I am the ghost of groovymother.com. Woooooo!

Squaring Up

The following is my answer to the question “How is Square going to give out merchant accounts with minimal verification while still preventing fraud?” on Quora

I’ve signed up for a merchant account with Square, and received my card reader today. There were several steps along the way that I noticed that could contribute to lowering fraud.

1. In order to start accepting payments, you need to supply a physical (non PO Box) mailing address so they can send you a card reader.
2. To activate the card reader, you need to supply your social security number so they can run a credit check on you.
3. Upon activation, you are limited in the size of transactions you can perform in a week. My limit is $100 per transaction, and $700 a week. Presumably these numbers will change as they become more or less confident in a user.
4. According to the TOS, new users, or users who have suffered chargebacks, might be required to lodge a reserve on their Square account before they can accept further payments.
5. Before they will deposit your money, you have to go through the standard “verify two sub-dollar deposits” test to ensure you have access to the bank account.
6. Transactions are geotagged based upon the cellphone’s location. This is presented as a handy feature for users, but I suspect it would make for interesting fraud datamining.
7. Swiping cards with a reader requires the presence of a physical card. Yes, they’re forgeable, but it’s still harder than entering a stolen number.