What is the Return Authorization Mandate?
The Return Authorization mandate, introduced by Visa and Mastercard, is intended to improve a cardholder's experience by showing them a credit/return authorization on their online banking statement in real-time.
Eliminating the Long Wait
This mandate comes to rectify the current state, in which an issuer is not aware if a merchant has given a refund to a cardholder until they receive a clearing message.
Today, purchase return information can take a varied number of days to make its way back to the cardholder’s account. Often, refund transactions are reconciled in different processes than standard payment transactions, and in some banks, it can take many days for the refunds to be billed to the cardholder accounts.
The lack of regulation and delay in settling the refund results in frustration, confusion, and unnecessary issuer chargebacks, as well as inquiries from cardholders about the status of the refund.
Benefits for All
This mandate will allow a card issuer to authorize and validate a refund for a cardholder and thus minimize the negative user experience if an account doesn’t exist or has been closed. There will also be benefits on the merchants' side - they will receive the decline reasons online which can help in case there's a need to refund the customer differently for the transaction to be successful.
Key Dates to Consider
Here is the timeline as outlined by Mastercard and Visa:
18 October 2019
Issuers and their processors must support refund authorization requests for all card programs (exceptions apply). An issuer must respond to an authorization request with a valid approval or decline response.
17 April 2020
By this date, acquirers and their processors will have to be able to send refund transaction authorization requests and to forward the issuer’s response to the merchant. Issuers will also be obligated by this date to update their websites and applications to showcase pending refund information.
How the Flow Works
The approved refund authorization flow should look like this:
- Cardholder contacts merchant for a refund
- Merchant sends purchase refund authorization request to the acquirer
- The acquirer then forwards request to Visa/Mastercard
- Visa/Mastercard relays a request to the issuer
- Issuer displays a refund “pending” language
- The cardholder receives a refund after the financial settlement
Failure to support this mandate by the stated deadline will result in additional fees for non-compliance, as well as chargebacks, which may be used by issuers in case a refund is not authorized before being cleared. We strongly recommend that you assess the impact of this mandate on your systems and adjust accordingly.
At ZOOZ, we are closely working with our providers and merchants to understand the implications of this mandate and implement the necessary changes to ensure our merchants’ compliance by the stated deadline.