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Square Cash Is Cool, but Are There Legal Risks?

By Brett Snider, Esq. | Last updated on

Square Cash is the newest way for individuals to email money to one another, but will the legal risks keep businesses from adopting it?

According to The Wall Street Journal, Square Inc. -- best known for equipping small businesses with a way to use mobile phones and tablets as cash registers -- launched Square Cash on Tuesday, allowing users to send up to "$2,500 a week" from one debit card to another (as long as it's a Visa or Mastercard).

But mobile payments always have their downsides. So what potential problems may exist with Square Cash?

Debit to Debit Transfers With Square Cash

The Journal reports that Square Cash works by simply sending an email to the person with whom you want to share money, with the amount as the subject line and in the "CC" field. Square will then:

  • Email the sender a link asking to verify that person's debit card information (one time only), and
  • Send a similar email to the intended recipient asking for the recipient's debit card information so that the funds can be transferred.

If the recipient accepts the transaction, the funds will appear in the recipient's account in a few days. There are no transaction fees.

Unlike with Square's flagship credit-card payment method (which requires either a monthly or per-swipe transaction fee), Square Cash doesn't involve credit cards or any physical device, which may ease some lawmakers' worries.

Mobile Payment Concerns

Despite only using debit cards and not requiring users to sign up for accounts, Square Cash does leave some legal room for worry.

Unlike some of the more compliant methods of payment, transactions using Square Cash are mostly final and there is no obligation on Square Cash's part for fraud. The WSJ reports that Square will agree to reverse fraudulent transactions, but unlike PayPal, it does not have a very comforting or aggressive fraud policy.

Similar to businesses that are considering Bitcoin, entrepreneurs will need to decide if these mostly anonymous forms of cash transfer are something you want for your business.

For many sole proprietors who work mostly on a contract basis, Square Cash may be a far more convenient way to collect clients' payments than waiting for checks to arrive via snail mail. But doing so could potentially leave you vulnerable to fraud, and with very little paper trail of your transactions.

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