We found this awesome article by Joris Lochy of Finextra and want to share some insights with you all. The most awesome part: Lochy references TodayPay and the company’s Founder Jeremy Balkin. As you all know, we’re one of their biggest fans and also led a huge refunds study with them.
Some time ago, Lochy wrote a blog titled “Refunds – A Bigger Problem Than You’d Imagine.” He discussed conventional method of refunding, typically through the original payment method, poses significant hurdles – it’s costly, intricate, and sometimes, downright impractical.
Over a year later, Jeremy Balkin, formerly of JP Morgan and now the CEO of TodayPay, identified this issue and introduced “Refunds as a Service.” This innovative platform enables merchants to offer instant refunds to customers through various payment methods. For instance, “Refund Now, Pay Later” allows TodayPay to issue refunds while granting merchants up to 90 days to reimburse the funds. Another option, “Better Refund,” offers consumers cashback in exchange for a refund. This novel approach highlights a glaring gap in payment systems concerning efficient refund processing.
However, the challenge of refunds extends beyond traditional retail and eCommerce scenarios. Numerous niche cases exist where consumers are entitled to refunds, yet linking them to the original payment is either non-existent or exceptionally difficult.
Consider the following examples:
– Recycling Initiatives: Festivals and supermarkets often refund deposits for returned glasses or bottles to incentivize recycling.
– Library Late Fees: Some libraries offer refunds for late fees upon returning books within a grace period.
– Rental Equipment: Deposits for tools or vehicles are refunded upon returning the items in good condition.
– Hotel Incidentals: Temporary holds on credit cards for incidentals are released (refunded) if unused during the stay.
– Parking: Refunds for parking fees are issued if leaving within a specified time frame or proving patronage.
– Public Transportation Cards: Deposits for reusable transit cards are refunded upon return.
To address the intricacies of refunds, especially in scenarios lacking direct purchase links, businesses are adopting diverse solutions:
– Cash Transactions: Immediate refunds for straightforward transactions like bottle deposits.
– Card Holds: Temporary holds on cards, common in hotels or car rentals, are released upon fulfilling service terms.
– Digital and Mobile Payments: Digital wallets offer convenient refund options, particularly for online transactions.
– Prepaid Solutions: Refunds for public transport or rentals are processed through prepaid cards or tokens.
– RFID Technology: Refunds for event payments are issued upon returning RFID bands.
– Online Gateways: E-commerce platforms simplify refunds by processing them directly to the original payment method.
– Direct Bank Transfers: Ideal for larger deposits, ensuring secure and direct refunds.
– Vouchers and Credits: Some businesses offer future service credits instead of cash refunds to promote customer retention.
Looking ahead, smart contracts hold promise in automating refunds under predefined conditions, simplifying the process further. Additionally, innovations like SEPA Request-to-Pay, as explored in Lochy’s blog “SEPA Request-to-pay: a door opener to innovation,” could streamline refund processing.
While refunds are often viewed as loss activities, investing in efficient refund processes can yield significant benefits. Not only does it reduce costs by minimizing manual actions and customer support calls, but it also enhances customer satisfaction. A smooth refund experience not only streamlines operations but also fosters consumer trust, paving the way for repeat business.
Yours truly,
The Instant Refund Expert™
The Refunds Blog 