I’m trying to understand the technical/payment architecture behind some of the third-party checkout solutions in India

Shopify Discussion
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I’m trying to understand the technical/payment architecture behind some of the third-party checkout solutions in India.

For example, GoKwik, Razorpay Magic Checkout, Shopflo, etc. can act as the checkout/payment layer while Shopify is still used for the store, products, inventory and order management.

My question is:

How do these solutions avoid (or reduce) Shopify’s additional third-party transaction fees?

As I understand it, if you use an external payment provider instead of Shopify Payments, Shopify can charge an additional third-party transaction fee.

So how does the architecture work with these checkout providers?

Is it something like:

Shopify storefront → GoKwik/Razorpay/Shopflo checkout → payment gateway → create order in Shopify

And if so, why doesn’t Shopify apply the normal third-party transaction fee to that transaction?

Are these providers using Shopify’s Checkout Extensibility / payment app APIs / some specific Shopify partner arrangement, or is there another mechanism involved?

Would love to hear from anyone who has actually implemented one of these integrations and can explain what happens technically between checkout, payment authorization and Shopify order creation

2

Those checkouts don’t run through Shopify’s checkout at all, so there’s no Shopify checkout transaction for the fee to attach to.

The flow is roughly storefront, then their own checkout page, then their gateway takes the money, then the order gets pushed into Shopify over the Admin API. Usually as a draft order that’s completed and marked as paid, or an order created against a manual gateway name. Shopify’s billing docs list what’s exempt from the third party fee and two of those exemptions are the whole trick. Manual payment methods like cash, COD and bank transfer aren’t charged it, and neither are draft orders marked as paid or pending. So the card money moves entirely outside Shopify, and what lands in the admin is an already settled order on a manual method.

My read on why this took off in India specifically is that COD was already fee exempt, so a large share of volume was never billable anyway, and routing the prepaid side through the API puts it in the same bucket.

The cost is real though. No Shop Pay, checkout extensibility apps don’t run, Shopify’s fraud analysis never sees the payment so the risk signals are thin, abandoned checkout data lives on their side rather than yours, and discounts and gift cards have to be reimplemented by whoever owns the checkout page. Discount logic is where I’ve seen these integrations get ugly.

I wouldn’t call the API part TOS breaking on its own. Creating orders over the Admin API is documented and plenty of legitimate tools do it, marketplace importers, subscription apps, POS adjacent stuff. Whether using it to replace checkout sits inside the merchant agreement is a separate question, and worth reading the agreement on rather than taking anyone’s word for it.

Are you looking at one of these for a store, or trying to build something in the same shape?

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i don’t think the conclusion should be that they’re just breaking Shopify’s TOS. the important bit is whether the payment is actually being processed as a Shopify checkout/payment transaction or whether the provider is operating a separate checkout flow and then writing the resulting order back into Shopify.

those are pretty different architectures. if the external checkout is collecting the payment outside Shopify and only creating/syncing the order afterward, Shopify isn’t necessarily seeing the same transaction flow as a normal third-party payment provider used inside Shopify Checkout. but that doesn’t automatically mean there are no Shopify fees either, since the commercial agreement between the provider, merchant and Shopify matters.

i’d be especially interested in someone from one of these integrations explaining the actual sequence. the useful details would be where payment authorization happens, whether a Shopify checkout ID exists, when the Shopify order is created, and which API is used to create it. that would answer the fee question a lot better than assuming they’re exploiting a loophole.

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I was tryna implement this for a client and got blown away by their sales rep telling me they bypass shopify 3p transaction fee

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So they use shopify store front and everything but as soon as they click add to cart , their custom cart opens and then the checkout flow is completely owned by them

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Hi @tanmaykejriwal
The key difference is whether the checkout replaces Shopify Checkout or builds on it. A third party checkout can process the customer facing flow and payment authorization, and then push the resultant order information into Shopify using supported APIs.

Nonetheless, that doesn’t necessarily mean Shopify fees won’t have to be paid. Transaction fees as applicable vary based on how payments are set up the Shopify plan and provider, and the specific integration or commercial arrangement.

For a technical comparison, see if the provider uses Shopify Checkout, a payment extension or their own checkout before assuming fees treatment is the same.