

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

======
creeble
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
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
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.

~~~
jes5199
Definately the US banking systems also still have the feeling that there's
been an accretion of layers of technology over ancient systems. APIs that look
like XML files wrapping fixed-field-length VAX-style data. It made me wonder -
are there still mainframes under there? Or mainframe software being run in
emulation? Or are the systems just patchworks maintaining the 1970s
interchange formats because no one can stand to making breaking changes?

------
atonse
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-...](http://www.npr.org/blogs/money/2013/10/04/229224964/episode-489-the-
invisible-plumbing-of-our-economy)

~~~
rsync
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.

~~~
lsc
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.

~~~
joezydeco
Wow, and this podcast was done by Bloomberg and Kestenbaum, two of their
_better_ reporters.

I mean, yeah, it's NPR. You're not going to get amazing voice talent reading
the stories. I don't feel talked-down-to as much as I feel like I'm hearing a
work done by second-year broadcasting students trying to finish a project.
Listen to Chana Joffe-Walt or Zoe Chase sometime.

But if you think _this_ podcast is annoying, best you skip the rest of them...

~~~
lsc
nah, the voice acting is fine. And certainly, I'm not claiming that they are
objectively arrogant, or that a 'reasonable person' would feel talked down to,
and when you get down to it, I'm the last person to call someone else out on
arrogance.

It's odd, too, as the non-financial stories on, say, this American life
usually doesn't trigger the same response. (I mean, I'm not a huge fan of this
American life, but not because I feel talked down to.)

I was commenting mostly because I find my own reaction... unexpected. And I
think the question "what is arrogance?" is an interesting one. Different
people will perceive vastly different levels of arrogance in the same document
or reading.

------
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.

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

~~~
jes5199
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.

~~~
jasonlotito
The reason why it wasn't done to any great degree is that banks generally
frown on this, and when I was last dealing with them a few years ago, Visa and
MC would see a rise in refunds sort of like a chargeback. It wouldn't cost you
a penalty, but do too many and you'd be at risk to get shut down.

------
jmtame
I personally liked this explanation better: [http://www.quora.com/Square-
Cash/How-does-Square-Cash-work-t...](http://www.quora.com/Square-Cash/How-
does-Square-Cash-work-technically)

------
joshstrange
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/](http://www.fuzenetwork.com/contact-us/) linked to from here
[https://github.com/balanced/balanced-
api/issues/32](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](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.

~~~
encoderer
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
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.

~~~
encoderer
I thought that was only true when processed over the debit network? That is,
when using pin transacations. In my experience debit cards processed over Visa
or MC network have identical fees to the merchant.

On the money-sender side, debit cards have far fewer consumer protections so
will result in fewer successful chargebacks. Whether that had anything to do
with it, I have no idea.

------
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!

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

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

~~~
jonbwhite
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.

------
Codhisattva
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.

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

~~~
objclxt
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.

~~~
jonbwhite
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.

~~~
PeterisP
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.

------
yrral
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](http://www.crunchbase.com/company/offermatic)

------
Zoomla
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?

------
not_that_noob
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.

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

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

~~~
a3voices
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.

------
shloime
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.

------
source99
How does square make money(or not lose money) in this transaction?

