Chapter 12: Collecting Payments
When it comes to collecting payments, you will need some kind of payment processor if you want to accept credit cards (which you will likely want to do). This is a no brainer if you’re selling a product online, but you may want to have the option available even if you’re selling a service, although there are other options available that we’ll go over in the following sections.
One of the main reasons we recommend using Shopify for online stores is their integrated payment processor. If you’re using any other website builder, you’ll have to set up Stripe separately, but with Shopify Payments, it’s fully integrated. One of the advantages of using Shopify is the discounted fee structure for the more expensive monthly Shopify plans. Stripe charges an industry standard fee of 2.9% + $0.30 per transaction (NOTE: include this amount in your ROAS and expense calculations! It adds up!).
Shopify Payments fees start identical to Stripe, but if you upgrade to the $400/mo Shopify plan, the fee drops to 2.4% + $0.30 per transaction. If your store is doing more than $80,000/mo in revenue, it becomes significantly cheaper to upgrade to the more expensive fixed price plan. Any less, and you’re better off with the cheaper plan and standard fee rate.
Setting up an account with Stripe or Shopify Payments is quite easy, and you should only need your business bank account and business information (EIN, registered address, etc.). When you first start using an online payment processor, sometimes holds can be placed on the account while they ask for additional information to verify your company. This can include your articles of incorporation/organization or operating agreement to see how many people hold a stake in the company. Stripe/Shopify are usually pretty good about this sort of thing and generally release any holds within a couple of days as long as you submit the required documentation. Once you’ve been verified and start pushing big revenue, there’s nothing more to worry about.
Holds and verification are one reason we recommend NOT using PayPal, especially to start. This is personal preference, but I’ve had nothing but horrible experiences with PayPal. PayPal holding tens of thousands of dollars for months on end with zero customer/client support are common stories in the ecommerce world, just do a bit of googling if you don’t believe me. Especially in the beginning, it’s best to stay away and just use Stripe.
One other quirk about payment processors you’ll have to familiarize yourself with is chargebacks. If you’ve ever called your bank to dispute a fraudulent charge on your credit card, then you’ve initiated a chargeback as a customer. When a bank or institution receives a chargeback from a customer, Stripe (or any other payment processor) will deduct that chargeback from your account automatically. However, you always have a chance to dispute that chargeback and get the funds returned. As a rule of thumb, ALWAYS dispute any chargebacks you receive. The burden of proof is on you to show that the customer willingly purchased an item, and the customer will automatically win if you don’t dispute it.
A common example of a chargeback ecommerce stores will get often is a customer never receiving an item they ordered. An easy way to avoid these on the front end is to always email your customer their package tracking number and information (this is a good practice regardless, but can also serve as direct evidence to support your case in a chargeback dispute). Even if the customer never saw the tracking information, you will still be able to submit the tracking info in the chargeback dispute. If you can prove that you sent the product and it was indeed delivered to the customer, then you should win the dispute (sometimes you just get screwed…).
Any and all communication between your business and the customer can be solid evidence in a chargeback dispute. Generally, customers will email a company first if they have an issue with a product or shipment. Having evidence you tried to help them prior to the chargeback, or clearly stating your “no refunds/returns” policy is great evidence to help your case.
Be sure to keep on top of chargebacks as they roll in. If you start to get a lot of them, it might be time to rethink a part of your fulfillment pipeline. Not only do chargebacks cost you money (whatever the refund amount was PLUS a $15 fee for the payment processor’s hassle), but they reduce your standing with your payment processor. If you get too many chargebacks, Stripe/Shopify may put a 30-180 day hold on your payouts before they can be released, or they may ban your account entirely.