CNN recently published an article which gives a breakdown of what’s going on with an express focus on Square. In the Wall Street Journal, Pete Rudegair wrote the following on the topic, “Payment processors tell customers they will take care of the nagging details. But lately, they are emerging as yet another headache for businesses hit hard by the new coronavirus.” Indeed, MSPs (merchant service providers) are creating a minor but snowballing issue.

So far, PayPal, Square, Stripe, and WorldPlay have all begun issuing a policy of holding money. They have applied this policy in varying numbers, with Square reportedly holding as much as 30% of sales. Timelines were unclear, leading to confusion from many users of these payment processors, but seems to be as long as a 120-day rolling reserve. These funds are being held in a reserve account, which was a previously rare practice for low risk businesses that these aggregators are best for.

However, MSPs are using this ability with increasing frequency since the beginning of the coronavirus pandemic. Square has been the most vocal about the practice, explaining that the decision is based on many factors. These include their perceived proneness to chargeback risk and the length of time that a company has been using their service. Square says that the businesses most likely to be affected are those that ask for payment prior to delivery of a service or good. This is a method of protection for the merchant service provider, which should theoretically extend to the user. Square estimates that only 1% of their customers will be affected, but the policy does not seem in line with that information.