The problem with a checkout app layered on top of your processor
Every sale on your store goes through a payment processor. The processor takes a cut. On Shopify’s own checkout (Shopify Payments), the cut is 2.9% plus 30 cents. That is about $3.20 on a $100 order. That part you cannot avoid.
But many stores do not use the platform’s own checkout. At some point they added a third-party checkout app. Maybe for a custom look. Maybe for an upsell widget. Maybe for subscriptions. The app charges its own fee on top of the processor’s fee. On your books, the two blur into one ‘payment fees’ line. Together they can take 5 or 6 cents of every dollar. Not 3.
Here is the trap. Nobody ever checks. The app was added for a feature. Nobody priced the fee against what the feature earns. So it just runs. Quietly. On every order. For years.
This article is about the fourth one: sales channel and payment fees. Your takes one hour to measure. If it sits well above your platform’s own rate, part of it is probably yours to take back.
1. An example showing you the numbers
You sell cosmetics on Shopify. You get 50,000 orders a year at $100 each. Two years ago you switched to a checkout app. It had a slicker checkout page. Nobody measured what it did to your fees.
You pull three months of invoices. You do the division. Your fees are 5.5% of sales. Shopify’s own checkout would charge 3.2%. The gap is 2.3 cents on every dollar. That is the app’s slice. Here is what it looks like per order and per year.
Payment fees on a $100 order, checkout app vs the platform’s own checkout
Same store, same order, same customer. Only the checkout changes.
| Line item | Checkout app (today) | Native checkout (after) |
|---|---|---|
| Order value | $100 | $100 |
| Processor’s own fee (2.9% + 30c) | $3.20 | $3.20 |
| Checkout app’s extra layer | $2.30 | $0 |
| Total fee per order | $5.50 | $3.20 |
| Fees as a share of the sale | 5.5% | 3.2% |
| Yearly fees on 50,000 orders | $275,000 | $160,000 |
Read the middle rows first. The processor’s fee never changes. Shopify Payments takes its $3.20 either way. The switch removes only one thing: the $2.30 layer the app was adding. That is $2.30 back on every order. At this store’s volume, that is $115,000 a year.
One honest note. That $115,000 is only a saving if the app was not earning its fee. Maybe the app’s features truly bring in more than they cost. Say a subscription checkout that runs your whole subscription business. Then the fee is a fair trade. The audit is not ‘delete all apps.’ It is this: price the fee, price the feature, and keep the app only if the feature wins.
The sentence that changes how you think about checkout fees
The processor charges the same either way. The extra 2.3% is the layer on top. Unless that layer earns more than it costs, it is your money.
Your real fee rate takes an hour to measure. Take three months of fee invoices. Divide by three months of sales. If the answer sits far above your platform’s own rate, you have found a leak.
2. How to audit your fees and switch
The audit takes one hour with your invoices. The output is one honest comparison. What the checkout app costs. What it earns.
- Pull three months of fee invoices, all of them. Get the processor’s fees. Get the checkout app’s fees. Get any per-order or monthly charges the app adds. The rate on the app’s website is rarely the whole bill.
- Work out your real fee rate. Add up all the fees. Divide by your sales for the same three months. That percent is what really hits your books. On the store above, it is 5.5%.
- Compare it to your platform’s own rate. On Shopify Payments, a $100 US order costs about 3.2%. Within half a point of that? You are fine. Stop here. Two points or more above it? Something is layered on top. Go price it.
- Price the app’s feature against its fee. The app costs this store $115,000 a year. Does its feature clearly earn more than that? More finished checkouts? Revenue that would not exist without it? Measure. Do not guess. If the feature loses, plan the switch.
- Switch carefully, watch the results, and re-check yearly. Checkout changes touch every sale. So test on a slice of traffic if your platform allows it. Then watch two numbers for a month: how many shoppers finish checkout, and how many quit with a full cart. If those hold, keep the saving. Then book the one-hour audit for next year. Rates drift on both sides.
3. One warning before you act
Some checkout apps truly earn their fee. The clearest case is a subscription checkout that powers a subscription business. Hard international tax handling is another. Special Business-to-Business (B2B) flows are another. The test never changes. The fee must buy revenue or profit at least equal to what it costs. And you must be able to measure it.
And be careful with the switch itself. Checkout is the most sensitive page you own. If even half a percent fewer shoppers finish checkout, that loss can eat the fee saving. Test before you commit. If the numbers say roll back, roll back.
4. Frequently asked questions
How do I work out my real fee rate?
Take three months of processor and checkout-app fees. Divide by three months of sales. Multiply by 100. If you sell to other countries, do the math twice. Once for home orders. Once for international orders. International rates run higher and blur the picture.
The app says its fee is only 0.5%. Why is my number so much higher?
Because the headline rate rarely includes everything. Per-order charges, monthly fees, and add-on modules stack on top. That is why the audit uses your real invoices, not the app’s pricing page.
Can I keep the app for subscriptions and use native checkout for everything else?
Often, yes. Some setups can split the traffic. Subscription orders flow through the special checkout. One-time orders, usually most of them, use the platform’s own. The app keeps its fee where it earns it. You get the layer back everywhere else. Ask your platform’s support team what your setup allows.
What about PayPal, Apple Pay, and other payment buttons customers like?
Keep them. They live happily next to the native checkout. Each one charges its own rate to the customers who pick it. This audit is about the checkout layer underneath. It is not about removing payment options.
5. Quick reference: what to avoid and what to apply
What to avoid
- Adding a checkout app for a feature and never pricing the fee it adds to every order.
- Trusting the app’s advertised rate instead of your real rate from invoices.
- Blending home and international fees into one number, international runs higher and hides the gap.
- Switching checkouts overnight without testing, checkout is your most sensitive page.
- Dropping an app that truly powers more revenue than its fee.
What to apply
- Pull three months of processor and checkout-app invoices, every fee, not just the headline.
- Work out your real fee rate: total fees divided by total sales.
- Compare it to your platform’s own rate (about 3.2% on a $100 Shopify order).
- If the gap is 2 points or more, price the app’s feature honestly against its cost.
- Test the switch on part of your traffic, watch results for a month, and re-audit yearly.
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Definitions, modeling notes & rate-basis disclosures
Definitions
- The six profit levers
- In this series: (1) Discounts, (2) Refunds, (3) Product cost (landed COGS), (4) Sales channel and payment fees, (5) Shipping and 3PL fees, (6) Advertising spend.
- Payment processor
- The company that moves the card payment. Shopify Payments on Shopify. Amazon Pay on Amazon. Stripe on many custom stores.
- Native checkout
- Your platform’s own checkout, running on its own processor. A third-party checkout is any app that replaces or wraps it and charges its own fee.
- Real fee rate (effective take rate)
- The share of each sale that leaves as fees. Work it out from invoices. It is usually higher than any advertised rate.
- Conversion rate
- The share of shoppers who finish checkout. Watch it closely through any checkout change.
- Contribution per order
- Selling price minus all six costs. What one sale really leaves behind.
Modeling notes
- This article uses the series’ standard teaching store: a $100 average order. The standard payment and channel fee in the series is about 3%, the native rate. This article’s ‘before’ state is the exception being fixed: 5.5% with the checkout app’s layer included.
- Per-order math: native fee $3.20 (2.9% of $100 plus 30 cents); app layer $2.30; total ‘before’ fee $5.50. Saving: $2.30 per order.
- Yearly math: 50,000 orders × $5.50 = $275,000. 50,000 × $3.20 = $160,000. Difference: $115,000. The saving grows in a straight line with order volume.
- Real rates vary with card mix, country, and your app’s pricing. Some apps add less than 2.3 points. Some add more. The audit turns up your number.
Rate-basis disclosures
- Baseline: cosmetics brand on Shopify, $100 average order value, 50,000 orders a year ($5 million in sales).
- Native benchmark: Shopify Payments domestic US, 2.9% + 30 cents = $3.20 on a $100 order (3.2%).
- Current state: 5.5% real fee rate. The third-party checkout layer is 2.3 points of it.
- All figures rounded to the nearest cent per order and the nearest dollar per year.