Making it in the eCommerce business is harder than ever. One reliable constant in the industry has been Shopify. Thanks to its convenience, the platform has become popular among online merchants looking for an accessible, reliable partner through which they can create online stores and accept payments for their products.
That is, until Shopify unexpectedly removed a core payment gateway, authorize.net. As one of the platform’s only payment options for high-risk businesses, many merchants spent a lot of resources opening an authorize.net account only to find their effort has been for naught. The move has also forced some new users to revert to Stripe, which charges the highest margins on the platform.
Shopify may be the most convenient choice when accepting payments online, but does that justify the platform using its reputation to pull a fast one on its customers? And if not, what are the alternatives?
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Shopify and Stripe create payment instability
Getting paid online has become harder thanks to payment compliance rules becoming increasingly sophisticated and nuanced. In response to this growing sophistication, many payment gateways and small business payment processors like Shopify (through its partner Stripe) have resorted to imposing arbitrary rules on their customers to try to keep their platforms compliant without fully understanding their clients’ business patterns.
In exchange for their relative convenience, they’ve also imposed steep fees and margins on the transactions they facilitate. This leads to merchants experiencing the following negative consequences:
- Higher costs of doing business
- Lower net margins
- Uncertainty in payment acceptance and cash flow
- Lack of transparency in payments compliance
- Constant account validation despite adhering to rules
The ability to consistently accept payments is integral to any online business, and most of that ability relies on payment facilitators and ISVs like Shopify. Without them, businesses would have to spend enormous amounts of money and time developing their own payment gateways and ensuring they comply with the industry’s complex regulations and laws.
There simply isn’t enough ROI for businesses that choose this option, unless they’re large enough to ignore Shopify.
The disadvantages of Shopify
Shopify has long dominated the eCommerce market, but at what cost? It has drawn in millions of eCommerce businesses with rosy offers like not needing to open a merchant account, or offering lower fees per transaction compared to its competitors.
However, over the years it seems it has come to take its market monopoly for granted, and authorize.net is not the first time Shopify has unexpectedly killed off an integral part of its customers’ payment pathways.
So despite its widespread use, Shopify’s disadvantages have become far more glaring every time it chooses to mistreat its clients. Here are some of the issues Shopify’s customers routinely face.
Lack of transparency
Shopify and Stripe conduct inadequate Know Your Client (KYC) processes upon onboarding and their AML algorithms are unsuited for high-risk and unconventional businesses. As a result, they often:
- Freeze payouts
- Arbitrarily ask for identification and seller information
- Request proof of income repeatedly despite sellers providing this information
- Create uncertain cash flow for sellers
They have no clear guidelines on the information they require or the milestones at which certain checks are conducted, which leaves many businesses in the dark as to when to expect holds to be placed on their money and how to get those funds released.
Inadequate customer support
Should businesses run into random fund holds, Shopify’s customer support may only be able to provide surface-level insight into the issue, as their technicians have little to no experience dealing with payment issues.
Shopify is ultimately an intermediary between its merchant bank and its clients. If the merchant bank decides to hold funds or delay payments, customer support won’t be able to do much to help.
Outright rejects high-risk businesses
Authorize.net was Shopify’s only payment gateway available for high-risk merchants. With the gateway removed, alternatives like Shopify Payments and Stripe outright reject working with high-risk businesses.
As a result, new merchants are left with no way to continue using an account and online store they may have put a lot of work and resources into.
Penalizes fast growth
Shopify has become a master of turning a good thing into a bad thing by penalizing businesses for unexpected or rapid growth. Even low-risk industries may find their funds being put on hold randomly while Shopify verifies vague variables like ID, compliance status, and income source. This is especially true once a business crosses the $20,000 sales threshold.
These holds slow business growth, turning a good thing into a nightmare for sellers.
Is “less convenience” better for eCommerce businesses?
WooCommerce and BigCommerce are both viable alternatives to Shopify. Although both platforms present steep learning curves, these two platforms may be better for the following reasons:
Offer more flexibility
WooCommerce and BigCommerce offer merchants the freedom to use third-party payment facilitators without charging exorbitant transaction fees as Shopify does.
WooCommerce charges no transaction fees when payments are processed by a third party, providing merchants with a lot more flexibility when it comes to choosing the perfect, reliable payment partner.
Don’t dictate terms
Payment processing is a central pillar of every business. Sellers using WooCommerce and BigCommerce are free to partner with a variety of other online service providers to set up their payment pathways.
Unlike Shopify, these alternative platforms don’t dictate which payment gateways are accepted, how they are to be used, or whether or not certain features on the platform can be used by high-risk businesses.
Support all business models
Neither Shopify nor Stripe support high-risk businesses, with an added drawback being that Stripe doesn’t even support a business model as popular as dropshipping. Alternatives like WooCommerce have no such qualms over dealing with high-risk industries or dropshipping businesses. This makes them more reliable than the limited options for these industries available on Shopify.
What to look for in a payments partner?
If you’re thinking of entering eCommerce, finding a reliable payment facilitation partner should be a top priority. Stable payments partners offer their clients various benefits easily overlooked by Shopify and Stripe, including:
1. Transparency
Stable payment partners should offer their clients upfront, transparent explanations of payment and transaction limits and thresholds. That way, merchants will know beforehand which sales or transactions may pose a problem or cause delays.
This pledge of transparency also applies to ensuring they require no hidden fees, unnecessary transaction costs, or unfair margins.
2. Commitment to the groundwork
Conducting thorough KYC and anti-money laundering screening and protocols before allowing merchants to launch their online business is essential. This ensures funds are not put on hold in future.
3. Intelligent compliance measures
Stable payments partners should have a policy of intelligently adhering to compliance requirements. This means a payments partner won’t arbitrarily flag business growth as fraudulent or suspicious and then apply checks that stunt growth momentum.
4. Accessibility for all business models
A reliable payments partner should be able to demonstrate their track record of working with various payment structures and both low and high-risk businesses.
As Shopify unveils its true colors when dealing with high-risk or exponentially growing industries, finding reliable alternatives that won’t cause your business to stall or funds to be put on hold has become a significant priority.
Interested in learning how a reliable payment acceptance partner can help your business grow and expand smoothly? Get in touch with us.
FAQs
Qn 1: Why did Shopify remove authorize.net?
There has been no clear explanation as to why Shopify decided to remove authorize.net overnight. Some believe that since most of its other payment gateways don’t accept high-risk industries, Shopify is trying to distance itself from these businesses.
Qn 2: What are the alternatives to using Shopify?
WooCommerce is an excellent alternative to Shopify for businesses willing to put in a little more development work on their online store before going live. Using WooCommerce while partnering with a payment acceptance partner is a safer, more stable way to ensure payment acceptance never becomes an issue as your business grows and evolves.
Qn 3: How can high-risk businesses ensure access to a stable payments partner?
- Use a sales platform that offers flexibility when setting up payment pathways.
- Work with an experienced, responsive payment acceptance partner that knows how to support high-risk and rapidly growing businesses.
