The dropshipping business is a tough industry, and Shopify’s latest move to remove authorize.net from their list of approved payment gateways came without warning. This move has understandably left many new dropshippers wondering how their businesses will cope.
Dropshippers are now left to deal with payment processors like Stripe and Paypal, whose payment structures do not benefit this business model. Shopify’s latest move shows that they are not bothered by the concerns across their community over this move, probably because they’re an intermediary and do not understand payments.
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A troublesome history with payments
This is not the first time that Shopify has removed a flexible payment processor without warning and against the concerns of their clients. In 2018, Shopify removed NMI, a payment processing platform that accepts and understands the risks of dropshipping.
Shopify has a pattern of disregard for its clients. One reason for this is Shopify is incentivizing its customers to move to Stripe. In 2021, Shopify invested around $350 million into the payment processor to solidify its partnership. This means Stripe is now the backbone of Shopify’s payment processing, and the move to strike authorize.net off the approved vendors list makes sense.
While other businesses might benefit from such actions, dropshippers face several roadblocks with Stripe.
Lack of transparency
One of the problems that dropshippers face with Stripe is a lack of transparency. Many dropshippers are reporting issues with Stripe freezing their accounts without any way of sorting the issue. The problem lies in the lack of transparency about why the accounts were frozen, what factors influenced Stripe’s decision, and how this problem can be solved.
Some dropshippers have reported that Stripe is suddenly flagging accounts over issues such as being unable to verify their bank accounts, despite sellers submitting such details during onboarding. Shopify and Stripe’s customer care technicians typically offer no insights into these issues and dropshippers are left out in the cold.
Arbitrary flagging
Dropshippers face account holds due to Stripe’s arbitrary flagging. On their company website, Stripe says that they have a team of compliance analysts to ensure that all businesses and payments meet the legal standards in the US.
Unfortunately, Stripe’s compliance analysts have created more hassles for dropshippers than good by arbitrarily flagging dropshippers’ accounts. Dropshippers have noticed a pattern with Stripe’s arbitrary flagging as it is only when there is an increase in monthly sales does Stripe flag the account.
Stripe considers dropshipping businesses at higher risk for fraudulent activities like money laundering. On their website, Stripe claims that dropshipping needs more scrutiny to ensure no illegal transactions are taking place. Unfortunately, Stripe’s extra “vigilance” has led to many dropshippers’ accounts being frozen, with business owners asked to provide invoices and order tracking to recover their accounts.
This arbitrary flagging without explanation penalizes business growth. Many dropshippers can spend months trying to get Stripe to undo the hold the moment their businesses begin to experience high growth.
Zero recourse
While Stripe promotes their 24/7 customer care, this is very far from the truth, especially when dealing with problems like account holds and arbitrary flagging. Stripe does not communicate when it comes to its decision-making. Dropshippers have no other option but to just accept the decision at the cost of their businesses.
With no communication and no real way to fight back, dropshippers are closing their accounts and looking for solutions elsewhere.
High-risk businesses face instability
Stripe’s unrealistic policies and Shopify’s lack of payments expertise have left dropshippers searching for the right small business payments processor. They’re not alone. High-risk businesses also face significant issues working with Stripe.
On top of their team of compliance analysts, Stripe makes use of an algorithm that matches business sales records to industry-based sales patterns. This algorithm does not lend itself well to dropshipping businesses’ sales patterns.
Stripe’s lack of dropshipping expertise makes it a payment processor unsuited to the business’ unique needs. Its policies place severe strain on online sellers. Some of these adverse effects include:
- Increased costs of doing business. Stripe applies a one-size-fits-all approach to transaction fees which can cost more for dropshippers.
- Decreased business flexibility. Stripe says they offer flexible payment types, but they end up dictating terms.
- Limits dropshipping to certain geographic zones. For example, US dropshippers will only have their account approved if they prove they are sourcing from North America.
Stripe and Shopify’s troublesome history with payments begs the question whether they are the right payments partners for dropshippers. After all, if sellers cannot get paid, setting up a shop on a convenient platform is pointless. Payments processing is an important part of every business.
Businesses will need to look elsewhere for a platform that understands their business model. While alternatives like WooCommerce come with a steep learning curve, it provides users with access to payment gateways like authorize.net and NMI. The platform allows dropshippers to build their business the way they like.
BigCommerce is another example of a stable platform for dropshippers. Choosing these platforms will help dropshippers build stability in their businesses and avoid Stripe’s arbitrary whims when it comes to accepting payments.
Dropshippers need stable payment acceptance
Starting a dropshipping business on Shopify is a lot of hard work. When a chosen payment processor is removed, it can be frustrating and detrimental to the growth of the business,
A stable payment facilitation partner is vital. Here are some of the benefits of such a partnership.
1. Transparency
Transparency about transactional limits and other important financial details is important for dropshippers. It lets them know what to expect and avoid cash flow surprises.
2. Comprehensive fraud protection
The right payment partners make use of intelligent compliance flags rather than a one-size-fits-all algorithm that does not understand specific business models.
3. High-risk business expertise
A good payment partner understands how your business works. A payment partner that understands a seller’s business model and payment patterns aids business growth.
4. Cost-effective
Payment partners that understand the dropshipping business model will know that each business is different and that a one-size-fits-all approach to fees and transactions does not work. Payment processing can make or break a business, and having a stable payment acceptance solution is crucial.
Shopify’s latest move to remove authorize.net has left dropshippers worried about the future of their businesses. They face problems with account holds, arbitrary flagging, and geographical limitations. Dropshippers must choose a payments partner that offers stability and helps them grow their business instead of penalizing fast growth.
Curious how GETTRX simplifies payment acceptance and helps high-risk sellers grow their business? Get in touch with us.
Frequently asked questions for Shopify and Stripe’s Unrealistic Policies:
Qn.1 Why is Shopify a bad choice for dropshippers?
Shopify is a bad choice for dropshippers because they no longer offer a payment processor that understands how dropshipping and its payment structure works. This is because Shopify is only an intermediary.
Qn. 2 What are the benefits of a stable payment acceptance partner?
There are many benefits of having a stable payment acceptance partner:
- Transparency
- Fraudulent transactions are flagged correctly
- Understanding of high-risk businesses
- Cost-effective
Qn. 3 What are the risks dropshippers face with Stripe?
Dropshippers that use Stripe are at risk for:
- Arbitrary flagging and frozen accounts
- Zero recourse
- Poor customer service
