Much-hyped payments start-up Square has been forced to delay shipping its product that turns mobile phones into payment card readers because of emerging fraud concerns, with founder Jack Dorsey admitting parts were released "before they were fully baked".
Unveiling his new firm to much fanfare in December, Twitter founder Dorsey predicted Square would be available for customers in the US early this year.
Now, in a letter to customers, he admits "we've let our excitement get the best of us" and says "we realize the amount of time we've taken to ship our Square readers has been frustrating, sometimes confusing, and has generated a number of questions".
The start-up initially suffered from hardware shortages but says this has been resolved with manufacturers in China.
However, a new problem has emerged. According to a letter to users from the Square support team: "We need to strengthen our underwriting infrastructure so that we can handle the huge demand for readers and still manage the risk of chargebacks and fraud."
Dorsey says Square initially moved to negate the risks by setting transaction limits but these have been set too low according to customers, prompting "rethinking and expanding" of the underwriting infrastructure.
The letter provides no details on when the product may be ready to ship, with Dorsey signing off: "We thank you for your continued patience as we work to deliver a utility you can use every day and for allowing us the time to get it right."
Finextra verdict: Reality bites for Square. Overly-hyped by the starry-eyed Silicon Valley tech press, Jack Dorsey and Co are discovering the hard way that payments processing is not as easy or as simple as it might first appear. Innovation has its place, but in the money-changing business it has to be backed up by a resilient infrastructure and water-tight contracts. There's no place for a fail-whale in the payments sphere.