Square roll-out delayed over security concerns

Much-hyped payments start-up Square has been forced to delay shipping its product that turns mobile phones into payment card readers because of emerging fraud concerns, with founder Jack Dorsey admitting parts were released "before they were fully baked".

  0 1 comment

Square roll-out delayed over security concerns

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

Unveiling his new firm to much fanfare in December, Twitter founder Dorsey predicted Square would be available for customers in the US early this year.

Now, in a letter to customers, he admits "we've let our excitement get the best of us" and says "we realize the amount of time we've taken to ship our Square readers has been frustrating, sometimes confusing, and has generated a number of questions".

The start-up initially suffered from hardware shortages but says this has been resolved with manufacturers in China.

However, a new problem has emerged. According to a letter to users from the Square support team: "We need to strengthen our underwriting infrastructure so that we can handle the huge demand for readers and still manage the risk of chargebacks and fraud."

Dorsey says Square initially moved to negate the risks by setting transaction limits but these have been set too low according to customers, prompting "rethinking and expanding" of the underwriting infrastructure.

The letter provides no details on when the product may be ready to ship, with Dorsey signing off: "We thank you for your continued patience as we work to deliver a utility you can use every day and for allowing us the time to get it right."

Finextra verdict: Reality bites for Square. Overly-hyped by the starry-eyed Silicon Valley tech press, Jack Dorsey and Co are discovering the hard way that payments processing is not as easy or as simple as it might first appear. Innovation has its place, but in the money-changing business it has to be backed up by a resilient infrastructure and water-tight contracts. There's no place for a fail-whale in the payments sphere.

Sponsored [Webinar] Operational Resilience in the age of DORA

Comments: (1)

Nick Green

Nick Green Consultant at ISD Consultants

"Jack Dorsey admitting parts were released 'before they were fully baked'." I'd suggest that it's not even half baked yet. From the American Banker "Square charges 2.75% plus 15 cents, and on keyed-in transactions where a card is not present, the charge is 3.75% and 15 cents" which sounds worse than some bank MSC. I'd be interested to know what Dorsey is doing about PCI-DSS, PA-DSS et al. Will the product support the current 'flavour of the year' end to end encryption? I'm sure the fraudsters will be keeping an eye on eBay for a job lot of cheap square skimmers.

[Webinar] Operational Resilience in the age of DORAFinextra Promoted[Webinar] Operational Resilience in the age of DORA