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Just to add some context, this is a not unexpected consequence of Square's approach, which in many ways parallels what Paypal did in the ecommerce space. Prior
by abalone 13y ago
Just to add some context, this is a not unexpected consequence of Square's approach, which in many ways parallels what Paypal did in the ecommerce space.
Prior to Square the individual / very small business market was underserved (for real-world transactions). You had to go through a PITA application and due diligence process with a processor. And you typically had to pay significant up-front costs and ongoing fees to maintain your account.
There's a reason for that: the processor is financially liable for any fraudulent merchant charges. If a merchant signs up and puts through $10K of fraudulent charges and skips town with the money, it's the processor that pays.
So Square did two things. First it lowered the upfront costs by piggybacking mobile devices to turn them into low-cost swipers.
But the second very crucial thing they did is hidden on the back-end: they streamlined the signup process and support costs. They did that by doing exactly what you see here, using alternative ID and credit check methods. And making their customer support largely a self-service operation.
The good news is that the particular case you see here is probably fixable with continued improvement. But that's why it happened.. they are replacing an otherwise more costly and burdensome signup process with something largely automated. And there's a lot of money at stake if they screw it up and let fraudsters on board.
- kevinchen 13y agoI know how it used to work -- I've been following Square from the beginning. I just don't think it would cost that much to outsource verifying a DL and bank statement that I upload to their website.
- hobs 13y ago"I am sorry, but our automated verification system cannot process your information, if you wish to continue, we would need to bill you a 25 dollar verification fee to cover additional information gathering." Its certainly better than their response.
- abalone 13y agoTheir response could be better, but you can bet that one would result in an HN post complaining about it too.
- b0z0 13y agoThat sounds great. Bill, wait for money, and return it after the identity is verified?
- hobs 13y agoWell, if their identity verification services are a sunk cost, then no, don't return the money. If they verify the identity and know they are going to make it back in fees or however square does business, then sure.
- patio11 13y agoThis does not solve the problem "Fraudsters will appeal their denial, happily pay the $25 fee using a stolen credit card, and then skip town with their first $X,000 in payments."
- Dylan16807 13y agoIf the fee is to pay for better checking, then it's a fake $25 payment that results in a denial. And in this case square is still accepting them to make payments but not receive them, so there should be no problem with the $25 bouncing. In the general case perhaps they could demand cash for the verification fee.
- patio11 13y agoYou'll generally not find out that a credit card was used for a stolen payment until weeks after the payment goes through. At that point, it's too late for Square.
- Dylan16807 13y agoSorry did a bit of editing as you replied. But I think you misunderstood the idea. The $25 is not to prove them trustworthy, it's to incentivize square to do a better investigation into whether someone is trustworthy. It doesn't matter very much that someone could use a stolen credit card for that $25 payment, because square would deny such a person during their deeper investigation and lose less than $25 dollars total. And there is little reason for the criminal to do this because it will get one of their nice card numbers blocked faster. Or ignore the second paragraph and charge cash for the service of doing a better investigation with responsive customer support.
- rmc 13y ago$25 gets, what 1 or 3 hours of unskilled labour? How good investigating can that get you?
- hobs 13y agoAgain, fair argument, the 25 dollars was just me throwing out a number. If you want to get better identity checking the underlying idea is you can push the burden of cost onto the user and make them pay for it, because they are going to make money for themselves by using your service.
- rmc 13y agoSo what would be a fair cost? $1,000? Imagine what this blog post would be like with that 'cost': "Strip won't let me sign up unless I pony up a shake down fee of a grand!"
- kbar13 13y ago...what? I as a consumer would not trust handing over any identifying information to some paid-by-hour/contracted schmuck in a internet cafe in Asia.
- colinbartlett 13y agoOf course not, but you might trust them to the same verification outsourcing companies that already handle your identifying information whenever you apply for a new job or sign a new apartment lease.
- zende 13y agoYou can automate the DL verification process using Jumio. You hold your DL in front of your computer's camera, Jumio reads the info, and verifies the information. IIRC, Western Union uses Jumio for this very purpose.
- lbft 13y agoI am all for automation - but this is the same problem as Google has: there is no human intelligence available for the rare cases where the automation does not work.
- ubernostrum 13y ago> The good news is that the particular case you see here is probably fixable with continued improvement. Everything I've seen of Square suggests that they really are adopting the Paypal approach of "fuck you unless you're big enough or can rally someone big enough to make us care". That is not fixable, really, without massive change. As much as I'm loathe to say this, I think the financial-services industry is in dire need of waves and waves and waves of frivolous litigation. If it were possible for cases like OP's to end up costing Square even a few hours of a corporate lawyer's time to get the complaint dismissed, that would be enough to tip the scale and make real customer service the cheaper option.
- abalone 13y agoReally, everything? Do you have any examples to share? My impression is the vast majority of their sellers are small businesses.
- kevinchen 13y agoJust search online. There are plenty of frustrated posts by Square users (some of them small-business owners) who've had their money held and been unable to get ahold of someone to resolve it.