Square has started withholding some customer payments, angering business owners who say they need the money amid the coronavirus crisis
- Business owners say
Squarehas been withholding up to 30% of customer payments amid the coronavirus outbreak, forcing them to lay off employees or miss mortgage payments, according to a new report from The New York Times.
- Square has been using a tool called reserves, which is used to protect against "risky" transactions. But merchants told The Times they haven't had any such transactions flagged.
- Square said in a blog post that of its "millions of sellers, fewer than 0.3% have reserves on their accounts" and that is uses the tool sparingly, taking feedback from users.
- The company said in May that it has seen a "significant slowdown" during the pandemic, with losses totaling $106 million in the first quarter.
Business owners are outraged over what they say is a new Square policy that allows the company to withhold up to 30% of customers' payments, according to a report from The New York Times' Nathaniel Popper.
Square, the payments company run by Twitter CEO
But several sellers told The Times that Square was withholding thousands of dollars worth of payments for up to 120 days, despite them not having any risky transactions. The sellers said it has affected the health of their business, forcing them to lay off employees or miss mortgage payments.
Business owners told The Times that they felt as though they were helping keep Square afloat during the coronavirus outbreak. Given that Square focuses businesses with in-person retail experiences, the company has seen a "significant slowdown" during the pandemic, it said in a letter to shareholders last month, with its first-quarter losses totaling $106 million.
More than 1,400 business owners have now signed a petition asking Square to stop withholding the funds.
In the blog post, Square described reserves as "a common industry tool" and said it had implemented the practice to protect buyers, as well as to "enable more sellers to transact on our platform," noting that it had used the tool in 2019 to onboard CBD-focused businesses.
"We know that reserves can be frustrating for sellers so we use them sparingly, and we spend a lot of time building and adapting our tools based on feedback," the blog post said. "Recently we enhanced our reserves process by ensuring that sellers receive an even earlier notice of a reserve decision before the policy goes into effect. This gives them more time to choose whether they want to continue processing with Square under these new conditions, in advance of taking more payments."
Read the full report on how Square's new practices are affecting sellers over at The New York Times.
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