eCommerce is a tough business. Supply chain disruptions, rising advertising costs, and website platform changes offer several challenges to sellers. Stability is all-important in such conditions, and platforms such as Shopify often promise it to sellers.
However, Shopify often forces sellers into difficult situations by dictating terms arbitrarily. For instance, on September 8, 2022, Shopify quietly removed authorize.net from its approved payment gateway provider list, jeopardizing several businesses.
Such moves are unfortunately commonplace with Shopify. Ultimately, new sellers and those operating in high-risk industries pay the price.
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A Troubled History with Payments:
Shopify’s track record in the payments arena is spotty. The platform previously removed the NMI payment gateway overnight without prior notice. NMI was one of the few platforms that partnered with high-risk industry sellers, and this move understandably caused angst.
The latest move with authorize.net mirrors the NMI incident and highlights how Shopify is a less-than-ideal payments partner. The platform offers Shopify Payments and a Shopify Balance merchant account in partnership with Stripe.
However, these options have issues.
Issue 1: Freezing Payouts With Notice:
eCommerce sellers on Shopify can immediately begin accepting payments once their stores are live. However, quick onboarding comes at a cost. Shopify and Stripe conduct minimal upfront KYC on their clients, relying on algorithms and historical patterns to enforce checks instead.
As a result, sellers face arbitrary flags and account freezes as their sales grow. For instance, some sellers complain about Shopify Payments requesting ID verification well after accounts have been in operation. Worse, sellers have a few hours to submit these documents or risk payout freezes, jeopardizing cash flow.
Shopify Payments’ KYC and AML procedures are unsophisticated, as the above example shows. However, sellers pay the price since the platform dictates terms and leaves them without recourse.
Transferring the burden caused by a lack of compliance expertise is a monopolistic action, at best – one that does not help sellers.
Issue 2: Turning High Growth Into an Issue:
Shopify and Stripe base their KYC controls on historical data. For instance, the companies’ algorithms might project that a seller earning $1,000 in their first month might earn $5,000 in their sixth month. Seller accounts are safe if they conform to this invisible norm.
Naturally, high-growth sellers jeopardize their standing with Shopify, penalizing business success. Their sales growth does not conform with historical patterns, jeopardizing their accounts.
In a normal business environment, high growth should be a cause for celebration. However, Shopify’s monopoly is turning such success into a cause for concern.
Sellers routinely complain of high sales locking them out of their accounts or receiving KYC requests from Shopify and Stripe following high sales periods. The algorithm-dictated flags hamper many eCommerce sellers, causing them to constantly worry about cash flow drying up.
Some sellers report borrowing money from friends and family to make supplier payments due to delayed or frozen payments from Shopify. Again, sellers have zero recourse since Shopify controls all funds and releases them at its convenience.
These problems compound for high-risk sellers. Random requests for shipping documents, ID proofs, and business licenses are common, even if sellers have provided them previously. Requests for further information are usually left unattended, leaving sellers in the dark.
Left unsaid is the damage an eCommerce business faces due to such actions. Unfulfilled orders, unpaid advertising expenses, and supplier payment delays wreck a business. Shopify’s soft monopoly in eCommerce condemns high-growth sellers to failure, turning the very nature of business on its head.
Issue 3: A Lack of Support
Monopolies typically do not devote much time to customer service. After all, if a customer has no other options, why spend time resolving their issues? Payment processors such as Stripe and PayPal often behave this way.
Shopify’s technical support is outstanding, and its reps are helpful. However, these reps are powerless to address seller payment issues. Shopify is an intermediary in the payments cycle, relying on processors such as Stripe to do the heavy lifting.
As a result, sellers are left out in the cold when trouble hits. Shopify’s customer support refers sellers back to payment-related emails and unresponsive departments. Stripe does not offer any customer support, relying on opaque emails to communicate with its users.
Throughout this process, sellers cannot question the reasons behind payout freezes. After all, a faceless algorithm makes these decisions, and the average customer rep is powerless to explain or address such events. All sellers can do is hope for the best and leave ample cash in the bank to tide over any potential cash flow issues.
Given the ever-changing nature of these companies’ algorithms, sellers cannot hope for any insights into how they work or why they make their decisions. In short, sellers are at the mercy of an algorithm at all times and cannot expect any support from their payments partner.
eCommerce Sellers Need Stable Payment Acceptance:
Every eCommerce seller and small business relies on stable payment processing. Shopify offers convenience when setting up a shop, but none in the payments realm. There isn’t much point to such convenience if sellers cannot collect payments.
Shopify’s actions and monopoly in eCommerce have turned payments into a hurdle instead of a business asset. Here’s what a reputed and stable payments partner brings to the table.
1. Transparency
Highly-experienced payment service providers offer insights into transaction limits and enforce fraud monitoring consistently. Most importantly, an experienced payments partner understands the implications of freezing payments arbitrarily on high-risk businesses.
Instead of a faceless algorithm, the right payments partner offers human insight into their processes, assisting sellers with business growth.
2. Intelligent compliance
A good payment service provider conducts thorough compliance checks before and during a business relationship. While seamless onboarding is important, sellers must beware of fast onboarding at the cost of random compliance flags down the road.
Such behavior is typical of inexperienced payment service providers that look to boost user counts instead of offering a stable payments service.
3. Understands payment trends
Every eCommerce business experiences fluctuating revenue trends. An experienced payments partner understands these trends thanks to a wealth of experience. Every industry is unique and requires different compliance monitoring.
An experienced payments partner offers stability thanks to their experience dealing with several sellers across multiple industries.
4. Cost-effective
Reliable payment partners understand the impact payment acceptance costs have on seller margins. The right partner will offer cost-effective pricing to help sellers keep more of their money while handling all payment-related concerns in the background.
The result is a stable business that rewards sellers with high growth.
Shopify and Stripe offer fast onboarding for eCommerce sellers, but their long-term benefits are suspect. Given their habit of holding onto payments randomly and offering zero recourse, the time has come for sellers to abandon such monopolies and choose payment partners that care about their business.
Curious about how GETTRX can solve payments for high-growth eCommerce businesses? Get in touch with us.
Frequently Asked Questions:
Qn 1: What are some of the most common issues sellers face with Shopify?
Shopify’s sellers routinely face issues such as :
- Random compliance flags and information requests
- Account freezes without notice
- Lack of payment provider access
- Zero insight into compliance decisions
- No recourse or ability to appeal decisions
Qn 2: Why do eCommerce sellers need stable payment acceptance partners?
eCommerce sellers, especially those in high-risk sectors, receive the following benefits when working with an experienced payment service provider:
- Full transparency into payment-related decisions
- Intelligent compliance and predictable payouts
- Cost-effective service at every growth stage
- Foolproof fraud monitoring thanks to deep experience in several industries
Qn 3: Should high-risk eCommerce sellers choose to work with Shopify?
Based on historical evidence, Shopify and Stripe do not support or understand so-called high-risk businesses. These platforms lack historical data or the experience to support such sellers, causing them to experience turbulence and even business failure.
