73.3% YoY to $591 million in the quarter. By holding merchants' funds in reserve, processors can ensure they can repay refunds and handle disputes without increasing their own losses if merchants are unable to address them because they've gone out of business or for other reasons.
Square's seller base is largely made up of smaller merchants that may not be able to operate without access to all of their funds, potentially causing Square's client base to shrink. Forty-eight percent of Square's gross payments volume in Q1 2020 came from firms with annualized GPVs of less than $125,000.
Square plans to give merchants more information about its withholding practices going forward, but it may need to adjust how it determines which sellers to target to address merchants' concerns. The company that it's starting to give merchants more notice on its plans to hold onto reserves, and it intends to give them more information about why it's withholding funds and how they can be released quickly.
It also noted that it's withholding money from less than 0.3% of its sellers. But The Times found instances of Square reportedly withholding funds from merchants that weren't dealing with refunds and sellers struggling to contact a representative from Square, and the firm needs to iron out those issues as well to avoid alienating more clients.
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