Square Up. Thumbs Up, or Thumbs Down?

Business owners often ask me about www.SquareUp.com or one of the competitor mobile card reader companies like Intuit’s GoPayment or NAB’s PhoneSwipe. In this blog post, I’ll be focusing on Square, though much of the information applies to all the mobile companies previously referenced. Square, often referred to as “Square Up” (due to their domain name) is a company founded by Twitter’s Jack Dorsey. They have had significant amounts of buzz and media attention, in large part because of Dorsey’s PR skills and eye for design.

 

Should I use Square? The short answer

If you are a microbusiness with low monthly volume (less than $1,000/mo) and/or low average transaction size ($5-20), and don’t mind having little to no customer service, then yes. Square, or one of their competitors, are a great option for you.

 

A few considerations...

Square’s card reader

It’s not encrypted. Many merchants don’t see card fraud as their problem, unless they have been hit by the hassles personally. But the size of fraud in this country is directly proportional to the ease of access to card fraud tools. Encrypted card readers prevent various types of card fraud common with Square’s solution. If I was a merchant I’d strongly consider using a fully end-to-end encrypted card reader. At the top of this post is an image comparing the simplicity of Square’s electronics, to ROAM Data’s encrypted electronics.

 

Pricing

It’s clean and simple, having just one fee of 2.75% for swiped transactions, and 3.5% + $0.15 per typed transactions (as of this post). There are no monthly fees, no activation fees, or gateway fees,  or early termination fees.

 

 

Where’s my money?

Square does not share the algorithm they use to determine when they move funds, and some merchants complain that their funds get held by the company with no warning. Phillip Parker says “Merchants are reporting in great numbers that Square has randomly and without explanation, or notification, placed lengthy holds (exceeding 30 days) on their funds – even with swiped transactions.  Square appears to rely on undisclosed algorithmic “risk factors” to place automatic holds on transactions that it deems suspicious.  It many cases the system appears to flag a high number of legitimate transactions without notifying the merchant of the hold, or the reason for placing it.  Square’s policies regarding these types of holds are murky at best and make the service highly undesirable for higher volume merchants.”

 

Customer service

Square’s customer service is built on the internet. They provide a support blog, a Twitter support page, and an email address. However when a merchant has an issue and needs to speak to a live person over the phone, Square only has a voicemail. Many merchants are reporting wait times of several days before getting a response from Square, regardless of how they contacted the company. For many merchants, it feels ridiculous for a large financial services company to not have a readily available 800-number helpline.

 

The bottom line

I’ll leave this one to Phillip Parker.

“Square is definitely on the right track with providing an easy credit card processing solution with no long-term commitments and no monthly fees.  The service is proving to have some major drawbacks for higher volume merchants because of murky fund holding policies and poor customer support.  It appears that Square is best suited for individuals who have an occasional need to accept a credit card and merchants with small ticket items and low volume credit card sales."

 

Sources http://blog.roamdata.com/roam-datas-secure-solution-averts-square-like-attacks-on-its-customers-and-partners/ http://www.cardpaymentoptions.com/credit-card-processors/square-review/ http://www.moblized.com/blogs/blog/card-swipers-compared http://www.pymnts.com/commentary/pymnts-voice/roam-data-ceo-responds-to-verifone-s-open-letter-about-square/