Are you wondering if dropshipping with Stripe is a perfect fit for you? And if it's allowed?
In that case, you've come to the right place!
In this article, I will tell you everything you need to know about dropshipping with Stripe. For example, you will read about their pros & cons and pricing.
I will also answer some of the questions you may have. For example, ‘Does Stripe allow dropshipping businesses?'
But let's start with the first and foremost; what is Stripe?
What is Stripe?
Stripe is a company offering payment processing software. Their service is mostly used by ecommerce websites and mobile applications.
Stripe is dual-headquartered in San Francisco, California, and Dublin, Ireland. At the moment of writing, Stripe's services are available for businesses in 43 countries.
For ecommerce businesses, Stripe is a popular alternative to PayPal since it enables your customers to pay with a variety of credit cards, such as Visa, MasterCard, American Express, Discover, and more.
Of course, all of this sounds great, but is Stripe a trustworthy partner for your business?
Well, famous businesses such as Amazon, Booking.com, and Shopify use Stripe for their payment processing, so I guess that you will find your answer there!
Okay, you're probably interested in using Stripe as a payment processor for your dropshipping business now, but are dropshipping allowed on Stripe?
Does Stripe allow dropshipping?
One of the first things you should consider when picking a payment provider is if it supports dropshipping.
After all, if a payment provider does not support dropshipping, signing up your business with that provider will only lead to a lot of headaches!
Stripe allows dropshipping if your business is located outside of the Asia-Pacific or EMEA region. In that case, Stripe considers your business to be relatively lower-risk and will provide you with its services. For example, if your business is based in the US, Stripe will allow dropshipping.
Coming to this answer wasn't as easy as you might think. If you're interested, I will go over a more detailed explanation of Stripe and dropshipping below.
First of all, you should know that Stripe published a blog article with a list of businesses that aren't allowed to use their services.
These businesses are prohibited for various reasons. For example, some are seen as shady or financially-risky, while others are regulated or illegal.
Related article: Is Dropshipping Legal in 2023? (Take a Look Here First)
And guess what? Under the heading “Businesses that attract money-laundering or fraud”, you will find dropshipping:
Since we featured Stripe in our list of the best payment gateways for dropshipping stores, we contacted them and asked for clarification around this topic.
Their reply was quite long, so I will summarize it below:
First of all, Stripe mentioned that they generally can't support businesses in Asia-Pacific (APAC) or Europe, the Middle East, and Africa (EMEA) regions, as those businesses are tagged as risky and have a higher chance of receiving more chargebacks.
On the bright side, Stripe does generally support dropshipping businesses if they are located outside those regions. The US is an example of a country that Stripe can support. Still, Stripe assesses and evaluates businesses on a case-by-case basis to determine their risks.
Having said that, having just a US bank account is not enough to be supported by Stripe. To be accepted by Stripe, you will need to:
- Have your business registered in a country outside the APAC or EMEA region
- Have a bank account in that country
- Have a legitimate address and phone number in that country
- Operate your business from a country outside the APAC or EMEA region
Are you missing one or more of these criteria?
In that case, Stripe doesn't allow your dropshipping business. You should pick a different payment gateway and avoid being this guy:
Luckily, there are some other great payment gateways for dropshipping stores, which you can find here!
Why should you use Stripe? (Pros & Cons)
If you are dropshipping, you will need a payment gateway that works with the country you're operating in and offers a payment method that a large part of your target audience will be comfortable using.
When it comes to payment gateways, Stripe is one of the top choices for dropshipping stores.
Of course, I can't make that claim without backing it up in some way.
To help you make a decision about whether or not you should use Stripe, here are the pros and cons of using Stripe:
- Great lineup of payment options. With Stripe, most of your visitors will be able to make a purchase on your store. Stripe accepts payments made by all major credit and debit cards, as well as SEPA Debit and some regional payment options like iDEAL and Alipay.
Offering credit cards as a payment method on your dropshipping store is crucial, as over 40% of global online payments are made with credit or debit cards!
- Stripe supports more than 135 currencies. In total, there are currently 180 currencies in the world. Therefore, we can conclude that Stripe accepts 75% of all currencies in the world. Thus, your customers will most likely be able to pay in their preferred currency!
- Prevent fraud. Since Stripe processes millions of online transactions, they have a vast amount of data on credit card fraud. In fact, 89% of credit cards in the world have already been seen by Stripe's network. Crazy, right?
Using machine learning, Stripe is able to protect you and your business from fraudsters!
- Transparent pricing. We will talk more about this later, but Stripe's pricing page is really transparent. No hidden fees!
- 24/7 customer support. Whenever new issues arise, you will be able to contact Stripe's support by phone, chat, or email. Additionally, the Support portal offers a robust amount of documentation and guides on all the different Stripe tools.
- Stripe automatically transfers funds to your bank account. Payouts arrive in your bank account on a two to seven-day rolling basis, depending on your country. You can also opt to receive payouts weekly or monthly. Read more about Stripe's payouts here.
- Not available for dropshipping businesses in all countries. Like I've mentioned at the top of this article, Stripe does not support dropshipping businesses in the Asia-Pacific region.
- Disputed payments (or chargebacks) are quite expensive. When getting a chargeback, Stripe will charge you with a fee of 15 dollars / euros / pounds (depending on your country). However, if the customer's bank resolves the dispute in your favor, this fee will be fully refunded.
Read more about how Stripe deals with disputes here.
- Not as well-known as PayPal. Almost everyone will recognize PayPal, but not all of your customers will know Stripe. Because of this, it is possible that you might miss out on a small additional trust factor.
- The payout speed could be faster. While the payout time can be just two days (for example, for most businesses in the US), this can increase to up to 14 days if Stripe tags you as a high-risk business.
- Stripe doesn't return the fees you've paid for refunds. If you decide to refund a purchase, the transaction fees will stay with Stripe and won't be refunded.
Tip: As a dropshipper, you'll have to deal with chargebacks at some point. If you want to win as many as possible, consider using Chargeflow. It’s a company that uses AI to fight your chargebacks for you.
Chargeflow offers an industry-leading win rate, and you only pay when they successfully recover a chargeback, so it’s worth checking out!
Dropshipping with Stripe: What does it cost?
We continue with an age-old question; what does it cost?
This question can actually be answered pretty easily because Stripe uses a very transparent pricing model, as I've mentioned before.
Here we go:
You will probably use Stripe the most for credit and debit card payments.
For these payments, Stripe charges the average industry rate of 2.9% + 30¢. If your customer is paying with an international card or if currency conversion is required, Stripe will charge 1% extra (2% extra for both).
For bank transfers, Stripe charges 0.8% with a $5 cap.
Finally, the pricing for additional payment methods will vary quite a bit but start at 80¢.
Note: To see all of Stripe's pricing details for yourself, click here to go to their pricing page.
Does Shopify accept Stripe, and how to set it up?
Now that you know the pros & cons of Stripe and what it costs, you may already have made a decision about whether or not you will use it for your dropshipping store.
Are you planning to use Stripe? That's great; you will learn how to set it up on Shopify here.
If not, no worries, there are quite some awesome alternatives!
Note: You will be able to use Stripe with Shopify, but it will have a different name; Shopify Payments.
Stripe vs. Shopify Payments: What's The Difference?
Shopify Payments is Shopify's own payment gateway. It is completely integrated with the Shopify platform, and it's incredibly easy to set up.
The difference between Stripe and Shopify Payments is that Stripe is a payment processing company, while Shopify Payments is Shopify's own payment gateway that is powered by Stripe.
Be aware, don't assume that Shopify Payments uses the same terms & conditions as Stripe.
I recommend checking out the Shopify Payments requirements to see if you are eligible to use it for your store, as it differs for every country.
Using Shopify Payments, you will also be able to lower your transaction fees in comparison to directly using Stripe. For the standard Shopify plan, the fees lower to 2.6% + 30¢, and for the advanced Shopify plan, they lower again to 2.4% + 30¢.
For the most part, however, the terms & pricing for Shopify Payments will be pretty similar to Stripe.
Related article: Shopify Payments: The Definitive Guide (2023)
How to set up Shopify Payments?
To set up Shopify Payments, head to Settings -> Payment providers within your Shopify dashboard.
From there, Shopify Payments will show up as the first option:
Setting up Shopify Payments isn't hard, but the process has quite some details which will be too long to cover in this article.
If you need help with setting up Shopify Payments, you can refer to Shopify's help documentation here.
Which ecommerce platforms support Stripe?
We now know that Shopify is partnered with Stripe, but which other ecommerce platforms support Stripe?
If you're using an ecommerce platform other than Shopify, this is a pretty important question!
Luckily pretty much any ecommerce platform or Shopify alternative supports Stripe.
However, Stripe offers apps / extensions for the following ecommerce platforms:
If your ecommerce platform isn't listed here, don't worry. Just do a Google search on ” Stripe + [your ecommerce platform]” to find instructions on how to set it up for your dropshipping store.
How to avoid getting banned by Stripe?
Lastly, we've arrived at this article's final question; how do you prevent getting banned or suspended by Stripe?
To help you prevent experiencing getting banned by Stripe, I will provide you with some good practices to minimize the risk of getting suspended.
You will notice that it all comes down to preventing chargebacks. When you receive many disputes and chargebacks, Stripe will tag you as a high-risk business and eventually ban or suspend you.
Note: Most tips in the article “Using PayPal for Dropshipping: How to Not Get Banned” will also help to reduce your chances of getting banned by Stripe.
Here's a short overview of things you can do to minimize the risk of getting banned by Stripe:
- Keep your customer service at the top of the game. Notify your customer about every step in the shipping process and always reply to questions that your customers may have. If you're struggling with your customer service, our complete customer service guide will definitely help you!
- Don't try using Stripe if you don't meet their requirements. Eventually, Stripe will catch on and ban or suspend your account.
- Build relations with good suppliers. The best dropshipping suppliers will rarely have processing delays and will use the most efficient shipping methods to avoid delays in shipping times. Also, they will exercise quality control to prevent sending out broken products. Obviously, all of this decreases the chances of you getting chargebacks!
If you're still looking for good dropshipping suppliers, I recommend checking out one of our supplier articles!
Hopefully, that was everything you need to know to start dropshipping with Stripe!
If you still have any questions about dropshipping with Stripe, just leave a comment below, and I will make sure to reply as soon as I can.
Remember that before making a definitive choice on a particular payment gateway, you should check out your alternatives and find out which payment method people in your target country most frequently use.
And check out this article here to learn more about the best payment gateway combinations when dropshipping.
With that knowledge in mind, choosing a payment gateway will already be a lot easier!
Good luck with making your choice, and have a great rest of your day!