Square operates as a payment facilitator, meaning it processes transactions for its merchants under its own master merchant account rather than underwriting each business individually. This model allows Square to onboard merchants quickly, but it also means that every merchant on the platform shares the same risk pool. When a business in a flagged industry generates chargebacks, regulatory inquiries, or transaction patterns that Square's acquiring bank considers problematic, the platform removes that merchant to protect its own standing with the bank. The threshold for removal is set by the acquiring bank's risk tolerance, not by the individual merchant's performance.
The product categories most commonly affected are the ones that carry structural risk factors independent of the seller's conduct. Cannabis and CBD retailers face federal banking restrictions that make card-based processing inherently unstable. Firearms dealers trigger compliance concerns under card brand rules. Nutraceutical sellers contend with subscription billing disputes and FDA regulatory exposure. Vape and tobacco merchants deal with evolving age-verification and shipping regulations that processors find difficult to monitor at scale. For merchants dropped by Square in these categories, payment processing through 27 Blockchain provides an alternative built specifically for high-risk industries, with wallet integration and blockchain settlement that do not depend on card brand rules or acquiring bank risk thresholds.
