Payments Companies Increase Reserve Requirements to Detriment of SMBs

The current crisis has shown itself to have a long list of unintended consequences and increased reserves on payments is one that has hit small businesses especially hard; due to less volume and a higher chance of chargebacks payments firms are telling companies they need to hold a potion of their sales in reserve; according to Chargebacks911, a group that helps retailers manage disputes, chargebacks have climbed 25 percent as compared to a year ago; Square for example has told certain merchants they need to hold 20 percent in reserve and the money would not be released for months; “Like most payment processors, we may use reserves to enable riskier businesses to continue processing payments through Square while ensuring these sellers are able to cover issues like disputes, refunds, or outstanding fees without running a negative balance on their accounts,” Square said in an emailed statement; small businesses have felt the brunt of the pandemic and payments reserves is just the latest barrier they are forced to overcome. American Banker

  • Peter Renton

    Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.