Understanding Risk Evaluations on Transactions

What is a risk evaluation?

A risk evaluation shows Square’s determination of a transaction’s risk of fraud, indicating whether a transaction’s risk level is moderate or high based on our models. The evaluation is generated by Square’s proprietary machine learning models, which are informed by thousands of signals from our payments ecosystems and are continuously evolving. Our models have the ability to predict whether a given transaction might be fraudulent and therefore likely to end up in a payment dispute. It’s important to note that risk evaluations are provided as an informational tool only – you get to decide how to handle potentially fraudulent transactions processed on your account. With that, you are also ultimately responsible for any chargebacks.

Which transactions receive a risk evaluation?

We will evaluate all eCommerce transactions taken through Square or through our Connect v2 Transactions API endpoint.

Where can I see my risk evaluations?

In your Square Dashboard, select the Transactions tab in the menu on the left. If a transaction has a moderate or high-risk evaluation, an orange circular icon will replace the payment card icon to the left of the transaction description. If it is a moderate risk evaluation, there will be one upward arrow in the orange icon. If it is a high-risk evaluation there will be two upward arrows in the orange icon.

If you’d like to filter transactions by risk level, select the All risk levels drop-down at the top. From there you have the option to view high-risk only, moderate-risk only or high and moderate-risk transactions.

How is a risk evaluation generated?

Many payment processors and third-party fraud solutions mitigate your risk on your customers’ data alone, but Square looks at the big picture. We build our machine learning models based on thousands of signals from our payments ecosystem.

What should I do if a transaction doesn’t have a risk evaluation?

If you don’t see a risk evaluation on your transaction, and it’s a qualifying online payment, it means our models didn’t indicate many signals typically associated with fraud or high-risk activity. However, it’s important to note that there’s always some amount of risk with taking card payments and there are other types of fraud that can happen after the payment has been taken. It never hurts to verify the cardholder’s information if you have not processed payments from them in the past.

What should I do if a transaction is evaluated as moderate-risk?

Square’s models detect a slightly elevated number of signals indicating potential fraud. You may want to request additional information from the cardholder to verify their identity. To do this, you can make sure the cardholder’s delivery and billing addresses match, confirm the order with the cardholder, and verify any personal information. If you cannot verify the cardholder’s identity, you may want to consider issuing a refund to avoid a potential dispute.

What should I do if a transaction is evaluated as high-risk?

Square’s models detect a high number of signals indicating potential fraud. If you’re unable to verify the cardholder’s identity and the legitimacy of the delivery address – or if the order seems suspicious (e.g. larger than normal, unverifiable information, unresponsive cardholder) – we recommend issuing a refund and cancelling your fulfilment to protect your inventory and avoid dealing with a payment dispute down the line.

If a transaction is evaluated as high-risk, why doesn’t Square decline it automatically?

For the absolute riskiest cases, Square will automatically decline. However, for high-risk transactions that are not confirmed fraud, we think it’s important to surface the risk level and help you make an informed decision based off of your customer knowledge rather than reject transactions automatically.

Why should I issue a refund?

Square’s fraud detection signals have indicated this order may have been placed on a compromised payment card. If the true cardholder’s bank determines they did not authorise this transaction, the bank will require you to return the disputed funds. To avoid losing product and having to deal with a dispute down the line, you may want to consider issuing a refund and cancel the delivery if possible.

What if I can tell that a transaction is fraudulent, but it doesn’t have a risk evaluation?

Navigate to the Transactions tab in your Square Dashboard. Select the transaction line in question to open the Transaction Details pop-up on the right of your screen. Select Issue Refund in the pop-up, and when prompted for a reason, select Suspected fraud. This information helps us better inform our models to catch these types of transactions in the future. You can learn more about refunding transactions in our Support Centre.

What if I can tell a transaction is good, but it is evaluated as high-risk?

We want to empower you to make your own decisions when it comes to your sales. If you’ve verified the cardholder’s information and are comfortable accepting the sale, you may do so. It’s important to note here that as a seller, you will continue to be liable for all payments you accept and disputes you receive. Square does not assume liability for payments, regardless of the risk evaluation delivered.