Square has eliminated holds and deposit limits for manually entered transactions in the U.S., and is marketing these changes to frustrated PayPal users.

Funds from swiped and non-swiped payments will arrive in Square customers' bank accounts within two business days, a speed Square is positioning as a benefit to merchants who accept payments in advance of meeting their clients.  Previously, Square set a limit of $2002 on manually entered transactions, and it deposited these funds over a seven-day rolling window.

With these changes in place, Square has begun directly courting merchants on Twitter, responding to people posting gripes about PayPal's policies. Several of the people Square reached out to posted complaints about the waiting period PayPal imposes on certain transactions (see below).



PayPal did not return a request for comment by deadline. The eBay unit recently began overhauling its risk policies for certain companies after facing a backlash from merchants who use PayPal in conjunction with crowdfunding systems such as Kickstarter.

PayPal's website includes an explanation of merchant payment, limits, and bank account transfer policies and its account verification processes. PayPal positions these policies as a risk management measure.

Square would not comment on how it's changing its risk management strategy to accommodate its removal of deposit limits.

"We are always working on our sophisticated risk models, which have allowed us to make this change," said Faryl Ury, a Square spokesperson, in an email. "This move is significant because it is another example of Square further removing barriers to growth for local businesses."

Square accepts payments through its portable card reader, which plugs into a mobile device's audio jack, or by manually typing the card number on a phone or tablet's screen. Previously, if a merchant exceeded Square's deposit limit, funds above that limit were not included in the merchant's next deposit.

"If you process $10,000 over several days, the faster that money can go into an account, the better is," says Vadim Semenov, co-owner of Planet Construction, which does renovations in the Sacramento area.

The holds previously in place would leave some funds unavailable for about 30 days, Semenov says, adding his company typically uses Square to process card payments taken over the phone. "If you're a small business it's difficult. The more there is in account, the easier it is to do payroll and buy materials, and to move on to the next project."

Many of these types of businesses have chosen not to use Square or PayPal's portable card reader, PayPal Here, because of the long payment windows, says Rick Oglesby, a senior analyst at Aite Group.

"[Square's move] will make things better for the few that have been willing to participate despite the obstacles, but more importantly it will make the solution far more appealing to those that have historically opted out," he says. "Therefore, it's a strategic decision to greatly expand their penetration into this particular market segment."

Square has made a number of moves over the past year to increase its appeal to merchants, including the launch of an online storefront.

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