On the surface, the additions are innocuous, with new punch-card-like functionality integrated into the system. The effect of this, though, is for retailers to even more completely turn over crucial information to Square, which can use it for whatever purposes Square wants. If Square later wants to market to a retailer's customers directly—on behalf of itself or even possibly a rival—it theoretically can.
What if that merchant chooses to stop using Square at some point? There are no paper or electronic CRM records in the possession of the merchant. Now there's an incentive for that merchant to stick with Square.
Even if the departing merchant demands—and is given—an electronic copy of all its records, will it be in a format the merchant can easily use, such as Excel? Without Square, would the iPad files work?
This wouldn't be the first time that small retailers found a downside to turning too much over to Square. Many small merchants have no problem with turning over as much of the POS environment to a third-party firm as possible. That might be a fine short-term decision, but those merchants had better look up the term "lock-in" before proceeding.