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Square shores up losses by withholding money from small businesses

(BUSINESS NEWS) Square is losing money like many other companies due to COVID-19, but their way of padding this loss doesn’t seem fair or friendly to their small business customers.

square greediness

Another month has started and as we sift through information on our television or computer screens, one thing in general is consistent. Everyone is struggling and it’s showing in their choices. We’ve seen company after company close their doors forever and many are small businesses. The affect the pandemic has had on smaller business is severe, but the affect that larger businesses are making on them is starting to cause an uproar.

The pay service, Square, has pulled some legal yet disturbing shenanigans lately. A growing number of small business owners have started reporting that the company has been withholding up to 30 percent of each transaction since May. This has caused major issues with some of the aforementioned smaller companies as they’ve had to start laying people off, taking out loans, missing mortgage payments, and stoping growth plans because they aren’t getting the money that they earned.

Withholding portions of transactions is a legal aspect for any payment company. In fact, Square has long made the vast majority of its money by deducting 2-4 percent of a purchase in fees from each transaction. However, the jump up to possibly 30 percent was unprecedented until the pandemic for the most part.

Square announced that the reserves were applied only to “‘risky’ sellers, such as those that take prepayment for goods or services deliver at a future date, sell goods or services more prone to disputes, or operate in an industry that historically receives higher chargeback rates than others,” and the intention was to protect everyone involved with the transaction. One does notice however, that the companies who are noticing this increase in withholdings are the ones that weren’t hit particularly hard by the lockdowns. So then where is the money going to and is it all legal?

As you can imagine, the San Francisco company has been hit pretty hard by this pandemic as their main form of business is in-person sales. The assumption from this is that they are using legal means to possibly pad their own cushion while they wait for sales to get back to some kind of normal. Square announced last month in a financial report, that it had swung to $106 million in losses for the quarter and that it was going to increase cash it had on hand by 290% to pad future losses. So we know exactly where the money is going.

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What we may want to ask though is if the legal right to withhold payment is justified when they are spreading out the pain of the pandemic to people who were previously unaffected?

Robert Raney is a geoscientist whose been writing and painting for years to get his creative fix in. While working on his thesis in theoretical planetary physics he was also creating fantastical worlds on paper for fun. He's an at home Texan Houstonite who currently works slinging drinks at a local LGBTQ+ bar in the gayborhood, when not fielding oil & gas jobs that have taken him around the world.

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