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How Square moves Cash

jonbwhite.tumblr.com

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Re: How Square moves Cash

#21

Post by pbreit »

"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!

Re: How Square moves Cash

#22

Post by PeterisP »

objclxt wrote: post #7
jonbwhite wrote: post #3

Earlier quoted context omitted.

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

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 bad…

Payment delay has only a little bit to do with infrastructure and a lot with competition and incentives.

If you're required to do, say, next-business-day payments but your infrastructure gets them done in 5 minutes, you could still want to delay all those payments to the next day since there it makes a significant addition to your revenue (float of the money held, interest on overdue customers, payment fees for 'more-urgent' payments) - unless competition forces you to do so.

Banks aren't sitting on their hands - you should expect a "transfer system that works" from banks as soon as someone actually threatens to outcompete them. Square Cash doesn't seem to be that thing - it relies on banks allowing the debit-card-refunds (AFAIK they are allowed to kill this ability as soon as they wish to), and I'm sure the banks make sure they earn 'their due' in fees on every such payment anyway.

Re: How Square moves Cash

#23

Post by PeterisP »

jonbwhite wrote: post #9
objclxt wrote: post #7

Earlier quoted context omitted.

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 bad…

Square is taking advantage of the existing terrible system to give users an experience that is a step in the right direction. But I agree having instantaneous transfers instituted at the bank level would be real progress. Unfortunately congress can't even agree on the incremental changes it makes to the existing system, so I have little hope for sweeping reform.

As the global experience shows, it won't happen without government regulation forcing it - the current system has a strong financial motivation to keep it slow and expensive forever, but other than that there aren't any serious obstacles.

Re: How Square moves Cash

#24

Post by djcapelis »

encoderer wrote: post #16

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…

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

Re: How Square moves Cash

#25

Post by andrewpi »

encoderer wrote: post #18
joshstrange wrote: post #5

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…

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 cr…

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.

Re: How Square moves Cash

#26

Post by kapilkale »

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.

Re: How Square moves Cash

#27

Post by bmcleod »

mey wrote: post #13
creeble wrote: post #12

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…

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.

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.

Re: How Square moves Cash

#28

Post by recuter »

bmcleod wrote: post #27
mey wrote: post #13

Earlier quoted context omitted.

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.

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.

Well... that is horrifying.

Re: How Square moves Cash

#29

Post by ajtaylor »

atonse wrote: post #14

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-...

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!

Re: How Square moves Cash

#30

Post by a3voices »

iamleppert wrote: post #19

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

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.
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