Greetings,

Based upon a recent problem and very unsatisfactory resolution process, I would like to recommend that your Risk Manager add a new warning.  Specifically...

Selling e-gift cards using the links that Square provides to the online e-gift card sales portal is very risky.  This is due to the following reasons:

1) The sale of the e-gift is entirely handled by Square.  We (The merchants) have no opportunity to verify the customer’s identity, etc.

2) When customers dispute the transaction where the e-gift card was purchased, Square disavows any responsibility for the transaction.  Instead, after going through the dispute process, if the customer’s dispute stands then we (the merchants) are penalized.  Square’s dispute team then goes on to tell us (the merchants) what we should do to verify our customers, etc.  Of course, since we (the merchants) are not involved in the sale of the e-gift card at all, it is impossible for us to verify our customers, etc.  Square is instead telling us to do the very things that they are not doing, it seems.

3) If the e-gift card has not yet been redeemed, none of this is an issue.  However, as is often the case in e-gift card scams, if the card has been redeemed then we (the merchants) are out the amount of the fraudulent e-gift card, while Square (who transacted the e-gift card sale without our input) is completely off the hook.

This merchant is working on a procedure to have people call us so that we can process e-gift card requests over the phone instead of using Square’s convenient (but dangerous) online e-gift card sales portal.  I think that your Risk Manager should prominently alert people using Square’s e-gift card sales portal of the great risk in using it, because I have learned that using it is indeed a great risk.  Since the entire purpose of Risk Manager is to alert us to risks to our business, this seems highly appropriate.

Regards,

Chip