Can Square be Trusted for Your Business?

The quick answer is yes—for most small, low risk businesses, Square provides a secure, compliant, and reputable payment processing solution. However, there are some risks to weigh if you operate in a high chargeback industry or at larger transaction volumes. Let‘s dive into the details on Square‘s security, transparency, track record, and potential limitations.

Is Square Secure and Trustworthy?

Square utilizes strong encryption, tokenization, fraud prevention tools, and other security measures to protect your data and transactions. Here are some of the key reasons why Square meets modern standards for a trusted payment processor:

• End-to-end encryption – Card data is encrypted as soon as it‘s read by Square‘s card reader, and it remains encrypted as it‘s transmitted and stored. This prevents interception of sensitive data.

• Tokenization – Card numbers are replaced with unique tokens during processing so the full number is never stored. This means Square has no valuable card data for hackers to steal.

• EMV and NFC support – Square‘s readers can accept EMV chip cards and contactless payments which offer enhanced security.

• PCI compliance – Square maintains Level 1 PCI DSS compliance, the strictest standard for safeguarding cardholder data.

• AI fraud prevention – Proprietary machine learning algorithms monitor for suspicious activity and anomalous transactions to detect fraud.

• Insurance – Square offers protection from fraudulent chargebacks up to $250,000 per year. This covers you in case of disputed charges or scams.

According to Square’s last transparency report, less than 1% of transactions on Square involve suspected fraud—a rate on par with competitors like Stripe. Overall, Square exceeds industry security standards which is why large retailers like Starbucks trust Square with payments.

Does Square Have a Good Business Reputation?

Square is a large, publicly traded fintech company with a valuation of over $50 billion as of 2022. They‘ve been in business since 2009 and have an overall positive reputation based on:

• Strong leadership – Co-founder Jack Dorsey also co-founded Twitter and served as the CEO of both companies. This inspires confidence in Square’s direction.

• 43,000+ positive merchant reviews – On Trustpilot, Square maintains a “Great” 4.2 out of 5 star average rating from thousands of satisfied business owners.

• Mainstream adoption – Square powers payments for mainstream sellers like Nike and Nestle without issue. Over 2 million businesses actively use Square which indicates reliability.

According to the 2022 Nilson report, Square ranks #6 among payment processors based on purchase volume market share. For a company less than 15 years old, Square has rapidly gained trust in the industry by repeatedly delivering for sellers and buyers.

Is Square Compliant and Transparent?

As a financial services provider, Square is subject to oversight, regulations, and security requirements including:

• State money transmitter licenses – Square maintains licenses to legally operate as a payment processor in all 50 U.S. states.

• FDIC insurance – Square Checking accounts come with FDIC insurance protection up to $250,000 per account for bank-level security.

• KYC and AML compliance – Square verifies merchant identities and monitors for money laundering to comply with financial laws.

• Public company obligations – As a publicly traded company, Square must abide by accounting, compliance, and transparency requirements.

• PCI compliance – Square complies with technical standards set by the Payment Card Industry for securely handling transactions.

By meeting regulatory and compliance burdens, Square demonstrates a commitment to transparency and fair business practices. This reduces risks to customers compared to non-compliant processors.

What Are the Limitations and Downsides of Square?

While Square excels at serving low risk, small businesses, there are some caveats depending on your business model:

• High volume pricing – Square’s transaction fees of 2.6% + $0.10 are competitive for low volume sellers, but get expensive for large ticket sizes compared to interchange-plus pricing.

• High risk industry challenges – Some higher risk sectors like CBD have reported issues getting approved and staying compliant with Square.

• Account terminations – Complaints of surprise account shutdowns and withheld funds persist, especially among high chargeback sellers.

• Chargeback liability – Merchants assume greater liability for disputed transactions and chargeback costs compared to some processors.

• Lack of dedicated support – Larger businesses may desire a dedicated account manager, which Square does not provide. Support is primarily self-service.

If you expect to process over $100K per month in card payments, operate in a risky industry, or depend heavily on customer support, then a traditional merchant processor may be a safer choice than Square.

Is Square Right for Your Business?

Square is a great solution for the vast majority of low volume, low risk small businesses. If you identify with the following profile, Square is likely a fit:

• Sell less than $50K per month in card transactions
• Operate in a standard, non-prohibited industry
• Have minimal chargebacks and disputes
• Appreciate DIY setup and support
• Want reliable tech from a reputable company

Businesses in food services, farms, salons, retail, and professional services excel with Square‘s transparent pricing model and robust software tools.

But enterprises processing over $1 million annually in payments or classified as high risk may want to opt for a processor that offers interchange-plus pricing, dedicated support, and customized underwriting.

The Bottom Line

Square has earned a reputation as a trusted, secure, and compliant processor thanks to its transparency, technology, and responsible business practices. Fraud prevention, encryption, and compliance separate Square from shady processors.

Of course, Square must make tradeoffs like any processor and isn‘t a perfect fit for every business. Yet its track record serving micro sellers up to the Fortune 500 demonstrates Square‘s ability to competently evolve with customers. For most small businesses, Square remains a top choice for taking payments while protecting your data and reputation.