Square announced this morning that it has removed deposit limits and holds on credit card transactions that are entered manually by its customers. In the United States, regardless of whether a transaction is swiped or not, the paid funds will land in the customer’s bank account within two days.
Treating all payment input methods the same and promising to send funds in two days or less to U.S. companies could expose Square to an increased risk of fraud. It could be that payments entered via a phone call into the Square network have more problems than those swiped in person with a credit card. This seems to be the case, or Square would not have had protection in place regarding those transactions to begin with.
Square views the move as pro-small business noting, for instance, that caterers – and other industries that often include small providers – often accept payments over the phone. They will now have a simpler cash flow.
The payments space is increasingly competitive, with Square squaring off against the likes of PayPal, as well as solutions from traditional providers. In this case, Square is moving closer to the banking space than the payment-processing space, by taking on fiduciary risk to ensure a better service for those who enter payments over the phone.
Square processes in excess of $15 billion in payments each year, so it is hardly low-volume. It is likely dollar flow that allows the company to assume slightly higher risk on select payments to ensure that its payment system works for every possible customer in its home country.
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