How Square moves Cash

http://jonbwhite.tumblr.com/post/66853226398/how-square-moves-cash

by jonbwhite • 13 years ago

86 42 13 years ago

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Codhisattva2• 13 years ago

Using the debit card system is not innovative and it's not "cash" either. But don't mind me, I just hate the credit card industry and wish it would roll over and die already.

jonbwhite4• 13 years ago

Point taken, but given ACH as the alternative, I still think this is a step in the right direction.

objclxt• 13 years ago

I think the right direction would be to have a system of inter-bank transfers that was instantaneous, and didn't suck. The banking system in, say, the UK isn't perfect by a long shot, but at least I can move money from one bank account to another (across banks) a) instantaneously, and b) for free.

The fact that the US insists on operating on such a terrible system where it takes five business days reflects really badly on the infrastructure in place.

So on the one hand, I really like Square Cash as a concept. On the other, I wish banks would actually stop sitting on their hands and make a transfer system that works. Of course, there's no incentive for banks to do that, because they can keep charging money for 'instant' wire transfers right now.

Codhisattva2• 13 years ago

No way. Feeding the credit card system is feeding children to satan.

Replacing ACH is a much better solution. Like what Dwolla has done.

not_that_noob• 13 years ago

Very interesting. The big concern here is what exactly happens in case of fraud. With credit cards, this is less of a hassle for the consumer, since the issuer takes the hit. With debit, it's a pita to get your money back if it's stolen. I use my debit card only at the ATM for this reason.

jonbwhite4• 13 years ago

Yeah, it's unclear what Square's responsibility is in this situation, especially since they are indirectly performing transactions on your behalf.

joshstrange• 13 years ago

Are there any API's out there currently that allow you to issue a debit card refund like this?

After some googling I found this: http://www.fuzenetwork.com/contact-us/ linked to from here https://github.com/balanced/balanced-api/issues/32

I tried to use their contact form but was redirected to what looks like a version of their site that isn't supposed (or expected) to be public yet. From there I find a link to this page: http://info.fuzenetwork.com/developer-center-fuze-network and I was able to submit the form.

Edit: I received an email after signing up but it seemed a little half-baked. I would guess that they are still working on their product and aren't ready to launch just yet.

encoderer3• 13 years ago

Debit-card only is something you'd need to determine yourself. But any merchant account API lets you issue refunds in this way. I've used Cybersource for it myself.

And of course, has anybody verified w/ Square that it MUST be a debit card. It could also just be a marketing distinction. For me, I NEVER use a debit card -- i abhor them -- and put everything on a credit card. So I wonder if it would let me provide a credit card number. For a friend sending me $20, it's no difference to me whether it goes directly to my Amex or makes a brief stop in in my bank account first.

andrewpi• 13 years ago

Another reason they probably have the debit card restriction is due to the fact that the fees on debit card transactions are much cheaper than credit card processing fees.

nayefc• 13 years ago

I'm not sure where you got this from. But Visa already supports P2P payments for its acquirers: https://developer.visa.com/vpp/.

Venmo uses it. Square probably does it as well. Mastercard has an equivalent.

jonbwhite4• 13 years ago

Transactions via Square Cash show up as "transaction adjustments" in my bank account. It is possible that Square is using VPP and that is simply how Visa distributes the payments, but it seemed to be different to me.

yrral• 13 years ago

Offermatic [0] used to do the same thing with issuing refunds to cards. They could offer rewards such as "Get 10 dollars off your next purchase > $50 at xyz". They would poll your cc to check for the purchase at xyz and you would then see a refund for $10 from offermatic on the same card. I personally thought that this company had a lot of potential.

[0] http://www.crunchbase.com/company/offermatic

creeble• 13 years ago

This is what x.com (aka payPal) did in the earliest days. You could submit a credit transaction to a credit card without an initial charge.

It worked, but it was strictly against Visa/MC policy, and they had to stop. By that time they had some critical mass and got ACH going quickly.

I don't know if it's the same thing with debit cards, but I suspect it is -- the transaction goes through Visa/MC, but settles via ACH once it's known that it's a debit card.

But Square might be big enough to change the policy. Especially since Visa is an investor?

mey• 13 years ago

The debit networks don't universally allow for refunds, even for legitimate transactions. Additionally it is generally against their terms of use.

Either Square is flying under the radar or has gotten special permission to do this.

bmcleod• 13 years ago

We've been looking at the payments infrastructure in New Zealand recently and have discovered that, unless you find whoever wrote something 30 years ago, most of the senior payments people have limited and ofter contradictory understanding of the capabilities of the underlying systems.

atonse• 13 years ago

By the way, Planet Money (a public radio show in the US) had a great episode on how ACH works, and the history behind it.

Excerpt from summary: "On today's show: Why the invisible pipes that move money around America are so slow. (And why the ones in England are so much faster.)"

http://www.npr.org/blogs/money/2013/10/04/229224964/episode-...

rsync• 13 years ago

I keep seeing this radio program referenced every time a thread comes up related to (blah blah ACH...).

So I listened to it. It wasn't that interesting. If you had never heard of ACH before, it would perhaps be illuminating, but if you already have a decent grasp of the existence of this system and it's shortcomings, there's not a lot more meat in that program...

YMMV.

halcyondaze• 13 years ago

Why listen to it when it's a layman's finance podcast if you already have a decent grasp of ACH and it's shortcomings? Did you really expect them to be giving an in-depth look at ACH for their 3million+ audience?

lsc2• 13 years ago

What I find interesting about the program is that I have an emotional reaction like they are talking down to me.

I mean, yeah, it's a podcast targeted at the average person, sure, I'm not expecting them to really go deep. But I don't know very much about that sort of thing, so sometimes they really are giving me information I don't have.

But the tone? Well, it really does feel like I'm being talked down to. I do not know why. I find my own reaction odd, and I've listened to the podcast several times in an effort to try to figure out what, exactly, I found condescending.

It's especially odd because I'll listen to other podcasts targeted at the average person, and I'll be entertained or informed, and I won't feel like they are talking down to me. There's something about the planet money folks that sets me off.

joezydeco2• 13 years ago

Well they have 22 minutes to fill and the situation with ACH is pretty simple. Antiquated system, no motivation to change, done.

Planet Money's original charter was to explain what was happening, literally day-by-day, as the 2007-2008 financial meltdown was happening. And those were pretty informative and well-written shows.

ajtaylor• 13 years ago

The most interesting part was at the end when they talked about a proposal & vote to upgrade the payment network (and not even real-time like England's) which failed to pass. A later survey found that the prime reason was cannibalisation of existing revenue streams - aka wire transfers.

Having lived in the US, Ireland and Australia, I find the US banking system to be archaic compared to Ireland or Australia's. I can pay anyone up to around 1000 EUR/AUD in a few clicks. No fees or waiting days for money to show. It's brilliant!

encoderer3• 13 years ago

To be fair, it's not some amazing flash of brilliance that led to square realizing you can "refund" a card without a charge first.

About 4 years ago I was building a payment processing solution for an ad network (something along the lines of an adsense clone) and for new users we needed to support micro-deposit verification. Usually this involves ACH deposits but to cut down the time it took, I implemented this using the Cybersource API against debit and credit cards. Obviously sending somebody money only reliably works with debit cards, because many people don't use a credit card often, but I just want to downplay the rhetoric in this post about squares unique brilliance in this regard.

djcapelis• 13 years ago

It's not a flash of brilliance for thinking about it, it's a flash of guts for building a product around it.

jes51992• 13 years ago

Yeah, I second this. When I was at Square (a year ago), we knew the banks' APIs would allow "refunds" of arbitrary amounts, but it was a sort of "gee, isn't that odd" piece of information - it certainly didn't occur to me that it would be reliable enough to replace ACH. I'm super-curious about who made the call to use it this way.

jmtame• 13 years ago

I personally liked this explanation better: http://www.quora.com/Square-Cash/How-does-Square-Cash-work-t...

iamleppert• 13 years ago

This is all irrelevant when Bitcoin supplants all these silly money transfer companies anyway.

a3voices• 13 years ago

I agree. Bitcoin is a technological advance for all of civilization (like the printing press), while Square is just a slight optimization of the status quo.

pbreit• 13 years ago

"Original credits" have been around forever but they are typically watched pretty closely by the acquirers, processors and associations (V, MC) since they are ripe for enabling fraud. But I could imagine someone with Square's clout could work out a deal with Paymentech/First Data and/or Visa/MC (Visa is an investor).

As someone mentioned, we did this at PayPal a long time ago but it was frowned upon. We even looked at refunding prior credit card charges that were unrelated to the new payout. We'd even make money on those txns!

kapilkale• 13 years ago

These have colloquially been referred to as blind credits, and are seriously frowned upon by the card networks. We told a Visa exec that we were planning on doing these and he said that at any substantial volume, we'd get shut down.

Square has a totally different cachet than GiftRocket does, so they may actually be in a position to bend the rules. Seemingly, other smaller payments providers have been able to implement APIs around this.

Zoomla• 13 years ago

I always wondered how can ACH be automated and take days to process transactions? Do they use an almost infinite number of monkeys for their automation system?

source99• 13 years ago

How does square make money(or not lose money) in this transaction?

shloime• 13 years ago

I tried Square Cash. Sent a payment to a friend and immediately received a notice that due to fraud detection my account had been permanently closed. Completely turned me off from Square and I don't ever intend on using one of their services.

How Square moves Cash

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