Payment Providers

Visa Purchase Return Authorization Mandate

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It’s that time again: Visa is rolling out a new mandate. This one relates to purchase return authorizations, and it was first introduced last year for merchants who met certain return-volume thresholds. This April, it went into effect for all merchants doing business in the United States and Canada.

The mandate requires merchants to process a purchase return authorization for every return. Prior to this mandate, cardholders would often have to wait several days before a purchase return would hit their online banking statement. During this time, they would receive no updates on the status of the return and have no way of knowing that a return had been processed at all unless they inquired directly with the merchant.

All too often, cardholders get impatient during this waiting period, leading to them concluding that they’re being brushed aside or ignored. Then they file chargebacks, which means that the merchant (who already initiated the refund) will end up giving double the transaction amount back unless they take the time to fight the chargeback and submit proof that they issued a refund.

The authorization messages Visa is mandating for these situations will allow cardholders to follow their progress in real time as they go from pending to processed. This should reduce the uncertainty and frustration that leads to chargebacks. Merchants can also look forward to receiving fewer customer service inquiries about the status of refunds, since customers will be able to check for themselves in their own online banking accounts.


Impact on Merchants

The successful implementation of this mandate will be a good thing for merchants, who should welcome any changes that reduce the likelihood of chargebacks. Of course, complying with its requirements may involve a learning curve. Your procedures around handling refunds will have to be adjusted, and on a technical level, some point-of-sale systems may not be set up to process return authorizations as separate transactions.

Here is an important date to remember: April 14, 2020. After that date, issuing banks will be able to file chargebacks against return transactions that do not include a purchase return authorization from the merchant. Additional enforcement mechanisms (mainly non-compliance fees) go into effect on July 1, 2020. It is essential for merchants to get up to speed with the demands imposed on them by this new mandate before this window of time closes.

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What’s Different about Processing Returns Now?

The way things work now, when a merchant processes a return for a customer, the return transaction is stored in the merchant’s POS system until the next merchant settlement is processed. This is why it can take a few days for returns to show up on the customer’s bank statement. Purchase transactions are dialed out immediately, so they show up as “pending” on the statement. Under Visa’s new mandate, return transactions will be handled in a manner similar to purchase transactions.

Potential Issues

Here’s an interesting thing that can happen when a return authorization is processed as its own individual transaction: the return can be declined. This would usually occur when the card the original transaction was made with expires or otherwise becomes invalid.

Visa has guidelines for merchants to follow when this happens. In most cases, the merchant can simply post the refund to an alternative Visa card or some other payment method. To avoid risking fees or chargebacks, always seek out and follow the card network’s instructions in these cases.

Merchants may also see increased charges from their payment processor as a result of this mandate. Many processors charge fees every time the POS system connects to their network, and POS network connections will necessarily increase as a consequence of complying with this mandate.

Visa isn't the only network with changes in 2019 and they won't be the last either. Make sure your team stays on top of these mandates and remember you can reach out to Chargeback Gurus to get free advice any time. For topic requests, questions or advice, please submit to: win@chargebackgurus.com

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