[encoderer]

To be fair, it's not some amazing flash of brilliance that led to square realizing you can "refund" a card without a charge first.

About 4 years ago I was building a payment processing solution for an ad network (something along the lines of an adsense clone) and for new users we needed to support micro-deposit verification. Usually this involves ACH deposits but to cut down the time it took, I implemented this using the Cybersource API against debit and credit cards. Obviously sending somebody money only reliably works with debit cards, because many people don't use a credit card often, but I just want to downplay the rhetoric in this post about squares unique brilliance in this regard.

[djcapelis]

It's not a flash of brilliance for thinking about it, it's a flash of guts for building a product around it.

[jes5199]

Yeah, I second this. When I was at Square (a year ago), we knew the banks' APIs would allow "refunds" of arbitrary amounts, but it was a sort of "gee, isn't that odd" piece of information - it certainly didn't occur to me that it would be reliable enough to replace ACH. I'm super-curious about who made the call to use it this way.

[jasonlotito]

The reason why it wasn't done to any great degree is that banks generally frown on this, and when I was last dealing with them a few years ago, Visa and MC would see a rise in refunds sort of like a chargeback. It wouldn't cost you a penalty, but do too many and you'd be at risk to get shut down.