Last updated: July 2025

Shopify Payments is the default choice for UK merchants, but it's not always the lowest-cost or fastest-settling option. Here's a clear comparison of Shopify Payments, PayPal, and Pay by Bank via Fena — what each costs, how quickly each settles, and which works best for which situation.

Shopify Payments is convenient — but it's not your only option

Shopify Payments is the path of least resistance for UK Shopify merchants. It's built in, there's no separate gateway to configure, it avoids Shopify's third-party gateway surcharge, and it handles card payments, Apple Pay, and Google Pay in a single integration. For many merchants, particularly at launch, it's the right default choice.

But "default" and "optimal" are different things. As merchants scale, the interaction between Shopify Payments' fee structure, payout timing, and chargeback exposure becomes more commercially significant. And for merchants in restricted categories — CBD, vape, supplements, adult products — Shopify Payments isn't available at all.

Pay by Bank via Fena is a different architecture entirely: account-to-account payment through UK open banking infrastructure, lower fees, same-day settlement, and no chargebacks. It doesn't replace Shopify Payments — it complements it, covering the use cases where cards are structurally more expensive or more problematic.

This guide provides an honest comparison of Shopify Payments, PayPal, and Pay by Bank via Fena — what each costs at realistic UK transaction values, how payout timing actually works, and where each method is the better choice.

Quick summary

• Shopify Payments is the most integrated option for UK merchants accepting cards and digital wallets, and it avoids Shopify's third-party gateway surcharge — making it the right default for most merchants accepting card payments

• PayPal adds customer reach and wallet convenience but costs more than Shopify Payments and triggers the Shopify gateway surcharge on plans where it applies

• Pay by Bank via Fena is typically the lowest-cost payment method for UK merchants, with same-day settlement and no chargebacks — complementing Shopify Payments rather than replacing it

• Payout timing is a meaningful operational difference: Shopify Payments takes 3–5 business days, PayPal can take longer, Pay by Bank via Fena settles same-day

• Chargebacks are structurally present with cards and PayPal; they don't exist for Pay by Bank transactions

• No single payment method is optimal for all merchants or all transaction types — the best UK Shopify payment setup typically combines Shopify Payments for card volume, Pay by Bank for the growing bank-authenticated segment, and selective BNPL for higher-AOV purchase decisions

Shopify Payments: what it is and what it costs

Shopify Payments is Shopify's native payment processing product, built on Stripe's infrastructure. Because it's integrated directly, it avoids the third-party gateway surcharge that Shopify applies to external payment providers — which is the primary reason it's typically the cost-efficient default for card payments.

Fee structure for UK merchants:

The processing rate for UK card transactions varies by plan. On the Basic plan it's approximately 1.7% plus £0.25 per transaction; on the Shopify plan approximately 1.6% plus £0.25; on Advanced approximately 1.5% plus £0.25. International cards and American Express attract higher rates — up to 2.9% plus £0.25 in some cases. There's no additional Shopify gateway surcharge because Shopify Payments is Shopify's own product.

Payout timing:

Shopify Payments processes payouts on a rolling schedule — typically 3–5 business days from the transaction date for UK merchants. Merchants can choose daily, weekly, or monthly payout schedules. The 3–5 day window is the typical delay between a customer completing a purchase and funds being available in the merchant's bank account.

Chargebacks:

Shopify Payments carries standard card chargeback exposure. When a customer disputes a transaction through their card issuer, Shopify charges a £10 dispute fee — applied whether the merchant wins or loses. Winning a dispute means the fee is refunded; losing means the merchant absorbs both the fee and the reversed transaction value.

Restrictions:

Shopify Payments is not available to all UK merchants. Categories including CBD, vape, supplements with health claims, adult products, and several others are excluded. Merchants in these categories cannot use Shopify Payments and need alternative payment solutions.

PayPal: reach and familiarity at a cost

PayPal is a fixture in UK ecommerce and carries consumer trust built over two decades of mainstream use. For many UK shoppers — particularly those completing first purchases from unfamiliar merchants — seeing PayPal at checkout provides a recognisable trust signal that can improve conversion.

The commercial trade-off is cost. PayPal's transaction fees for UK merchants are typically higher than Shopify Payments for equivalent transactions, and because PayPal is a third-party gateway, it triggers Shopify's additional gateway surcharge on plans where that applies (2% on Basic, 1% on Shopify, 0.5% on Advanced).

Fee structure:

PayPal's standard UK merchant rate is approximately 2.9% plus a fixed fee per transaction, though the specific rate varies by transaction volume, account history, and product type. Adding the Shopify gateway surcharge for merchants on the Basic or Shopify plan increases the effective cost further.

Payout timing:

PayPal holds funds in a PayPal balance before merchants can withdraw. For established accounts this process is relatively quick — often a few days. New accounts and those flagged for review can face holds of 7 to 21 days. For merchants who've experienced PayPal account restrictions, the unpredictability of payout timing is a meaningful operational challenge.

Chargebacks:

PayPal's dispute process is notable for being buyer-friendly. PayPal chargebacks carry a fee of approximately £14 per dispute. PayPal's Seller Protection programme covers some transaction types, but for regulated product categories and digital goods, coverage is often inconsistent or absent entirely.

When PayPal earns its cost:

PayPal has genuine conversion benefits for the segment of UK shoppers who prefer paying from a stored PayPal balance and who find PayPal more familiar than alternatives. For merchants where this segment is significant and clearly measurable in conversion data, the cost premium may be justified. For merchants whose customers are primarily paying by card rather than from a PayPal wallet, the benefit is smaller and the cost premium is harder to justify.

Pay by Bank via Fena: the account-to-account alternative

Pay by Bank is a payment method built on UK open banking infrastructure — the FCA-regulated framework that enables direct account-to-account payment without card network intermediaries. When a customer pays via Pay by Bank through Fena, they authenticate the payment within their own banking app and the funds transfer directly between accounts.

Fee structure:

Pay by Bank via Fena processes at a significantly lower effective cost than either Shopify Payments or PayPal — typically in the range of 0.5–1% per transaction, with no Shopify third-party gateway surcharge for eligible merchants. On a £100 transaction, the saving compared to Shopify Payments is approximately £1–£1.50. Compared to PayPal on the Basic plan, it's approximately £4–£5. At volume, these differences compound substantially.

Payout timing:

Pay by Bank via Fena settles same-day or faster. Because the payment moves directly between bank accounts through open banking rails rather than through card network clearing cycles, there's no 3–5 day settlement window. Funds are available in the merchant's account the same day the customer authorises the payment.

Chargebacks:

Pay by Bank transactions don't go through card networks, so the card chargeback mechanism simply doesn't apply. There are no chargeback fees, no dispute timelines, and no impact on a chargeback ratio. Disputes between merchants and customers are handled directly, without card network arbitration.

Security and compliance:

Fena is FCA-authorised. Every Pay by Bank transaction uses Strong Customer Authentication through the customer's existing banking app — the same authentication they use for everyday banking. No card credentials are shared with the merchant or stored in their systems.

Restrictions:

Pay by Bank coverage is strong for the major UK banks. For merchants with a significant proportion of international customers using non-UK bank accounts, card payments remain necessary for those transactions.

A realistic cost comparison at different order values

The cost advantage of Pay by Bank versus cards and PayPal varies by order value. At lower order values, the fixed-fee component of card processing (typically £0.25 per transaction) represents a higher proportion of the total fee. At higher order values, the percentage component dominates.

£30 order:

• Shopify Payments (Basic): approximately £0.76 (1.7% + £0.25)

• PayPal (Basic plan with surcharge): approximately £1.77 (2.9% + £0.20 + 2% surcharge)

• Pay by Bank via Fena: approximately £0.40 (1% effective, no fixed fee or with lower fixed component)

£100 order:

• Shopify Payments (Basic): approximately £1.95

• PayPal (Basic plan with surcharge): approximately £5.10

• Pay by Bank via Fena: approximately £0.75–£1.25

£250 order:

• Shopify Payments (Basic): approximately £4.50

• PayPal (Basic plan with surcharge): approximately £12.45

• Pay by Bank via Fena: approximately £1.50–£2.75

The percentage saving from Pay by Bank grows in absolute terms with order value, which is why the benefit is most pronounced for merchants with higher AOVs.

Payout timing: what the difference actually means operationally

The 3–5 day Shopify Payments payout window and the same-day Pay by Bank settlement aren't just a convenience difference. For merchants who actively manage working capital — who need to restock inventory, fund marketing spend, or pay suppliers against incoming revenue — the timing difference has real cash flow implications.

A merchant doing £1,000 per day in Shopify Payments revenue has, at any given time, approximately £3,000–£5,000 in confirmed but unsettled revenue sitting in transit. That's capital that's earned but not available. For merchants with thin working capital margins, this creates a persistent need for credit facilities or operational constraints on what can be done in the period between sales and settlement.

Pay by Bank via Fena's same-day settlement means the transit pool is effectively zero. Revenue earned today is available today. For merchants managing tight cash cycles or making time-sensitive purchasing decisions, this timing improvement has quantifiable value.

Choosing the right payment mix for your Shopify store

The optimal UK Shopify payment setup isn't a single payment method — it's a combination that covers different customer preferences and transaction types at the lowest overall cost.

Shopify Payments

remains the right choice for the core card payment volume — it's integrated, it avoids the gateway surcharge, and it covers the broadest range of card types and digital wallets. For most UK merchants, this is the foundation.

Pay by Bank via Fena

adds a lower-cost, same-day-settling, chargeback-free payment option for the growing proportion of UK shoppers who prefer bank-authenticated payment. It captures volume that was either not converting (customers who prefer Pay by Bank but don't find it available) or converting at higher cost through cards. Adding it to the checkout doesn't require removing Shopify Payments.

PayPal

is worth maintaining if your analytics show meaningful conversion contribution from the PayPal wallet segment — customers who are genuinely paying from a PayPal balance rather than from a card via PayPal. If most of your PayPal volume is effectively card volume routed through PayPal, the conversion benefit is smaller and the cost premium is harder to justify.

For merchants in restricted categories who cannot use Shopify Payments, Pay by Bank via Fena may be the primary payment method by necessity as well as by economic preference.

Frequently asked questions

How much does Shopify Payments cost for UK merchants?

The processing rate varies by plan: approximately 1.7% plus £0.25 on Basic, 1.6% plus £0.25 on Shopify, and 1.5% plus £0.25 on Advanced. International cards and Amex typically attract higher rates. There's no Shopify gateway surcharge because Shopify Payments is Shopify's own product.

How does Pay by Bank compare to Shopify Payments on cost?

Pay by Bank via Fena typically processes at 0.5–1% with no Shopify gateway surcharge for eligible merchants, compared to 1.5–1.7% plus £0.25 for Shopify Payments. The saving per transaction depends on order value, but is meaningful at scale. At higher order values where the percentage dominates, the saving is proportionally larger.

When will I receive payouts with Shopify Payments?

Shopify Payments processes payouts in 3–5 business days. Merchants can choose daily, weekly, or monthly payout schedules. Pay by Bank via Fena settles same-day — funds arrive in the merchant's bank account when the customer authorises the payment.

Are there chargebacks with Shopify Payments?

Yes. Shopify charges a £10 dispute fee per chargeback, applied whether the merchant wins or loses. Winning a dispute means the fee is refunded. Pay by Bank transactions have no chargebacks because they don't go through card networks.

Can I use Pay by Bank alongside Shopify Payments?

Yes. Fena's integration adds Pay by Bank as an additional checkout payment option alongside Shopify Payments, PayPal, and any other methods you offer. Customers choose which method to use at checkout. There's no requirement to remove existing payment methods.

Is Pay by Bank available if Shopify Payments has restricted my category?

Yes, in most cases. Pay by Bank via Fena uses open banking rails rather than card network infrastructure, so it's not subject to the card network acceptable use policies that cause Shopify Payments to restrict certain categories. Merchants selling CBD, vape products, supplements, and adult items can use Pay by Bank even where Shopify Payments is unavailable.

Is Pay by Bank secure for Shopify transactions?

Yes. Fena is FCA-authorised and Pay by Bank uses Strong Customer Authentication through the customer's own banking app. No card credentials are shared with the merchant or stored in Shopify's systems. The authentication meets the same security standard as everyday banking.