Visa is introducing an authorization requirement, or mandate, for return transactions (also known as a cardholder refund). Authorizing a return enables the card issuer to validate the cardholder account, decline potentially fraudulent cards, and minimize chargebacks if the account does not exist or has been closed. The return authorization message is intended to improve the return process, minimize return inquiries and improve the customer experience for cardholders by enabling them to view a credit/return on their online banking account/statement in real time and receive other services from the card issuer such as text alerts. Most Point of Sale (POS) systems were not previously designed to obtain an authorization to return money to the cardholder. Prior to this update, a return transaction was stored in the system until submitted for a settlement. With this in mind, below are key items to consider in regards to returns:
Important Dates
What is a Visa Purchase Return Authorization?
Why is Visa introducing this mandate?
How is this different from how returns are currently processed?
What are the steps to follow when a declined return authorization response is received?
Will an approval code be supplied on refund authorizations?
Can return authorizations be processed through voice authorization?
Are merchants required to support this mandate?
Why am I seeing an increase in my authorization fees?
Why am I seeing an increase in Visa Misuse and Zero Floor Limit fees?
A Purchase Return Authorization is a mandate or a directive that enables a card issuer to authorize and validate a refund for a cardholder and minimize chargebacks and fraudulent cards if the account doesn’t exist or has been closed.
The return authorization mandate is intended to improve the current cardholder experience by allowing them to view a credit/return on their online banking statement in real time, receive text alerts and minimize return inquiries.
Currently, the cardholder returns a product for a credit. When the merchant processes the return, the point of sale (POS) system doesn’t dial out; it stores the transaction in the system, and the cardholder is unable to view the information in their account until after a merchant settlement is processed and posted by the cardholder’s issuing bank. With this new directive, cardholders will return the product for credit but when the merchant processes the return, the POS will dial out and the merchant will receive a response on their POS. The cardholder can then view the transaction information immediately in their account they have with the card issuing bank. In most cases the response from the POS terminal will be an approval, but if a decline is issues, it would generally be in response to a fraudulent card or the fact the account is closed or doesn’t exist.
The merchant is liable for potential fraud and/or a disputed transaction by the issuer if an unauthorized return is submitted for settlement. The merchant can choose another form of credit, depending on the refund policy, including check, in-store credit, bill credit, or a prepaid card. The merchant can also choose to submit the return for settlement without an authorization (known as a forced-post) or use another Visa card if their POS can process that type of transaction. The merchants can also offer cash for refunds.
NOTE: If a return is not made on the original card or with an approval, the merchant is liable for potential fraud and /or a disputed transaction by the issuer. Failure to obtain a proper authorization for return transactions may increase fee exposure for failing to properly authorize and settle every transaction.
Yes – upon approval of a return transaction, your POS will display “approved” with the 6 digit approval code.
Yes –the Voice Authorization Center will be updated to support return authorization functionality.
Yes – failure to support this mandate will result in additional fees assessed for non-compliance. This may also result in an increase of non–defensible chargebacks for no authorization.
If a cardholder were to dispute an original purchase (or portion of the purchase) via their card issuer due to “Credit Not Received/Issued,” the card issuer would initiate the dispute, but the merchant/acquirer has the right to say “Credit was issued.”
The merchant account is assessed a fee each time the POS device connects with the network. With this change, the POS device must connect with the network for both purchase and return transactions.
Not supporting the mandate by properly authorizing and settling the return transactions will incur additional fees.