Photos courtesy of Etsy
Etsy sellers will have to begin using the new Etsy Payments platform by May 17, 2017 or their selling privileges will be revoked. Etsy Payments is an updated version of what was formerly called Direct Checkout and allows shoppers to enter their credit card information when buying an item.

The new Etsy Payments provides shoppers with 10 different payment options including Apple Pay, Android Pay, and bank transfers in some countries. Etsy shoppers will still be able to use PayPal to checkout, but the payment will now be processed by Etsy rather than PayPal and the funds will go into the seller’s Shop Payment Account rather than into their PayPal account.

Etsy Payments also offers sellers a more flexible deposit schedule: daily (as long as there’s at least $25 to deposit), weekly, biweekly and monthly. The fee for Etsy Payments will be 3% (including shipping fees and sales tax) plus .25 for each sale made, the same fees as Direct Checkout.

Etsy Payments is one of a suite of seller services Etsy provides and together these make up a significant portion of the company’s revenue. Seller services currently includes Direct Checkout (Etsy Payments), Promoted Listings, Shipping Labels, and Pattern by Etsy (a website maker).

As of the end of 2016, 51% of Etsy sellers used at least one seller service. After May 17 that number will be 100%. As of 2016, seller services $200.9 million, or 55% of Etsy’s revenue.

When Direct Checkout launched in 2015 sellers had a choice to opt out and choose to have shoppers use PayPal exclusively. Those sellers who opted out then will now be required to enable Etsy Payments, but will also continue to be allowed to process orders through PayPal for now, although an Etsy customer support agent told me this option will also likely go away sometime in 2018.

Etsy has shared internal statistics which show that shops that allow Direct Checkout (now called Etsy Payments) see 49% higher sales than shops that don’t, yet many Etsy sellers have resisted this option up until now.

Some sellers have expressed doubts about the security of Etsy’s payment processing system although there haven’t been any reported security breeches. Etsy has assured sellers that all bank account information is encrypted and stored securely. Etsy is certified as a Level 1 PCI DDS compliant institution which is a stringent security certification process recognized across the payments industry.

Other sellers are concerned about how payment disputes with customers will be mitigated going forward. Once all payments are processed by Etsy all disputes will be mitigated by Etsy as well (even if the payment was made using PayPal). For some sellers this is a red flag because they trust PayPal’s mitigation process over Etsy’s. Sellers cite Etsy’s customer support call back system as a source of concern. Rather than reaching a customer support specialist, sellers leave a message and get called back. (Note that when a reporter left a message she received a call back within 10 minutes). Transactions made using Etsy Payments will be covered by Etsy Seller Protection which is Etsy’s system for buyers and sellers to resolve the issue together. If they’re unable to come to a resolution the case escalates to Etsy for review.


Sellers who don’t have a bank account for their business and will now have to open one for the first time or connect their Etsy Payments account to their personal bank account. Although this might seem simple, it’s proving problematic to the many Etsy sellers who are hobbyists and use PayPal rather than a bank for their shop’s financial transactions. For these sellers Etsy Payments is a push to professionalize.

Opening a bank account for even a hobby business is a good idea. A separate bank account helps keep business and personal finances segregated which allows sellers to keep tabs on how their business is doing, ensure they’re paying taxes completely and correctly, and helps to protect you personally from liability. In addition, PayPal is not FDIC insured. PayPal does have FDIC insurance on its deposits, but PayPal doesn’t have nearly enough FDIC coverage to cover all of the money its holding at any given time.

Some sellers that already have bank accounts are disappointed to lose the immediate access to their funds that PayPal offer.  It generally takes banks a few days to process new deposits. (Note that those Etsy sellers who didn’t have Direct Checkout enabled will have a five day hold on their funds when they initially sign up for Etsy Payments.)

Others are concerned about the possibility of even longer delays in access to their funds. Last July Direct Checkout payments were delayed by several weeks due to an outage at WorldPay, the payment processor that Etsy contracts with. To remedy this issue and prevent it from happening again in October of 2016 Etsy added an additional payment processing partner, Adyen, which added redundancy and resiliency to the system to avoid future interruptions.

International sellers have expressed concern about currency conversion fees under the new Etsy Payments system. To avoid additional fees Etsy is recommending that listings are made in the same currency as the seller’s bank account. If that’s not possible Etsy will charge a 2.5% currency conversion fee for each sale according to the market rate.

According to another recent announcement Etsy Payments appears to be paving the way for guest checkout which would allow shoppers to make purchases on Etsy without first setting up an account. Removing that barrier for shoppers could lead to increased sales for all sellers.

If your Etsy shop already had Direct Checkout enabled you don’t need to take any action to activate Etsy Payments. If not, you’ll need to activate Etsy Payments by May 17. Sellers who fail to do so and have their selling privileges revoked will be reinstated within 24 of adding Etsy Payments.

Etsy Sellers Will Have to Shift to New Payments Platform or Have Privileges Revoked

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