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I don't get what Square understands that merchant account providers do not. There are tons of merchant account providers whose best interest is to give you an a

I don't get what Square understands that merchant account providers do not. There are tons of merchant account providers whose best interest is to give you an account, yet they still make you jump through all kinds of hoops to get one because fraud is so costly to them. (Chargebacks are expensive). If it was profitable to make it easy to get a merchant account it seems that this market is developed enough that it would have figured it out by now. Square makes it sound like they are effectively "merchant accounts for everyone" Makes me wonder what they have figured out on the fraud prevention side that nobody else has.

crux_ 17y ago
One possibility from the video (n.b. I had it muted): Requiring a photograph of the buyer, as well as their signature, might help quite a bit with fraud prevention...
- jim-greer 17y ago
  Sounded like you only get the picture if the buyer has a square account as well. Didn't seem to be required.
wmf 17y ago
I don't get what Square understands that merchant account providers do not. They're willing to take a different approach to risk management. AFAIK merchant account providers only deal with really-low-risk customers - established businesses - and they don't have to invest in fraud detection/mangement because they just pass all the chargebacks along to the merchants. Square will be accepting significant risk; when they get a chargeback they can try to take back the money from the recipient via ACH, but in many cases it'll already be gone and Square will have to eat it. We can expect Square to evolve the same hypersensitivity to fraud as PayPal, freezing accounts (aka stealing people's money) at the slightest provocation.
mfr 17y ago
At a guess, they're trying to make it up in volume. If you're a merchant bank, the smallest thing you can profitably target is a small business, so even a handful of significant bad accounts will do bad things to your bottom line. Assuming that the potential customers of this service are not trying to commit fraud, and that each one of those customers is doing a relatively low amount of transactions, Square could put this device in the hands of enough people that the aggregate chargeback percentage would still be low enough to be profitable.

crux_ 17y ago

One possibility from the video (n.b. I had it muted): Requiring a photograph of the buyer, as well as their signature, might help quite a bit with fraud prevention...

jim-greer 17y ago
Sounded like you only get the picture if the buyer has a square account as well. Didn't seem to be required.

wmf 17y ago

I don't get what Square understands that merchant account providers do not. They're willing to take a different approach to risk management. AFAIK merchant account providers only deal with really-low-risk customers - established businesses - and they don't have to invest in fraud detection/mangement because they just pass all the chargebacks along to the merchants. Square will be accepting significant risk; when they get a chargeback they can try to take back the money from the recipient via ACH, but in many cases it'll already be gone and Square will have to eat it. We can expect Square to evolve the same hypersensitivity to fraud as PayPal, freezing accounts (aka stealing people's money) at the slightest provocation.

mfr 17y ago

At a guess, they're trying to make it up in volume. If you're a merchant bank, the smallest thing you can profitably target is a small business, so even a handful of significant bad accounts will do bad things to your bottom line. Assuming that the potential customers of this service are not trying to commit fraud, and that each one of those customers is doing a relatively low amount of transactions, Square could put this device in the hands of enough people that the aggregate chargeback percentage would still be low enough to be profitable.