Who Provides Square’s Credit Card Processing Service?

Judging by an incessant stream of comments, emails and phone calls coming our way, there are quite a few Square users out there who believe that UniBul actually provides their service. At first I thought that these were just a few confused customers who somehow managed to link Square and UniBul, even as no such link exists or can be reasonably conjectured, but they just kept coming and still are.

Until yesterday, I never paid much attention to these things — comments and emails were promptly deleted or, in some cases, spammed, and voicemails were simply ignored. After all, what is there to be said about it? Well, yesterday I had an inspiration — having just read the latest such comment I realized that all these comments, emails and phone calls are quite revealing — they clearly show why you shouldn’t be taking on Square, unless you have PayPal-deep pockets. Incidentally, they also confirm an old observation of mine about the link between certain characteristics of new service inquiries and the ultimate value for the business of the customers who made them. It’s a fascinating subject.

‘Please Advise or I Am Quitting Square’

That is the threat at the end of a comment we received on a blog post about Square’s customer service issues. Here it is in its entirety:

I had a dispute from a customer and you charged back my account $583.00.

You sent me an e mail to explain back in February. I replied right away from your email, and I still have not heard back from you ….. NOT ONE WORD from you people.

That customer service really sucks!!!!!!

Please Advise or I am quitting square.

Clearly, this irate Square customer means what he says. Now, I ask you, how is it possible for anyone to come to this blog and conclude that UniBul provides Square’s service? I mean, even if you’ve never read a single word on our blog — and our indignant correspondent clearly hasn’t bothered to do so (which is a capital offense in its own right) — and you were just looking at the pictures, how can you possibly link UniBul to Square? Well, I’ll leave you to search for answers to this conundrum. I, for my part, am thankful to this commenter for proving a point I made recently about the importance of setting up a process to weed out undesirable customers.

Everyone Is Welcome!

A couple of months ago The Economist ran an excellent article on how companies are using new technologies to assess the creditworthiness — or to “weed out likely deadbeats”, as The Economist delicately put it — of existing and potential borrowers. You should go read the entire piece, but here is the paragraph, which bears most closely on the subject at hand:

As statistics accumulate, algorithms get better at spotting correlations in the data. Applicants who type only in lower-case letters, or entirely in upper case, are less likely to repay loans, other factors being equal, says Douglas Merrill, founder of ZestFinance, an American online lender whose default rate is roughly 40% lower than that of a typical payday lender.

What is the relevance? Well, bear with me for a minute. Years ago I noticed that service inquiries we received on our websites which shared certain common characteristics were much less likely to lead to a positive outcome than the average inquiry — the applicant would either be unqualified or would not follow up with me, after I responded to his information request. Such characteristics include typing entirely in upper-case (not in lower-case, though), using poor grammar and an urgency to get an account up and running just as quickly as possible. And so I clearly saw the benefits in using unorthodox and alternative data to pre-qualify leads.

And here is the point: Square does not do any pre-qualifying worth noting — they give an account to everyone who asks for it. As a result, not only is the company losing money on the vast majority of their accounts — simply because most accounts are used either never or very rarely — but they are stuck with legions of loss-making customers who demand real-time customer support (small wonder that Square still has not published a customer support number on its website). Now, for Jack Dorsey, such a strategy makes sense — he is perfectly happy to lose money on most user accounts, as long as the processing volume as a whole keeps growing and as Square keeps establishing itself as the dominant force in the direct mobile payments acceptance industry, which he created. Crucially, however, Dorsey has access to hundreds of millions of dollars to bankroll his start-up’s strategy and he is spending the loot with abandon. Not many of his competitors, not even some of the biggest among them, can keep up with him, though. Only the ones with the deepest pockets, like PayPal, stand a fighting chance.

The Takeaway

So it’s all very well if you are the Twitter-famed founder/CEO of a cool, household-name mobile payments service, but what about the rest of us who are not famous and don’t have hundreds of millions of dollars to spend on business development? Well, in that case it would make sense, I think, to use some care when pre-qualifying your potential customers. In any case, that is what we are doing here at UniBul and is working well for us. And what about our angry correspondent and everyone else who thinks that we provide Square’s service? Well, we can’t help you, sorry.

Image credit: Squareup.com.