It looks like the honeymoon is over for iPhone-credit-card-payment-thingy Square, which has admitted that it needs a bit of a strategy rethink.
Following problems with the supply of hardware (Square essentially plans to provide users with a small device which plugged into iPhone and Android mobiles, allowing it to scan credit cards), the much-hyped (and we’ve probably been guilty of that) brainchild of Twitter creator Jack Dorsey has now admitted to a bigger problem:
Until recently, we were facing a big hardware shortage, but that is now resolved (we sent our co-founder Jim to China for a couple weeks to arrange better manufacturing, and that did the trick). The problem has transitioned to something we’ve been working on simultaneously, a credit processing and risk issue. We need to strengthen our underwriting infrastructure so that we can handle the huge demand for readers and still manage the risk of chargebacks and fraud. This is the last thing preventing us from shipping readers as fast as we’d like, and we have pretty much the entire team working on it.
Square had initially wanted to minimise the risk of chargebacks by limiting the size of the transactions that Square would authorise, but feedback suggests these limits have been set too low.
It’s a reality check for the startup which was looking to shakeup the credit card payment industry, yet admitted they’d got a little carried away so far.
They seem to be finding that in the payment game it’s not the technology that’s the problem, but human nature and the need for a stack of cash to provide themselves with backup.