Over time, the government has taken several steps to ensure that the transactions are digital, cashless and hassle-free. It eliminates the need for carrying around huge amounts of cash that is in constant threat of being stolen. Even after getting stolen, a card can be cancelled by the respective bank; thus, a person’s money is always safe.
These online transactions also act as a check for money laundering practices because the origin of money in such transactions can always be traced back. Cash transactions, however, cannot be traced back, and it is for this reason that the government has disallowed the use of cash above a certain limit.
Did You Know? Card transactions are easy to account for, safe and provide various benefits to the users in the form of discounts, cashback and offers.
What is Purchase Return?
Before understanding the purchase return authorisation, let us understand what a purchase return means. In a normal business transaction, a seller sells goods or provides services, and a buyer buys those goods or receives those services. The goods bought by the buyer are sometimes returned to the seller, and the seller, in turn, refunds the amount or adjusts the amount on the buyer’s credit, depending on the store’s policy. This return of goods to the seller is known as a purchase return. It is a common practice followed in many business-to-business and sometimes business-to-customer transactions.
In a survey, over 72% of the people claimed that they are more likely to shop at stores that offer easy and lenient return policies than the ones that don’t. Another survey shows that if a store offered free returns, the customers are likely to spend up to 357% more than they did before making the return.
Thus, statistics prove that the more customer friendly the purchase returns are, the more the customers associate the brand with reliability, trust and confidence.
What are the Reasons for Purchase Returns?
Whether a customer can make a purchase return depends largely on the common industry practices, local laws and the seller’s return policies. Below are five common reasons why a customer chooses to return the products:
Wrong Style, Size or Colour:
All companies somewhat differ in their size. Thus a small size of one company might be equivalent to the medium of another. Also, in online orders, the colour displayed might be slightly different from the one the customer receives. In all these cases, a customer would want to initiate a return for such products.
Sometimes, when a customer purchases an item online or when purchasing in bulk, the chances are that they get a damaged product. The customer would want to return such damaged goods in such a scenario.
A customer might want the product for a specific purpose, and late deliveries defeat that purpose, and the product might not be useful to him anymore. In such cases also, a customer may choose to return the product.
A seller may deliver the wrong product, and almost 23% of the customers return goods for this reason. There might also be instances where a buyer mistakenly orders the wrong product.
Change of Mind:
A buyer’s mind can change due to several factors, like the availability of a better or a cheaper or substitutable product, and the original product would no longer be desirable. Thus, in this case, too, a buyer may opt to return the product.
What is Visa Purchase Return Authorisation?
In the year 2019, Visa introduced an authorisation requirement for cardholders' return or refund transactions. By authorising the return, a card issuer can validate the cardholder's account, decline the accounts that appear fraudulent, and ensure that the chargebacks are minimal if the account is non-existent or is closed down. The authorisation message is intended to provide a seamless return process. It lets the cardholder view credit or return on his online banking statement in real-time. Apart from this, it supports issuer services that enhance a cardholder's experience, like text alerts.
What is a Visa Merch Refund?
In a common credit card transaction, the credit card company pays the merchant whenever an item is bought using the card. This amount is deducted from the cardholder's credit card account after the issuer approves the transaction.
A cardholder is required to request a refund in a case where he has to return the product. This amount cannot be refunded in cash and is credited to the cardholder's credit card account.
The credit card refund process starts as soon as the merchant accepts the return and agrees to refund the amount owed.
In refund cases, the merchant first sends back the amount owed to the issuer and then the amount is credited to the cardholder’s account. This is why refunds take a long time to reflect on the cardholder’s statements.
Impact and Benefit of Purchase Return Authorisation on Merchants
Earlier sales transaction systems were not required to obtain authorisation while returning the money to the cardholder. A return transaction was then required to be stored in the system until it was settled. Now, by sending a return authorization request before the settlement of the purchase return, merchants can enable the credit card issuer and the cardholder to see a pending refund instantly, on a real-time basis. This helps customers to view the status of their return requests.
Following are the benefits of the purchase return authorization to the merchants:
- This facilitates better customer experience and increases satisfaction
- Provides for a seamless real-time issuer account validation
- Reduces related chargebacks to a considerable extent by verifying whether the cardholder’s account is closed or not in use.
- Cuts down the customer service inquiries about refund status because they couldn’t track it themselves.
Purchase Returns: Then v/s Now
The credit card networks are responsible for processing all the transactions between a credit card issuer and the merchant.
- The cardholder initiates the return of the product purchased with a credit card.
- The merchant processes the return, and the transaction information gets stored in the system.
- The Point of Sales system does not dial out in the process.
- The cardholder has no information about the status of his refund until the merchant transaction is processed and the issuer posts the update by crediting the cardholder's account.
- It is time-consuming because refunds are only reflected on the statements when the merchants settle them with the issuer companies.
- The cardholder initiates the return of the product purchased with a credit card.
- The merchant processes the return, and the Point of Sales system dials out.
- The merchant receives a response on his Point of Sales system just like he gets prompts about a purchase transaction.
- The cardholder will be immediately able to access the transaction in his online account.
- A response from the terminal means approval in most cases.
- A decline is issued when the issuer company concludes that the transaction is fraudulent or the account is not in use or closed.
Decline of Purchase Returns
A cardholder provides a receipt as proof of purchase while making a return request. This receipt bears the Visa account used for making the purchase. The merchant first attempts to process the authorization of the same Visa account, but if the approval gets declined, he may do the following things:
- The merchant can choose another form of credit depending on his return policy.
- He can opt for settlement of the return without the authorization process.
- He can authorize or process the refund to a different Visa account
- He can also offer cash for the amount he owes in the refund.
Visa rolled out this mandate in 2019 to facilitate seamless and hassle-free credit card transactions. It increases customer satisfaction because they can track the status of their refunds. It is also beneficial to the merchants. Overall, this authorisation is a win-win for each party involved in the transaction. Visa Purchase Return Authorisation mandate established an authorisation need for return transactions.
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