pay. Instead, the tool works with a combination of data, some of which is found by asking you directly (where do you like to shop?) and some of which is pulled from your shopping habits. So it's kind of a hybrid, and Shopify states that they never send spam or maliciously track you in order to push more advertisement.

With this information, the app presents a simple, customized feed made just for you. You'll see recommendations from your favorite shops, deals from related shops, and trending items that you may like as well.

Local Shop Searching with In-Store Pickup and Delivery

Another way to personalize your feed is to use the Shop Local functionality. This essentially allows you to search for local businesses or specify the local businesses you like to shop from. Customers can either buy from the retailer's online store (with delivery) or opt for in-store pickup.

And here are Shop Pay's merchant-specific features:

Marketing Automations to Improve Repurchase Potential

marketing automations

When it comes to the standout features for online merchants, we'd definitely start with the marketing automations. Standard Shopify checkout modules allow for plenty of marketing options, but Shopify Pay makes it even more interesting.

Shop Pay is already active on customer devices (with their payment information saved), so merchants can implement automated marketing messages before, during, and after the transaction.

Some of these marketing automations include:

  • Shipment tracking notifications with links to other products
  • Trending product notifications
  • New arrival messages
  • Hot deals
  • Shipment notifications with recommendations for other products
  • Post purchase offers to bring customer back

Overall, this tool offers several marketing options that combine into a streamlined system for boosting conversions and repurchases.

Performance Tracking

Tracking in Shop Pay (for merchants) looks into the efficiency of your sales, taking into account the speed at which people make purchases, how much your conversions increase, and how well you're able to get products to customers in a reasonable time.

This all builds trust and makes your business far more transparent.

Tracking features are sent to both the merchant and customer, with tracking messages for when:

  • Orders are processed
  • Orders are sent
  • Orders receive a tracking code
  • Orders arrive

Complete Checkout and Store Customization

customize your store

Merchants get to choose what the checkout experience looks like and what gets offered to customers. For instance, sellers can choose to offer free shipping, fast shipping, or in-store pickup. You can also opt to reveal certain products, share recommended items, and have a module for customers to see their past orders.

Along with that, it allows you to customize elements like your customer support resources, contact methods, store description, and the images that appear on the shop, like your logo and cover image.

A Shop Pay Button to Place on an Online Store, Facebook Shop, or Google Shopping Page

the pay button

As a Shopify product, you'd think merchants would need a Shopify store to use Shop Pay. That's not the case. Although it was in the past, Shopify eventually expanded its support beyond Shopify merchants, meaning that even non-Shopify customers can add a Shop Pay button for selling on Facebook, Instagram, and Google.

When it comes to using the payment option on a different ecommerce platform, you're still limited to Shopify.

For Shopify merchants, you can install the quick Shop Pay button as an alternative payment method, allowing you to use Shop Pay on your ecommerce store, and whatever social shopping tools you sell through (like Facebook, Instagram, or Google).

A Mobile App to Manage Tracking Notifications, Shipments, and Marketing

We already covered tracking notifications, shipments, and marketing, but it's worth mentioning that all of these get merged into a sleek mobile app, allowing you to manage all facets of your business through the Shop Pay merchant app. So, handling customer support becomes easier while on the go. There's no reason to be at your desktop computer whenever you need to complete a task.

Shop Pay presents users with curated lists, recommended products, and local shopping opportunities on a regular basis. It also serves as a way for online businesses to reach new customers.

Merchants can take advantage of the strong marketing potential this brings about, considering Shop Pay already caters to over 100M shoppers around the globe. Your store gets looped into these recommendations based on what people buy, so it works regularly to ensure your business gets the exposure it needs.

Is Shop Pay Safe?

It’s not always easy to know which payment options and checkout solutions merchants should offer on a website. You want to make sure that you’re creating a simple experience for your customers. However, it’s also important to ensure that you're keeping your bills low and reducing the amount of effort required on your side too. The same can be said for customers; is my payment information safe if I purchase through Shop Pay?

Based on our research, Shop Pay is very secure.

Thanks to things like SMS text verification, PCI compliance, and encrypted financial data, customers and merchants get several layers of purchasing security. That’s important in a world where your customers are trusting companies online less than ever. The added layer of security means that shoppers and merchants can enjoy more peace of mind when they interact.

The processor even handles all the payment security elements on behalf of merchants. There’s no technical expertise necessary. This makes Shop Pay an excellent choice for companies that don’t want to hire their own developer to make their website suitable for customers.

What is a Shop Pay Code?

A Shop Pay code is the 6-digit code texted to a user's phone to verify their identity for a purchase. This code is essentially the piece that allows the app to make transactions for users take only a few seconds. Customer data is already stored and encrypted within the app; all that's required is to verify the user's identity, so each transaction sends a 6-digit code to that shopper. They then type it into the checkout screen to process the transaction, eliminating the need to type in anything else, such as the credit card number, customer name, or shipping address.

Here's what a Shop Pay code looks like when sent to your phone as an SMS message:

getting your shop pay code

After which, users can type the code into the authentication field (which appears in the store you're currently shopping at).

what is Shop Pay code

Then, it fills in all necessary payment information and processes the transaction.

Note: You can also send the Shop Pay code to an email address instead of your phone.

How to Use Shop Pay as a Merchant

Shop Pay usage all starts with the merchant. Online stores must add Shop Pay as a payment method in order for customers to use its functionality. That part of the equation is actually called Shop (from Shopify). Ecommerce store owners go to the Shop website and either add the Shop app to their Shopify store or use the option to place a Shop Pay module on any Facebook, Instagram, or Google Shopping page.

You can click the Add Shop Channel button, or use the link below that if you don't have a Shopify store.

download the app even if you don't have a Shopify website

Much like using Apple Pay or Amazon Pay, you can enable Shop Pay just like you would any other options for third-party providers on your Shopify website. It's an app, so you install it on your Shopify store through the Shopify App Store or under the Apps section in the dashboard.

add app button Merchants should walk through the steps to completely activate Shop Pay on their stores. You can find all of the app's management settings by going to Sales Channels > Shop > Settings. There, you can manage everything like tracking, shopping capabilities, and storefront customization. You'll also notice tabs for adding products, viewing analytics, and more.

settings page

And the Overview page highlights metrics like your sales, orders, users with an offer, and store profile followers.

what is Shop Pay dashboard and what does it look like

Now, when a customer gets to your checkout module, they see a purple button under the Express checkout section. It's shown with other express pay options like PayPal and Google Pay if you have those active in your store.

the purple shop pay button

When a customer checks out with your store using Shop Pay, and they’ve already entered their credit card, billing and shipping information, they’ll have the option to save that information for a following a purchase. This ensures that your customer has to do the bare minimum to check out next time. If you’re looking for a convenient way to keep your customers coming back for more, this is it.

As you can see, all customer information like their email address, shipping address, and credit card details automatically fills into the payment form. All they have to do is click Pay Now.

what is Shop Pay auto fill

With only one code to enter to allow a payment, your customers enjoy a more streamlined way of making payments. At the same time, Shop Pay has options that make the checkout more unique to your business. For instance, you can offer a local pickup or delivery option.

Another excellent feature is that your customers can adjust their information if they ever need to. They’ll have to opt out of Shop Pay using their current phone number, then create a new account with the number they’d prefer to use. Although this is a little awkward, it’s a good option for those who might want to use different details for their payments.

How to Use Shop Pay as a Consumer

Shop Pay serves as a wallet for online consumers, allowing you to save payment information for one-click payment options while shopping online.

To set up an account as an online shopper, go to the Shop Pay website. Click the Download Shop button or scan the QR code on the page with your phone's camera app. The Download Shop button brings you to another QR code, but you can also download the Shop app from the Apple App Store or the Google Play Store.

download the Shop Pay app

Once downloaded, open the Shop app and walk through the steps to set up your account. Start by clicking the Explore Shop button, then make an account with your email address or whichever login credentials you desire.

log into your account

Once you've completed the account setup, you're brought to the Home page, where the app allows you to auto-import orders from other sources (like Amazon or another Shop account), and you can view any current or past orders you have in your account.

home page of app

The Search tab provides a list of recommended products based on your location and customized preferences. Feel free to save products for later, purchase them right from the app, or ask questions to the product merchants.

view recommended products

The Account tab contains a link to your Wallet, along with settings for tracking orders, archived products, notifications, and app settings. There's also a section to contact customer support.

settings section on the app

The video below highlights the Shop app in action, with a look into how you can shop locally, view store pages, and check on the shipping progress of recent orders.

Is Shop Pay Different from Shopify Payments? (Yes, Completely Different)

If you’re familiar with Shopify as an ecommerce platform, then you’ll know that Shop Pay isn’t the only checkout option the company offers. Shopify allows you to connect with a variety of payment providers for taking credit and debit card payments.

Shop Pay is all about speeding the payment process along with saved information. It also serves as a wallet for customers. If you want to help your customers make fast payments, or even offer payment installments, Shop Pay will help with that. Your clients can save their credit card information and other crucial details, so all they need to do is enter a verification code.

Shopify Payments is an entirely different product from Shopify, but it's easy to confuse them because of the similar names. Shopify Payments is a standard online payment processor, similar to Stripe, Authorize.net, and Square, helping merchants accept payments from customers. There’s no personal wallet for rapid checkouts like you would find in Shop Pay. However, Shopify Payments has its own benefits, like saving merchants some cash on transaction and setup fees.

The Shopify Payments module appears on-site as an unbranded checkout option to process credit and debit cards.

This is what Shopify Payments looks like

On the other hand, Shop Pay is a branded purple button. It also gets placed under the Express Checkout section with comparable options like PayPal Google Pay. You’ll definitely be able to tell them apart on your website.

what is the shop pay buy button

Here are some additional ways Shop Pay works with (and differs from) Shopify Payments:

  • Customers can use Shopify gift cards on the Shop Pay solution if merchants offer them.
  • If the checkout doesn’t ask for a shipping address, then Shop Pay won’t either.
  • If you’re selling services or downloads instead of physical products, you might not need an address to complete a payment. Shop Pay will pay attention to the kind of checkout process that you already have set-up when creating an accelerated solution.
  • Shop Pay doesn’t force customers to use it every time; customers can always go through the full checkout journey instead. Installing Shop Pay just means that customers have another purchasing option, so merchants can activate both Shop Pay and Shopify Pay in tandem.

A Bonus: Shop Pay Also Helps the Environment

One of the unique parts of Shop Pay is that it’s committed to offsetting the carbon emissions caused by delivery. This means planting and protecting new trees. Currently, they have protected over 120M trees and planted over 4.6M.

what is Shop Pay and how do they help the environment

Whenever a customer pays for online orders using the Shop Pay feature, the product ships using one of Shopify’s carriers. The Shopify team uses the information they get from their carriers to calculate the emissions each delivery produces. Shopify then offsets the delivery emissions from your sale by protecting several trees.

Shopify believes that protecting trees is the key to reducing carbon emission issues. That’s because trees absorb carbon emissions and transform them. This ensures that we have better quality air. Unfortunately, today’s fragile forests often have a hard time keeping up with the number of emissions that people and companies create every day. That’s why Shopify has made this attempt to protect our trees.

Shopify also contributes to the Shopify sustainability fund. The sustainability fund is Shopify’s commitment to use more than five million dollars every year to fight for the environment.

Is Shop Pay Right for You?

Shop Pay is just another payment option offered by Shopify to give sellers and customers a better experience online. Now that customers are demanding more choice and better experiences than ever before, it pays to have a system in place that offers a straightforward and streamlined checkout. At the very least, offering multiple checkout processes will make it easier for customers to buy.

The biggest benefit for merchants is that it encourages regular future sales from your most dedicated clients. The easier it is for these people to make payments, the more likely they are to continue buying from your store. Because of that, and the incredible security that’s built into the service, there’s really no downside to using Shop Pay.

Another major bonus of Shop Pay is that you get to let your customers know that you’re doing something positive for the environment. The carbon offsetting strategy from Shopify ensures that every time you process a delivery, you give something back to the world around you. This is an excellent story to share with your customers if you want to prompt them to purchase more products. Plus, showing that you care about the environment can lead to more loyalty from buyers too.

As for the customer, Shop Pay presents a curated, one-stop-shop for managing everything from payment details to tracking codes. You're only required to type in a quick verification code to checkout online, and you can rest easy knowing that all transactions are secure with Shopify.

Do you use Shop Pay? How is it working out for you? Let us know in the comments, and read more about Shopify stores on our blog.

Joe Warnimont

Joe Warnimont is a Chicago-based writer who focuses on eCommerce tools, WordPress, and social media. When not fishing or practicing yoga, he's collecting stamps at national parks (even though that's mainly for children). Check out Joe's portfolio to contact him and view past work.

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