A quick look at the global top five1 payment processors is rather illustrative:
- PayPal
- Shop Pay
- Apple Pay
- Venmo
- Stripe
PayPal is #1 (and #4, as Venmo is a Paypal product), and we shouldn’t be surprised: The platform was launched in 1998, and has been a dominant player in payments ever since.
At first blush, the third-place ranking for Apple seems impressive. But it actually reveals an unpleasant truth: There are 750 million iPhones in use around the world and yet Apple Pay, launched way back in 2014, languishes in third place. Mobile drives ecommerce, and even on a platform where it controls every pixel of the user experience, Apple cannot beat the oldest electronic payments platform on the planet, or a goddamned Canadian upstart.
Shop Pay, the app from Shopify that allows you to check out fast and track your orders post-purchase, is the second-most-used payment processing platform on the planet. So how did this upstart, released after Apple Pay, so quickly become a dominant market force, and what does that mean for merchants?
Let’s take a deeper look at what is going on.
Leaving the island
First, Shop Pay represents the first major move that Shopify has made beyond the ecosystem. Remember that Shop Pay is a head-spinning combination of: 1) an accelerated checkout method; 2) a native mobile application that customers use to track their orders; 3) a method to pay by installments (think AfterPay), and 4) a shoppable marketplace.
Today, users of the application track orders for Amazon, Home Depot, and a myriad of other popular online merchants that do not run on Shopify. The app cleverly consumes order confirmation emails from user inboxes and uses that to create a central order management experience. But once using the application, users are able to discover new products and make purchases in a highly-personalized marketplace of related brands.
And on the payments side, Shop Pay has already expanded to other channels like Facebook and Instagram. What is next?
The 100-ton gorilla that is the Shopify platform ecosystem is breaking out into the wider world, bringing everything that made it the juggernaut it is today to other market segments. And that is where things will really start to get interesting.
Commerce with purpose: Look to your buyers
Shop Pay is not just a payment system. It is a way to help fight one of the major challenges of the 21st century: climate change. All a customer has to do is check out with Shop Pay, and carbon gets sequestered out of the atmosphere in the form of a new tree being planted.
Shopify understands that the only reliable way to protect the future is to understand what the upcoming generation cares about and align to that. By making Shop Pay about commerce with a purpose, they do just that for a population whose buying power will increase every day that they inevitably move deeper and deeper into adulthood.
Double conversion with the click of a button
The news is in, and the news is very damn good2: On mobile devices Shop Pay nearly doubles the checkout conversion rate. On desktop, improvement is still a startling 1.56x.
If it doesn’t use Shop Pay, is it even a checkout anymore?
What merchants need to do
If you are on Shopify, you need to prioritize enabling Shop Pay as well the major mobile payment options (Apple Pay and Google Pay). In addition, if your product pricing strategy is compatible with installment payments, you should enable this feature for shoppers. (Shopify recently partnered with market leader Affirm to offer this feature to customers.)
If you aren’t on Shopify, you should make sure that your order confirmation emails are compatible with Shop Pay’s order parser so that your order information flows into the app. When you can’t control the narrative, it’s still better to be present and participate then take your ball and go home.
For merchants already on Shopify, you need to audit the customer brand follow experience to ensure the experience is optimized for customers.
What the future holds
Shop Pay’s biggest competition will be Bolt. By year’s end, a third of all checkouts will flow through the Bolt network. This represents a stunning achievement for a checkout acceleration platform unmoored to any ecommerce platform. Network efforts matter in platform businesses, which Bolt and Shopify both are. This means Bolt will be operating at a position of strength in the wider ecommerce merchant ecosystem, on equal footing with Shopify Plus. Not even the mighty House of Bezos can compete at this level with the Wizard of Waterloo.
Each player approaches this market from a very different direction, so look to this battle to see who innovates faster and pulls ahead. Only time will tell, but were I a betting man, my money would be on Shopify.
Footnotes:
1. Reference
2. Reference