This is the experience you get with traditional merchant accounts (what every business had before 3rd-party processors like Square and PayPal, and most large and B&M businesses still use). You get chargebacks, you lose the money immediately, you often lose the disputes even if you shipped items, and if your CB rate is over 1% of your monthly volume for a few months, your account gets closed. Period. The only way to stay in business if you're a target for fraud is to become very good at screening orders, whether it's through systems or manual review, because nobody else is going to protect you.<p>This is the value of PayPal's Seller Protection Program, which people probably undervalue since they've never dealt with a real merchant account. If you sell with PayPal, and ship a tangible to the address on the buyer's PayPal account, and have proof of shipment, you have 100% liability protection. Someone charges back the payment, and it's PayPal's problem, not yours; even if they lose, you don't lose your money.
This is such a common refrain in the tech space.<p>"We provide you with this disruptive new service that's really cool. Oh, it doesn't work for you? We also provide you with absolutely zero support."<p>Sometimes this means you lose business for a few days, realize you were dumb for building your business on top of a company that can't even be bothered to give you a phone number, and move on.<p>Sometimes the company takes the money out of your bank account and gives you absolutely no recourse.<p>If Alex had time and money, he could bring charges against Square. Not that he'd necessarily win, but he'd at least get himself on their radar (and hopefully get a settlement just to get him off their back). Thanks to Square, he has too little of both right now.<p>It's stories like this that make me realize how grateful I am for companies like Zappos, whose big selling point was (and still is, reputedly) "we're not jerks". I had to contact their customer service back when they were still independent, and I was very pleased with the experience. I still shop there, even when it feels like I'm paying a premium, because a company that treats me decently is worth it.
This sounds like more of an issue with our card payment systems rather than individual merchants. All it takes is 16 digits to fraudulently use somebody else's money and the merchant is typically liable in case of that. And to add insult to the injury, they add a $20 chargeback fee on top. The banks and processors aren't taking responsibility and instead forcing merchants whose core focus is on selling and shipping rather than the intricacies of payment handling.<p>Due to this lopsided arrangement, banks and processors have no reason to change the system. We should force them to take the risk of fraud; it's the only way to make the system better for everyone.
Not square at all, this is a fundamental problem with credit card processing. As long as the costs of fraud are borne by the individual merchants I doubt it will be fixed. Fundamentally flawed system design / perverse incentives.<p>To the best of my knowledge, anybody taking a credit card will lose a chargeback if they don't have a signature. And you never have a signature in an ecommerce transaction, so you will lose all disputes. (I know the very large company I used to do the CC processing for routinely lost our chargebacks for ecommerce transactions, and at our volume we should have been able to find a system for not losing if one could be found.)<p>The only current "solution" is to do a good job of filtering up front and rejecting suspicious transactions, which can be helped by requiring AVS and CVV2 matches and phone calls for large orders - but there isn't really a good system for handling this at all. The best I've seen so far is a company that would verify new customers by calling and asking them a question about their neighborhood from google maps. And it's a shame that each individual merchant has to come up with something convoluted like this, and the payment processors don't provide technical help or financial guarantees for the transactions they authorize. But that's just how it is right now, and it isn't Square's fault.
Everybody's talking about how this kind of thing is baked into the credit card system. Even a few days back there was the article about processors changing to a system with PINs like in Europe or something.<p>What I don't get is why you can't do something much more simple.<p>Wouldn't 99% of these problems be fixed by something as simple as a credit card companies just requiring transaction approval from the card holder?<p>It could be handled by text message or an app and show up as on your phone within 5 seconds of running your card.<p>Swipe, okay it on your phone, done, forget giving everyone new cards with some sort of complex PIN # system.<p>Heck, you could even go a step further and make a barcode on your smartphone scan as a credit card at checkout, and then hit okay on your phone to complete the transaction.<p>Get an alert for something you aren't buying? Hit deny, it doesn't go through. No fraud, everyone's happy.<p>I'm guessing the reason there's not a system like this is that most credit card terminals are too archaic and dumb to have a live link to the Internet to handle something like this in real time? (Or the more obvious reason of not being able to use it without a cell phone?)
Shopify might be worth considering, they have a pretty good POS system (<a href="http://shopify.com/pos" rel="nofollow">http://shopify.com/pos</a>), and probably more experience dealing with these sorts of shenanigans, plus you can get them on the phone.<p>And you don't have to sign up for the whole POS system to get the card-reader for your phone/iPad. Their mobile app (available to any Shopify shop owner) ships out a free reader. <a href="http://www.shopify.com/blog/11013977-introducing-shopify-mobile" rel="nofollow">http://www.shopify.com/blog/11013977-introducing-shopify-mob...</a>
I don't like the trend of businesses becoming less and less easy to reason with. If an algorithm, or even a person, decides to cut you off, that's it. There's little recourse in situations like these.
Here's hoping a Square employee (or someone that knows one) reads this. It'll keep happening to the small guys as Square scales - they need to tackle this sooner rather than later.
Paypal does the same. Blocked mine with 30k in it for 6 months and destroyed my business with it. We had to sell stuff from our house to pay providers (~20k) to survive that month. We lost subscribers and our business recovered in almost 1.5 years out of that "High risk" ban.<p>To them "high-risk" often means "you put too many questions" or "we don't have time to actually support you properly". By simply banning you they get rid of businesses that require more attention instead of hiring more capable people. That list of capable people should grow along with the customers list but they stop at some point and that's when they can't deal with you.<p>It's good that stripe is not available in my country because I really wanted to pick them after Paypal nightmare. I think I would have killed myself at round 2 with this type of support and bans they throw at you when you need help.
Customer service is a cost center to most companies, even internet darling companies like Square. So you won't get any because it's cheaper to piss off a few customers than to invest in actual service. Until they feel some financial pain they don't care about you. Which would make a nice new startup, someone who actually worked with both customers (in this case sellers) and service providers to provide actual service. But I won't hold my breath as there is probably no financial reason to do this.
Thanks for sharing. For nearly 10 years I managed and engineered a large e-commerce site. I learned a ton in the process. These posts always hurt. I feel the pain.<p>Also, reminds me of this post a while back - <a href="http://elliotjaystocks.com/blog/good-riddance-paypal/" rel="nofollow">http://elliotjaystocks.com/blog/good-riddance-paypal/</a><p>"PayPal have all the power of a bank and yet none of the responsibility."
Most of the comments here seem to be that this normal practise, and he should have known in advance to check for fraud or else he would lose money and have his account closed.<p>If this is so obvious, why doesn't Squaree explicitly spell this out in a help page? Is this some magical knowledge that can only be learnt first hand, and never officially stated?<p>Square screwed him over by not being more transparent with their policies.
Shouldn't Square be the one detecting fraud with address verification, CVV codes, etc?<p>And while it's ok to cancel an account that has a high proportion of fraud, it's wrong to do that AND take the money back.
Can't he use Strip for the online portion of these transactions? I don't know if their customer service is any better, but at least he doesn't have to use Paypal.