Today’s world thrives on instant everything: from coffee to connection, we live in an era of instant gratification. Why should online refunds be any different? Usually, when customers request a refund, it takes about 7–10 days to process. Sometimes, this can be a frustrating wait. Imagine a customer who has made a big-ticket online payment, a hotel booking for instance. If they need to cancel for some reason, they shouldn’t have to wait over a week to get a refund. The long refund cycle can impact the customer experience. When online payments can be made within a few minutes, many fail to understand why refunds aren’t as instant. This delay in receiving a refund can create a poor brand impression. A survey from Digital Commerce concluded that 77% of customers surveyed were less likely to recommend a retailer if they took a long time to issue refunds.
Yet, there is a reason why online refunds take time. To understand this, we need to take a closer look at the process of refunds.
The process of refunding online payments
Online payments involve at least three parties — the customer who initiates the payment, the merchant who receives the payment, and the intermediary.
In general, the case where the customer and the merchant’s banks are the same is rare. Merchants use a payment gateway that coordinates the transaction between these two parties. A payment gateway acts as the link between the bank that initiates the payment and the acquiring bank.
When an online refund process is initiated, because of a failed transaction, or a cancelled transaction on the merchant’s or the customer’s part, the request needs to be processed across this network. First, the payment gateway will receive the refund request. The gateway will then pass this on to their banking partner via APIs. The banking partner must then communicate to the bank via which the customer has initiated the transaction. Once communicated and accepted by all parties, the refund is filed and processed. Only after this is complete does the amount reflect in all accounts.
The reason why this takes time is that not all the processes in the banking system are completely automated. Sometimes, they have to be manually approved. Given that the online refund process involves at least three parties, sometimes more, filing and mapping these requests are time-consuming.
Cash-on-delivery refunds are a different process altogether. It involves verifying the transaction, collecting bank account details from customers to process the refund, pick up the product, and then initiating the refund amount.
Going instant on refunds
If businesses want to succeed in the digital world today, they need to tackle the obstacles associated with online refunds. The long, opaque, and cumbersome process of refunds needs to be done away with.
Customers did not have to wait to receive refunds in their accounts. The new instant refund feature has extended this instant money option for transactions made via debit cards, net banking, and UPI. Merchants must ensure that a refund on credit card transactions are genuine and are not being abused for free credit into their bank accounts.
Instant refund option:
Allows both customers and merchants to initiate a refund request
Supports large payments so that no customer has to wait for their money
Provides 100% visibility on online refunds on the dashboard as well as APIs
Reduces operational costs for merchants
Does not levy any additional charge for the transaction on the customer or the merchant
The complete customer experience
In today’s digital world, a cradle-to-grave seamless customer experience must take into account the process of refunds. A slow and cumbersome refund process can tarnish your brand image and lead to lost customers. When instant refunds are a part of your business’s strategy, it can improve customer experience and perception, thereby leading to higher customer retention and consequently, sales.
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