Introduction
Selecting the right payment gateway is one of the most significant decisions for a Shopify merchant. The choice between PayPal and Shopify Payments affects your transaction fees, your daily cash flow, and the level of friction your customers encounter during checkout. Most stores do not need to choose just one, but understanding how they compete and complement each other is essential for protecting your margins.
We developed HidePay to help merchants navigate these choices by giving them granular control over when and where specific payment methods appear — install HidePay on the Shopify App Store. Whether you are trying to reduce high transaction fees in certain regions or want to prioritize the most trusted payment option for a specific audience, the way you manage these gateways determines your long-term profitability.
This guide will compare the fee structures, payout schedules, and user experiences of both platforms. You will learn how to balance the high trust of PayPal with the cost-efficiency of Shopify’s native system to build a checkout that converts.
The Core Differences Between Shopify Payments and PayPal
Shopify Payments is the native payment solution for the platform. It is built into the Shopify infrastructure, meaning you manage your transactions, payouts, and disputes directly within your store admin. It removes the need for third-party integrations and, crucially, eliminates the additional transaction fees Shopify usually charges when you use an external gateway. Read the Introducing HidePay for Shopify post for a deeper look at the problems HidePay solves.
PayPal operates as an external payment provider. While it is one of the most recognized and trusted brands in online payments, it functions outside of Shopify’s core ecosystem. When a customer chooses PayPal, they are often redirected to a separate window to log in and confirm their purchase. This creates a different set of financial and operational considerations for the merchant.
Quick Comparison Table
| Feature | Shopify Payments | PayPal |
|---|---|---|
| Integration | Native / Built-in | External / Third-party |
| Transaction Fees | 0% additional Shopify fee | 0.5% to 2% Shopify fee (if SP is not active) |
| Processing Fees | Based on Shopify Plan | 2.9% + $0.30 (standard US) |
| Payout Time | 2–5 business days | Instant (to PayPal balance) |
| International Fees | ~1.5% cross-border fee | ~4.4% + fixed fee |
| Customer Experience | On-page checkout | Often involves redirection |
Transaction Fees and the "External Gateway" Penalty
The financial impact of choosing between these two options is rarely a simple comparison of flat percentages. You must account for how Shopify treats external providers.
If you use Shopify Payments, Shopify waives the "external transaction fee" that otherwise applies to every sale. If you choose to use PayPal instead of Shopify Payments, you will pay the standard PayPal processing fee plus an additional fee to Shopify (ranging from 0.5% to 2% depending on your subscription plan).
The Cost of Shopify Payments
Shopify Payments does not charge a subscription fee. Instead, you pay a credit card processing rate that decreases as you upgrade your Shopify plan. For a merchant on the Basic plan, this rate is typically around 2.9% + $0.30. On the Advanced plan, this can drop significantly. There are no hidden "transaction fees" because the service is native.
The Cost of PayPal
PayPal’s standard rate in the US is 2.9% plus a fixed fee of $0.30. However, the true cost for a merchant includes the "transaction fee" paid to Shopify if Shopify Payments is not also enabled. If you enable both, Shopify typically waives the transaction fee for the PayPal orders as well, provided Shopify Payments is the primary gateway for credit cards.
Key Takeaway: To minimize fees, always enable Shopify Payments where available. This ensures you avoid the 0.5%–2% penalty on every order, even those processed through PayPal.
Hide, sort, and rename Shopify payment methods using powerful conditions. Customize your checkout and control payment options with HidePay.
User Experience and Checkout Friction
Conversion rates are heavily influenced by how many steps a customer must take to finish a purchase.
Shopify Payments provides a "transparent" checkout. The customer enters their credit card details directly on your site. They never leave your domain, and the branding remains consistent. This reduces the cognitive load on the shopper and can lead to higher completion rates, especially on mobile devices where switching windows is cumbersome.
PayPal, while highly trusted, often requires a "redirect." The customer is sent to PayPal’s site to authenticate. While "PayPal Express" attempts to shorten this by allowing customers to log in earlier in the flow, it still introduces an extra step. For some customers, this jump feels like a security feature. For others, it is an annoying delay that leads to cart abandonment.
The Trust Factor
In certain markets, PayPal is not just an option; it is a requirement for trust. In parts of Europe and for many older demographics in North America, shoppers are hesitant to enter credit card details into a store they have never visited before. They prefer the "Buyer Protection" that PayPal offers. In these cases, the friction of the redirect is outweighed by the confidence the customer feels.
Payout Schedules and Cash Flow Management
Cash flow is the lifeblood of an e-commerce business. The two platforms handle your money very differently.
Payouts with Shopify Payments
When a customer pays via Shopify Payments, the funds are batched and sent to your bank account on a rolling basis. In the US, this usually takes 2–3 business days. In other regions, it may take up to 5 business days. While you cannot access the money instantly, the process is automated and predictable.
Payouts with PayPal
PayPal deposits funds into your PayPal Business balance almost instantly. This is a major advantage for merchants who need immediate access to capital to pay suppliers or fund ad spend. You can use a PayPal debit card to spend these funds immediately or initiate a transfer to your bank. However, be aware that bank transfers from PayPal can take 1–3 days unless you pay for an "Instant Transfer."
A Word on Reserves: PayPal is known for occasionally placing "reserves" on accounts, especially for fast-growing stores or high-risk categories. This means they may hold a percentage of your funds for up to 90 days to cover potential chargebacks. Shopify Payments also performs risk assessments, but their hold policies are generally viewed as more integrated with the store's actual performance data.
International Sales and Currency Conversion
If you sell globally, the cost difference between these two providers widens significantly.
Shopify Payments handles multi-currency sales through "Shopify Markets." It allows you to show local pricing to customers and charges a cross-border fee (usually around 1.5% in the US) plus a currency conversion fee. Because this is native, the reporting is consolidated, and the exchange rates are managed by Shopify.
PayPal is a global powerhouse, supporting over 200 countries and 25 currencies. However, their international fees are notoriously high. Merchants often pay 4.4% for international transactions, and the currency conversion spread can be 3% to 4% above the base exchange rate.
If a large portion of your revenue comes from international customers, relying solely on PayPal can erode your margins by an extra 2% to 3% per order compared to Shopify Payments.
Dispute Handling and Chargebacks
No merchant likes dealing with disputes, but the platform you use determines how much control you have over the outcome.
Shopify Payments handles disputes directly in the Shopify Admin. You receive a notification, upload your evidence, and Shopify’s banking partners review the case. The chargeback fee is typically around $15. If you win the dispute, some plans refund this fee, and the funds are returned to you.
PayPal handles disputes through its own "Resolution Center." PayPal is frequently perceived as being "pro-buyer." Their dispute window is long—up to 180 days—and the process can be more time-consuming for the merchant. The chargeback fee is generally $20.
One advantage of PayPal is its "Seller Protection" program. If you meet certain requirements (like shipping to the verified address and providing tracking), PayPal may cover the cost of a dispute for "unauthorized transactions" or "items not received."
The September 2024 Update: A Closer Partnership
It is important to note that the relationship between these two companies is evolving. In September 2024, PayPal and Shopify announced an expanded partnership in the U.S.
PayPal is now becoming an additional provider for processing credit and debit cards within Shopify Payments via "PayPal Complete Payments." This means that for some merchants, PayPal transactions will be more tightly integrated into the Shopify reporting and payout flow. This move aims to reduce the "fragmented" feeling of using both gateways and offers a more unified experience for managing orders and chargebacks.
Managing the "Hybrid" Approach
Most successful Shopify stores use both Shopify Payments and PayPal. This "hybrid" approach offers the best of both worlds: the low fees and native experience of Shopify Payments with the trust and flexibility of PayPal. For merchants who also manage shipping and want a unified bundle, see HideSuite.
However, offering too many options can lead to "analysis paralysis" at checkout. If a customer is presented with five different express buttons and three credit card options, they might get overwhelmed.
Action Plan: Optimizing Your Gateways
- Prioritize Shopify Payments: Ensure it is your primary gateway for all credit card transactions to avoid external fees.
- Use PayPal as a Secondary Option: Offer it for customers who prefer the security of their PayPal balance or "Pay in 4" installments.
- Monitor Your Margins: Look at your "Finances" report in Shopify. If international PayPal fees are too high, consider using a tool to adjust visibility.
Using Rules to Control the Checkout
Strategic merchants use our app, HidePay, to manage the trade-offs between these two gateways. Instead of a "one-size-fits-all" checkout, you can create rules based on specific conditions:
- By Geography: If you find that PayPal’s international fees are too high in a specific country where you have low margins, you can hide PayPal for customers in that region—see how to organize payment methods by country or Shopify Market.
- By Cart Total: For very high-ticket items, you might want to hide PayPal to avoid their long dispute windows and instead force a direct credit card payment or a bank transfer — learn how to hide Cash on Delivery for expensive orders as an example of cart-total rules.
- By Customer Tag: For your B2B or wholesale customers, you can hide express buttons like PayPal to ensure they use your preferred net-payment or proforma methods — see the guide on how to hide payment methods based on customer tags.
- Sorting Options: You can use the app to ensure your most cost-effective method (usually Shopify Payments/Shop Pay) appears first in the list, guiding the customer toward the choice that is best for your bottom line — learn how to sort and rename payment methods in checkout.
HidePay also allows you to rename payment methods. If your customers are confused by "PayPal Express," you can rename it to "Pay with PayPal or Credit Card" to provide better clarity — see the steps to create a payment customization in the docs.
Why Native Performance Matters
Because we built our tool on Native Shopify Functions, it works within the core logic of your checkout. This is a significant shift from older apps that used "hacks" or theme code edits.
Using native functions ensures:
- Speed: The checkout remains fast because the rules are processed by Shopify, not a third-party server.
- Reliability: Changes to your theme or Shopify updates won't break your payment rules.
- Security: Your customer’s payment data never leaves the secure Shopify environment.
If you need to build or migrate custom Shopify Functions (discounts, payments, shipping, or validations), consider checking out SupaEasy to generate and manage functions without coding.
When you manage the conflict between PayPal and Shopify Payments, you are not just choosing a button; you are designing a financial strategy. The goal is to maximize the conversion rate while minimizing the cost of every transaction.
Summary of Key Takeaways
- Avoid the Penalty: Always keep Shopify Payments active to avoid the 0.5%–2% external transaction fee Shopify charges on other gateways.
- Balance Trust and Friction: Use PayPal to capture customers who wouldn't buy otherwise, but use Shopify Payments to provide the smoothest experience for the majority.
- Watch International Costs: Be wary of PayPal's high cross-border and conversion fees; use them strategically rather than globally.
- Control Your Checkout: Don't let your checkout become cluttered. Use rules to show the right payment method to the right customer at the right time.
Managing your payment gateways shouldn't be a passive task. By actively sorting, hiding, and renaming options, you protect your store from unnecessary fees and provide a better experience for your shoppers.
Using HidePay is a simple way to take this control without needing a developer or complex code. You can set up rules in minutes that start saving you money on every transaction — get HidePay for your store.
FAQ
Can I use both Shopify Payments and PayPal at the same time?
Yes, and most merchants should. Using both allows you to capture customers who prefer PayPal's trust and security while using Shopify Payments to handle standard credit card transactions with lower fees. Having both active typically waives the "external transaction fee" that Shopify usually charges for third-party gateways. If you need help installing the app, follow the HidePay installation guide.
Does PayPal or Shopify Payments have lower fees?
Generally, Shopify Payments is more cost-effective. It eliminates the 0.5%–2% external transaction fee and offers lower currency conversion rates (around 1.5% vs. PayPal's 3–4%). While both have similar base rates of 2.9% + $0.30 in the US, Shopify Payments becomes cheaper as you upgrade your Shopify plan.
Why would I want to hide PayPal at checkout?
A merchant might hide PayPal to reduce high international processing fees, avoid long dispute windows on high-ticket items, or simplify the checkout for specific customer groups like B2B buyers. Using a tool to hide PayPal for specific regions or cart values allows you to protect your profit margins where the fees would be too high.
How do payout speeds compare between the two?
PayPal provides instant access to funds within your PayPal balance, which is excellent for immediate cash flow. Shopify Payments typically takes 2 to 5 business days to deposit funds into your bank account. While PayPal is faster to the balance, Shopify Payments is more automated for traditional bank-based accounting.