Back in mid-May, Square quietly launched a landing page for a feature that helps small business owners create contracts that protect them from buyer chargebacks and other credit card disputes. It hasn’t publicly announced them yet, but in an interview, Square told The Verge why it launched these contracts, which will be promoted to business owners starting in August.
Kay Feker, Square’s risk program manager, noticed earlier this year that customers were increasingly asking for money back after a successful transaction. Even if they were satisfied with several home repairs, for instance, they would protest the final transaction and the business owner would have no real choice but to return their money as a result.
“These days with the increase in online purchases, you lose that sense of human interaction, so you’re more willing to send chargebacks along for all these purchases,” says Feker, explaining the uptick in transaction disputes over the last few years.
Customers can’t just say, “I don’t like the color of this T-shirt anymore”
Square says that business owners who are taken advantage of by customers charging back on goods and services could easily save money with a contract that details the terms of a transaction. The chances of winning a credit card dispute are nearly twice as high when contracts are used, according to Square. But the agreements aren’t supposed to help in the case of credit card fraud, when the affected customer generally holds no responsibility.
The landing page, which is also open to non-Square users, lets owners make custom contracts that follow specific state guidelines and a variety of templates depending on the service. Square says business owners can give customers contracts before the transaction is fully completed to ensure that if the item or service is delivered to satisfaction, the customer can’t just chargeback or insist the product never showed up.
“Now you can’t just say ‘I bought this T-shirt, paid them, but I don’t like the color. I want my money back, I expected something different,’” Feker says as an example. “The business owner will now prove it: here’s the color, it was indeed delivered as described.”
Square doesn’t make sellers pay it chargeback fees, which is standard practice for many payment platforms, including PayPal and Stripe. But it does offer sellers up to $250 of chargeback protection per month, so it’s likely that these contracts will help Square’s finances even indirectly. “We’re not looking to profit off this,” says Feker, “But we’re a business, too, so if the seller loses, Square loses as well. This insures we protect our relationship.”