Refund refers to reimbursement to the customer for purchases made for reasons such as defects or dissatisfaction with the merchandise. In e-commerce, providing the utmost customer satisfaction through a quick refund mechanism is crucial. Today many e-commerce businesses face refund challenges like slow refund process, lengthy refund processes, and non-availability of refund tracking status. As per the study, the average refund processing time is around 5-10 business days, and in Cash-on-Delivery (COD) cases, it may increase to 7-10 days also.
Let’s look at how the current refund settlement process is undertaken, but before that, it is crucial to understand how many parties are involved in the same.
There are generally five parties involved:-
– The customer who places the order and makes the payment
– The merchant who receives the order and accepts the payment
– Issuing bank from where the money is debited
– Acquiring a bank to which money is credited
– Payment gateway that processes the payment between the merchant and the customer
Once the customer requests a refund, the merchant initiates a request to the payment gateway and acquiring bank in case of a card or UPI transaction. The acquiring bank verifies the payment, identifies the original payment mode, and forwards the payment request to the payment gateway in case of UPI transactions. Then the payment gateway identifies the issuing bank to ensure the refund is credited back to the payment source.
All the above steps must be performed effectively to process a successful refund transaction. Otherwise, it may lead to a failed transaction and affect the customer’s experience. There can be multiple reasons for refund initiation, but the most popular ones are refunds raised due to unsuccessful transactions and refunds due to the return of delivered goods.
The good news is that Cashfree payments have come up with new offerings like instant refund API and Cashgram, which ease the mechanism for COD refunds and allow real-time tracking of the refund status to the customers.
Processing refunds is significantly easier when a customer has paid online. Cashfree payments offer instant refund products on the payment gateway and instantly allow refunds to be credited to the original source. Merchants can easily integrate a simple refund API mechanism with their internal products and process instant refunds.
COD refunds:
The majority of e-commerce customers opt for cash-on-delivery options. Merchants find more difficulty processing COD-based refunds due to a lack of payment information, as the procedure is long and tedious. It involves the customer placing a request for a refund, then the merchant arranging the product pickup service from the customer’s doorstep, reviewing the product, requesting the customer’s bank details, and finally placing the refund order. Further, the most cumbersome job is getting the customer’s bank details and getting them verified for the refund initiation.
Cashgram by Cashfree payments is an instant payout link used by businesses to derive customer bank details. This payout link is sent via email, Whatsapp or SMS to the customer. The customer then enters the preferred bank account/UPI ID/Debit card/Wallet details to the link and resends it to the merchant. Cashfree payments also offer bank account verification with the beneficiary’s name and ensure the refund is credited to the intended beneficiary.
Card Pre-authorisation:
Pre-authorisation is a facility that the Cashfree payment gateway offers to online merchants to temporarily block some funds when a customer places an order. If the order is modified or cancelled within a specific time frame (approx 7-9 days), the merchant can mark the transaction as void, and the amount goes back to the consumer’s original payment source. Let’s say a customer makes a payment online and instructs the payment gateway to hold the payment and not to transfer the amount (after deducting the transaction cost) to the merchant. In case the customer wants to request a refund, the merchant informs the gateway to refund the whole amount directly to the customer’s original source. This system ensures no transaction cost borne by the merchants on the cancelled orders and allows the customer to get the refund within 1-2 hours.
Status of the refund
Cashfree Payments offer advanced tracking and analytics. If the merchant has initiated the refund, the confirmation mail will be sent to the customer’s email address mentioning the refund ID, through which the customer can track the status of the initiated refund.
A systematic refund mechanism is vital for any business offering service to customers for the following reasons:-
– building customer relationship
– boosts customer confidence
– protect merchants from getting into financial losses
– reduce transaction costs
– better operational efficiency
– ensure transparency via real-time tracking status
Refund tools offered by Cashfree payments are user-friendly and highly sophisticated tools to manage and process refunds. Cashgram by Cashfree Payments is used by many renowned businesses like Nykaa, Apollo tyres, and Furlenco to refund COD orders and other security deposits. Pre-authorisation tools are highly recommended in online bus, hotel room, and movie ticket booking as these sectors see a high frequency of ticket cancellations and modifications. Refund tools offered by Cashfree payments are a quick and highly secure way to transfer money to customers, and also ‘Beneficiary name verification’ feature prevents incorrect and fraudulent transfers. Customisable refund APIs and refund reports for easy reconciliation are also an added advantage for merchants.
