Last year, Visa rolled out new purchase return authorization requirements to merchants in the U.S. and Canada to send credit return authorization messages. This rule allows the cardholders to view credit or return activity on their online statements in real-time, instead of the usual 2-5 days, improving the cardholder experience.
For merchants, this mandate can minimize refund-related inquiries by offering refund data to customers quicker. Providing the information upfront can also help reduce the likelihood of disputes, saving merchants time and money. Under the new rule, the merchant will receive a response – either an approval or a decline – when a cardholder returns a product or requests a refund. Once approved, the customer will be able to see that transaction in their online account in real-time.
Handling a declined refund response
A declined refund response can happen for several reasons. The most common reasons include: the issuer may have determined that the card is compromised due to past fraudulent use, the card is placed on hold by the cardholder, the card is marked as lost or stolen, or a cardholder’s account was closed, expired, or did not exist.
Merchants can take proactive steps to handle declines. Establishing preventative policies and procedures can help mitigate the risk of chargebacks and ensure that your customers are getting the best user experience.
- Make sure to work with your risk providers that can advise on best practices. They can also help monitor fraudulent activities during the initial transaction stage.
- Ensure you factor this rule into any fraud ratio mitigation strategies involving proactive refunding of suspicious transactions.
- Merchants may no longer be able to rely on standard mitigation tactics, such as proactive refunds. Speak with your fraud and payment partners to review alternative strategies under the new rule.
- Have a defined process in place when you receive a declined refund authorization.
- Prepare for additional time and resources since not all processes can be automated.
- Understand how the declines will feed into your ecosystems, including your financial, risk, and payment partners.
- Prepare for alternative means of refunds.
- Encourage customers to reach out to you first to handle any refund requests by making your contact information visible and easily accessible.
- Talk to your PSP about fraud prevention tools that can mitigate risk ahead of the transaction. For example, Checkout.com’s Account Updater tool automatically keeps all customer card details up-to-date in your system which will help minimize declines.
Global mandate schedule
- United States - October 2019
- Canada - October 2019
- Latin America - October 2019
- Europe - April 2020
- Central Europe, the Middle East and Africa - April 2020
- Asia Pacific - April 2020
- April 2020: If the merchant obtained positive authorization for a refund, the issuer has no disputes right. But if the merchant did not obtain positive authorization for a refund, the issuer has disputes right.
- July 2020: There will be a penalty if merchants do not submit authorization for refunds. For businesses processing with Checkout.com, we will handle this on behalf of merchants to minimize the impact on integration.
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