PayPal vs Shopify Payments UK 2026: Fees, Features & Which to Choose

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PayPal and Shopify Payments are not direct competitors in the usual sense: PayPal is a standalone digital wallet accepted on almost any e-commerce platform, while Shopify Payments is Shopify's own built-in processor, available only to businesses selling on Shopify. Most Shopify merchants actually use both together. This page compares their fees and roles so you can decide how to combine them, or whether PayPal alone makes sense outside Shopify. Updated September 2026.

Who Is This Page For?

This comparison is for UK businesses selling on Shopify who want to understand whether to use Shopify Payments alone, add PayPal as an additional checkout option, or compare the two if considering a move away from Shopify altogether.

PayPal vs Shopify Payments: Fee Comparison

What Is PayPal?

PayPal was founded in 1998 and is one of the oldest and best-known payment companies in the world. In the UK it operates as an e-money institution: PayPal (Europe) S.à r.l. et Cie is regulated by the CSSF in Luxembourg, with PayPal UK Ltd registered with the FCA under FRN 994790. Its standard online checkout fee is 2.9% plus 30p per transaction for UK personal cards, with no monthly fee on the standard Business account. PayPal also owns Zettle, its card machine and point-of-sale product, which charges 1.75% per in-person transaction. Full detail is on the PayPal UK review page.

What Is Shopify Payments?

Shopify Payments is Shopify's own built-in payment processor, launched in 2013 and available exclusively to businesses selling on the Shopify platform. It is powered under the hood by Stripe Payments UK Ltd (FRN 900461), giving it the same underlying FCA authorisation as Stripe itself. Rates run 1.5% to 2.0% depending on your Shopify plan, and using Shopify Payments waives the separate 0.5%-2% fee Shopify charges for using a third-party gateway instead. Settlement typically takes three to five business days for UK merchants. Full detail is on the Shopify Payments UK review page.

Should I Use PayPal or Shopify Payments on My Shopify Store?

For most Shopify merchants this isn't really an either/or decision. Shopify Payments is the more cost-effective primary processor, since it avoids the extra third-party gateway fee and generally charges a lower rate than PayPal's flat 2.9% plus 30p. PayPal is worth adding as a secondary express checkout option alongside it, since some shoppers specifically look for the PayPal button and it costs nothing extra in Shopify fees to offer it. The two work well together rather than as a straight substitute for each other.

PayPal vs Shopify Payments: Features Compared

Where Each Works

This is the fundamental difference. Shopify Payments only works if you sell through Shopify. PayPal works on virtually any e-commerce platform, a standalone payment link, or even in person via Zettle, making it far more portable if you ever move away from Shopify.

Pricing Structure

Shopify Payments' 1.5%-2.0% rate is generally cheaper than PayPal's flat 2.9% plus 30p, and choosing it also avoids Shopify's own extra fee for using an external gateway. PayPal's fee is the same whether you're on Shopify or any other platform, since it isn't tied to Shopify's plan structure at all.

Consumer Trust and Conversion

PayPal's brand recognition is its biggest advantage: many shoppers specifically look for the PayPal button at checkout, and studies consistently show it can lift conversion rates, particularly for lower-value or first-time purchases. Shopify Payments is invisible to the customer by comparison, usually presented simply as a card payment form rather than a named brand.

Settlement Speed

PayPal settles into your PayPal balance instantly, with a manual bank withdrawal taking one to three business days, or available instantly for a 1% fee. Shopify Payments settles directly to your bank account without a manual withdrawal step, but the overall wait (three to five business days) is longer than PayPal's standard withdrawal window.

In-Person Payments

PayPal's Zettle product gives it a genuine in-person offering at 1.75% per transaction, with a free first card reader. Shopify's own POS hardware serves the equivalent role for Shopify merchants wanting to take payments in person, priced separately from the online transaction rate.

Pros and Cons

PayPal Pros and Cons

Pros

• Works on almost any platform, not tied to Shopify
• Strong consumer brand recognition that can lift checkout conversion
• PayPal Zettle gives a genuine, well-developed in-person payments option
• No monthly fee on the standard Business account

Cons

• Higher standard fee (2.9% + 30p) than Shopify Payments' 1.5%-2.0%
• Funds sit in a PayPal balance before you withdraw them to your bank
• Account holds and fund freezes are a well-documented recurring complaint

Shopify Payments Pros and Cons

Pros

• Lower standard rate (1.5%-2.0%) than PayPal
• Avoids Shopify's separate third-party gateway fee
• Powered by Stripe's infrastructure, giving it a robust underlying processor
• Settles directly to your bank account with no manual withdrawal step

Cons

• Only available to businesses selling on Shopify
• Slower overall settlement (3-5 business days) than PayPal's instant-to-balance model
• No standalone consumer brand recognition equivalent to the PayPal button
• Requires an active paid Shopify subscription to use at all

Which Is Better For...?

Shopify Merchants Wanting the Lowest Total Cost

Shopify Payments is the better primary processor for anyone selling on Shopify, since it charges a lower rate than PayPal and avoids Shopify's extra fee for using an external gateway.

Businesses Wanting Consumer Trust at Checkout

Adding PayPal as a secondary express checkout option alongside Shopify Payments is a low-cost way to capture shoppers who specifically prefer paying via their PayPal wallet.

Businesses Considering Leaving Shopify

If you are weighing up a move away from Shopify, PayPal is the more portable option since it works the same way regardless of platform, whereas Shopify Payments would need to be replaced entirely.

Our Verdict

For a Shopify store, the sensible approach is not choosing one over the other, but using Shopify Payments as your primary processor for its lower rate and combining it with PayPal as an additional checkout option for the conversion benefit its brand recognition brings. If you are comparing the two because you are considering a move off Shopify entirely, PayPal's platform independence is the deciding factor, since Shopify Payments simply isn't available outside Shopify.