You’ve encountered either of these two instances: you returned a product and were promised a refund in 5-10 working days, or there was a payment failure, but your money got debited. In both cases, you were the customer. But if you are a merchant and own a business, you probably want to know how refunds work, especially in online payment gateway.
In today’s digital world, almost all payments are made online. These online payments go hand-in-hand with all other aspects of our lives. Customers prefer to pay online when shopping, ordering food, getting groceries, or paying bills because it is more convenient and hassle-free. Furthermore, these instant payments also save time.
Did you know? A survey shows 92% of customers would be willing to purchase again if the return and refund process is simple and straightforward. So, with a high statistic like this, it only makes sense that your business should strive hard to make the refund process easy and convenient for your customers.
But before you learn to do that, you must understand how refunds work in a payment gateway and how to get one. This blog will discuss everything you need to know about payment refunds from payment gateways.
And if you are a business owner who is looking to use a payment gateway for easy business operations, NTT DATA Payments can help you with it!
Why do Payments Fail?
If the customer account has been charged and there is a communication breakdown at any point, the payment will not be processed, and the customer will have a valid claim for a refund or online refund status.
There are many reasons why your business can witness a payment failure. The following are the most common ones:
- Payment failure from the customer’s side: These mistakes can occur when a customer provides incorrect card details, an invalid one-time password (OTP), or has insufficient funds in their account.
- Technology/network errors: When there is a technology or security error that the merchant is accountable for, these kinds of payment failures may occur.
- Data transfer error: When a customer receives a payment failure notification, but the transaction ultimately goes through, and the cardholder’s account is debited, this type of payment failure occurs.
- Update error: Payments can appear to be failed if the payment status is not updated by the issuing bank or the acquiring bank despite being collected.
- Amount not debited: Since the customer’s account was not deducted, naturally, the payment is deemed to be unsuccessful.
Apart from these common reasons, here are some additional factors that can contribute to a payment failure:
- The transaction is blocked by the merchant account
- Credit/debit card is cancelled or has expired
- Invalid billing address
- The bank has flagged the account of the cardholder
- The customer’s credit limit has been reached
- The payment gateway is incorrectly set up
- The customer’s preferred online payment option is not supported by the payment gateway.
Why do we Experience Delays in Refunds?
As you might already know, there are several parties involved in the refund process. The process includes more manual intervention than automatic processing and hence can take a considerable amount of time before it actually gets through.
Some of the most frequently cited reasons for such a delay include the following:
- Refund processing is complicated since it involves several organisations, which adds time to the process.
- When no one is in the office on the weekends and public holidays
- Errors on the site, network, or gateway that prevent efficient processing
Depending on the mode of payment your customer chose, their refund can take time as mentioned below:
- UPI: Instant or not more than 2 business days
- Debit/credit card: Minimum 5 working days and maximum 10 working days
- Net banking: Minimum 2 working days and maximum 10.
- Wallet: At least 1 working day, but no more than 3 days.
What is the Refund Process in Payment Gateways?
Before jumping into understanding the refund process in payment gateways, you need to understand the basic functioning of a payment gateway where payments are initially processed.
So, here’s how it goes:
- The payment gateway sends the customer’s full information to the payment processor, who then sends it to the merchant’s acquiring bank.
- The bank then determines if the customer’s account has an adequate balance to support the transaction after the payment gateway accepts it.
- The payment gateway notifies the merchant whether there are enough funds after confirming it.
- The bank then goes on to settle funds with the payment gateway after verifying the availability of funds.
- Finally, the payment gateway settles funds with the merchant to complete a successful transaction.
Now, how does a refund process work?
- In the event of a failed transaction, the refund request is processed across the network. The payment gateway receives the refund request, which then sends it to the merchant’s bank.
- The customer’s bank is then informed of this event. Once the transaction has been approved by all parties, the refund is processed.
- When a customer returns a product for a refund, the customer must first request the return, which the seller must then authorize. After approval, a refund request is made, and the same procedure is followed to complete it.
Pretty straightforward, right?
Experience the Future of Payments!
Choosing the right payment gateway for your business is one of the most important decisions to make as a business owner. At NTT DATA Payment Service, we help boost your business’s growth by offering a powerful and seamless payment gateway. We provide end-to-end payment acceptance services through both online and offline channels with over 100+ payment options to ensure a smooth and safe transaction.
With our secure payment gateway, you can enjoy benefits like:
- High success rates with minimal reversals on your transfers
- Safe transfer of refund balance to your customers
- Easy retry options for failed transactions, and more.
Choose NTT DATA Payment Service to send out bulk payments to your employees and to initiate simple, quick and safe refunds!
Conclusion
Payment refunds are a frequent occurrence in online bill payment operations. Therefore, it is essential to have a simple and practical gateway for refunds to be processed swiftly and easily.
If it were up to us, we’d handle your refund immediately. However, the acquiring and issuing banks are typically responsible for handling the refund and crediting your account. The method of payment used during the transaction also affects the duration it takes to process the online refund status.
Need help with easy refunds? You can reach out to us anytime!
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