Sarah Elizabeth
For ecommerce businesses, finding the right credit card payment processor can be challenging. Each business has a unique set of needs and requirements. Factors like costs (including transaction, setup and PCI compliance fees), ease of use and technology integration and implementation influence the final decision on which processor to choose.
Square offers convenience, fast payment processing, low fees and ease of use. Its functionality has made it a popular option for creating a frictionless, secure and integrated credit card payment system. But when it comes to ecommerce fraud, how does Square’s chargeback management measure up among a crowded landscape of established competitors and emerging payment technologies?
Square does offer chargeback dispute assistance to its business users; however, there are some limitations.
How Square Helps Businesses Prevent and Resolve Disputes
Businesses always prefer to catch fraud before it happens. But if fraud should occur and a customer files a transaction dispute, businesses want support that can guide them through the process.
Flagging Fraud Before It Happens
Square takes a proactive approach to fraud that includes:
- Providing tools that can help a business monitor activity to identify suspicious transactions.
- Using a combination of machine learning, human expertise, and Square’s extensive database of transactions to identify and flag emerging fraud strategies.
- Addressing a business’s questions directly via the Seller Community, where they can find the most up-to-date information on Square functionality as it relates to fraud protection.
Fighting Fraud with an Assist from Square
Square helps businesses manage fraud claims by streamlining the process of working with the customer’s bank during a dispute.
Businesses can screen for and manage potentially fraudulent transactions via Square’s Risk Manager tool. Square has information on the documentation businesses must submit to increase their chances of a successful claim when managing a dispute. The Risk Manager tool is currently free for Square business users. However, Square has indicated that in the future, they may offer a potential premium version where certain new features would include a fee and is not available on transactions processed via Square Virtual Terminal or Afterpay.
New Payment Methods, New Security Options and Concerns
Customers can complete a purchase at a business using Square via Cash App Pay. It’s a great way to provide customers with an alternative payment method. Working with Cash App Pay is slightly different from traditional Square payments when handling payment disputes and fraud claims.
A business that receives a fraud dispute from Cash App Pay is covered entirely by Cash App and owes no money for the dispute, with no additional action required. Businesses should be aware that this coverage doesn't apply to any other payment methods. In non-fraud disputes, Cash App does not cover sellers who receive a non-fraud dispute claim from Cash App Pay and the seller must follow the normal dispute process (which is similar to how all other non-Cash App Pay disputes are handled).
Cash App Pay may not be the best fit for every business. As of April 2024, Cash App Pay no longer supports international businesses, partnerships, multimember LLCs and large corporations, and these organizations must find alternative methods for payment processing.
Understanding everything that Square has to offer for payment processing will help a business get the most out of their payment technology investments. Staying up to date on how to manage risk related to chargebacks and payment disputes can help save time, money and stress in both the short and long term.
The Limitations of Square Chargeback Policies
Although Square offers chargeback support and other resources to businesses, these options come with some limitations. Here’s what businesses are most concerned about:
A Contract Isn’t Full Coverage
Square provides some options on creating a customer contract for businesses, providing an up-front set of terms and conditions that each customer agrees to when completing their purchase. Square contracts allow the business to quickly create and customize a contract for free. While a contract does help with clearly making the business case for refusing a refund, Square also makes their responsibility very clear: They are not a law firm, an attorney, or a professional advisor in any industry, and the templates they provide to individuals don’t constitute legal advice.
Risk Evaluation Is Only Part of the Puzzle
One feature that sets Square apart from other payment processors is how they predict a certain level of risk on each transaction. Square offers a more complete picture of transaction risk that goes beyond just assessing customer data to building their machine learning models on data across the Square payments ecosystem.
That means more data is at the business’s fingertips and risky transactions are easily indicated as moderate or high level. The challenge: A transaction that isn’t marked with moderate or high-level risk could end up as fraud. Overall, it’s still up to the business to determine what is and isn’t fraud, which can be an entire job on its own.
Square doesn’t automatically decline transactions marked as high risk if they aren’t confirmed as fraud either, and they don’t assume liability for payments — regardless of the risk evaluation they provide. Businesses looking for a comprehensive fraud protection platform for payment processing should consider all their own liability as well as what a payment processor can provide in terms of coverage, risk assessment and dispute management.
They’re Not Chargeback Experts
While businesses are happy to have someone in their corner to help mediate disputes, keep in mind that Square is in the payment processing business. That means they may not be able to guide businesses to successful resolutions and may not always be as thorough as an expert solution would be.
Prevent Square Disputes With a Fraud Protection Solution
The chargebacks landscape is continuously evolving. Disputing chargebacks requires more data analysis and collaboration on the business’s end. Data points like the device used to make a payment, the device’s IP addresses and customer data (such as user ID or telephone number) can help make the business’s case stronger against a chargeback.
Winning chargeback claims isn’t easy, even with support from a payment processor. Successful chargeback management requires research, staffing and meticulous record-keeping. Most small businesses may not have the bandwidth or resources to meet their risk management needs. Whether businesses are using Stripe, PayPal, Visa, Mastercard or another payment alternative, preventing and defending against chargebacks shouldn’t require a major lift.
To find out how ClearSale helps businesses prevent and dispute chargebacks, contact us today.
