Alex Shvartsman, a science fiction writer and the owner of a small New York City game store, wrote a lengthy blog post accusing mobile payments startup Square of essentially screwing his small business out of thousands of dollars.
In July 2013, Shvartsman began using Square to support his store’s ecommerce. Then, in November, someone used stolen credit card numbers to place several large orders on his site, and he and his staff shipped $US1,800 worth of trading cards to several different addresses. Shvartsman received two “chargeback” notices from Square, totaling nearly $US1,200.
What’s a chargeback? When a a person notices a charge for something on their bank statement that they didn’t purchase, they call their credit card company. That person generally gets their money back right away. The credit card company, however, then contacts the processor (in this case, Square), and so begins a complicated documentation process to determine whether or not the merchant who handled the fraudulent charge should be held responsible. The merchant either gets the money back, or they don’t. The process can take a few days or a few weeks.
According to Shvartsman, Square didn’t handle the chargeback process well at all. He writes that for each chargeback, he had to fill out a survey with supporting data and documentation about his transactions with the buyers. Meanwhile, Square withdrew the disputed funds from his store’s bank account. He writes that he wanted to speak to Square’s fraud prevention department to figure out how to best comply with the company’s policies to avoid future problems. He couldn’t find a phone number, so he sent an email asking about protection from fraudulent charges, saying, “I wanted to make certain that it’s safe for us to continue accepting large orders via Square.”
He wasn’t happy with the response he got from Square, about a week later:
Thanks for writing in. At this time, we do not provide live phone support. Our Support team operates over email in order to serve you most effectively. We also need to keep all communication with our merchants documented in writing.
Thanks for providing the requested information and documentation. We will respond to your customer’s billing disputes on your behalf and hope to receive a resolution soon. We will notify you once we’ve received a decision from your customer’s bank. Please note that it may take up to 90 business days to resolve these disputes, but we will provide updates throughout this process.
Square pointed him to a help page and an email address.
At that point, Shvartsman recieved another chargeback, raising the total cost to $US1,800. He writes:
$1800 is a lot of money to me. What’s worse, these items are sold on incredibly low margins. After the wholesale cost, shipping, and processing fees, I make approximately $US5 in net profit for each $US90 box of trading cards sold. (And that’s not counting fixed costs!) So an $US1800 loss wipes out profits from literally tens of thousands of dollars in sales.
He continued to use Square to process transactions on his website. Fast-forward to February 2014: In the first week of the month, recieved another chargeback from a transaction that took place back in November. He filled out Square’s documentation survey again, and received an email from the company that said:
Our Account Services team has concluded a review of your account and has determined it to be high risk. For security purposes, we have elected to deactivate your Square account. From the date of this letter forward, you will not be able to process credit card transactions using Square.
… We apologise for the inconvenience, but our decision is final.
Shvartsman wrote that it has been nearly 90 days since the initial chargeback and that he has received no updates throughout the process, that the company promised. The total he lost through the chargebacks was $US2,300, but he said that it will cost him more in business, because his website no longer gives would-be customers a way to make purchases while he scrambles to get PayPal installed (to replace Square).
[Square] created a cool, innovative product, but it seems that, as they rapidly grew as a company, they failed to build a robust customer service department or even a reliable way to communicate well with their own merchants.
Business Insider reached out to Square about its chargeback policies. Here’s what we got from a Square spokesperson:
Our goal is fast, efficient customer service that gets people immediate answers to their questions whenever and however possible. In addition to email and real-time Twitter support, we have a robust online Help Center that customers can visit anytime. We also provide phone support for some issues and continue to test new ways to help our customers as quickly and efficiently as we can.
Check out Alex Shvartsman’s full blog post here. We will update the post when we hear back from Shvartsman tonight.