How Shopify quietly became a payments giant in North America

Bernstein highlights Shopify's significant transformation into a dominant payment service provider, now ranking among the top 10 by revenue, with payments and merchant services contributing 74% of total revenue and 57% of gross profit. The company's payment services, including Shop Pay, now account for 66% of its GMV and have expanded globally, achieving over 90% penetration in mature regions like North America. This rapid expansion, alongside its accelerating offline POS business growing at 27% annually, positions Shopify as a formidable competitor to established players like PayPal, Square, and Clover, posing substantial risks to their growth and capturing increasing transaction economics.

Analysis

According to a research note from Bernstein, Shopify has fundamentally transformed its business model, evolving from a pure e-commerce platform into a leading North American payments provider. This strategic pivot is evidenced by payments and merchant services now accounting for 74% of total revenue and 57% of gross profit, a substantial increase from 41% in 2019. The adoption of its native payment solution is significant, with Shopify Payments now processing 66% of the platform's Gross Merchandise Volume (GMV) and achieving over 90% penetration in mature markets like North America. The company's branded checkout solution, Shop Pay, is growing at a 48% compound annual rate since 2021, processing $75 billion in volume and directly challenging PayPal's market position. Furthermore, Shopify is making aggressive inroads into the physical retail space, with its Point-of-Sale (POS) business growing at 27% annually, outpacing incumbents like Square and Clover and presenting a material risk to their growth.

Key Decisions for Investors

• Investors should re-evaluate Shopify not just as an e-commerce platform, but as a high-growth fintech entity whose primary value driver is its rapidly expanding and deeply integrated payments ecosystem.
• The sustained high growth of Shop Pay and the 27% annual growth in its POS business signal a significant competitive threat to PayPal and Block (Square), warranting a review of positions in those incumbents.
• Monitor the growth margin of Shopify's merchant solutions and the adoption rate of Shopify Payments in newer international markets, as these are key indicators of the long-term sustainability of its current trajectory.