Faster returns: Welcome news for customers and payments service providers

(Advertorial) We’ve all been there as consumers. We make a purchase with high expectations and, for any number of reasons, decide to return it. The seller agrees to take it back, we return the item—shipping it or in person—and then we wait for the funds to make it back to our accounts … and wait … and wait. Often, it can take days or even weeks, during which time, we’re checking our account, contacting the merchant multiple times, and just wondering when the money will show up.

Returns are big business, with huge numbers involved. According to research by the National Retail Federation and Apriss Retail,  approximately 14.5% of retail purchases in the US alone were returned in 2023, equivalent to $744 billion of goods . When looking exclusively at on-line purchases, the return rate is even higher at 17.6% .

So, in an era of easy, near-instant purchase transactions, why can’t refunds be just as fast? Well, now they can be with faster refunds enabled by Visa Direct, and merchants and payments providers delivering this important value-add service are poised to create better buyer-seller experiences and stronger relationships with their customers.

Who “pays” for refunds

Merchant brand and reputation risk factors are in play during the return process. Cardholders generally don’t realize the number of players involved in the refunds process, from acquirers to payment processors to issuers, and they often incorrectly believe merchants are solely responsible for delays in refunds. In a new Visa-sponsored survey conducted by IPSOS, nearly 60 percent of consumers across five countries said that the merchant is the player most responsible for deciding how long a refund takes . Customer frustration and ill will toward the refund process, stemming from lack of information on refund timing or refund delays, is generally borne by the seller.

While not an everyday experience, refunds can have an oversized impact on the buyer-seller relationship. A seamless experience can strengthen loyalty, while a rocky one can threaten it and influence future purchasing decisions. Refunds can also have an impact on a seller’s operational costs, driving up  call center inquiries and adding to the customer service burden.

Fast track refunds with Visa Direct Faster Refunds

Visa Direct is bringing innovation to the refund process. Our Faster Refunds solution accelerates the refund process, utilizing Visa Direct to transfer a refund back to customer’s card account in real-time . The solution allows the refund to be sent to the buyer as soon as the merchant accepts the return. No checks need to be issued, no standard bank transfer initiated, and nothing gets placed in a queue to be cleared later.

Here’s how it works. A consumer requests a refund from a merchant. The merchant submits the refund request to the acquirer, which send the Faster Refund OCT message to Visa. Visa, in turn, sends the message to the issuer, which makes the funds available to the cardholder in real time .

The solution offers rapid time-to-implementation with a single API integration, and it’s backed by the security and scale of Visa’s global payment network. It even has the ability to support partial returns (e.g., a customer purchases 10 items, but returns only two items).

Turn challenges into opportunities

Faster refunds make good business sense for participants across the payments ecosystem. An average of 87 percent of respondents in the Visa-sponsored IPSOS study said that the option of an immediate refund would significantly improve or somewhat improve their perception of a merchant . Further, approximately 80% of respondents said that they would be much more or somewhat more likely to shop at a merchant that offers this type of service .

With faster refunds, customers benefit from a better experience and faster access to their money, which they can use again for new purchases without needing to wait.

Gain first-to-market advantage

Payments organizations and merchants that adopt faster refunds stand to reap important benefits in terms of the unique value add that they can deliver.

Leading ecommerce marketplace eMAG is setting the pace with its Visa Direct Faster Refunds implementation. The marketplace leveraged Visa Direct to build its Instant Money Back solution, which provides customers with access to funds in 30 minutes or less via their Visa debit card credentials . In 2022, eMAG recorded $1 million in transactions through Instant Money Back and achieved a 216% year-over-year growth in transactions .

“Adding such a feature as Instant Money Back, using Visa Direct real-time  payments rails, allowed us to better serve customer needs by addressing a key touchpoint in the customer online journey, such as seamless return flow,” said eMAG’s vice president of eCommerce Services.

Consumer expectations for real-time all-the-time continue to grow, and now touch the return and refund process. Merchants that embrace this opportunity early and deliver on expectations are positioned to improve customer loyalty, drive growth and reduce operational costs. Faster refunds can, indeed, be good for consumers and businesses.