Refund Challenge: Common Issues E-Commerce Merchants Face with Refunds

Issues with refunds

Running an online business involves overcoming different sets of challenges. There would be challenges that merchants love to solve because those issues fall in their domain of expertise.

Those problems are the reasons why they chose to get into the business. But then, there are problems that they would like to dodge.

The challenge of streamlining returns and refunding the money to buyers falls in the latter category, at least for most online merchants.

Before we dive deep into the topic at hand, here is an interesting piece of information:

57% of merchants said dealing with returns negatively impacts their day-to-day business.

Let’s add one more nugget of information to make more sense of the topic:

A whopping 80% of buyers will reconsider their buying decision if the merchant’s website doesn’t offer convenient returns.

Setting up a quick refund and return system is critical to the success of your e-commerce website. It has the potential to make or break an online business. Hence, it is important that you know about common refund challenges and how to tackle them.

Before we talk about these challenges, let’s understand more about return policy.

What does a convenient return policy mean?

Cash on delivery, free logistics, discounts, no-questions-asked returns and full money refund policy are four pillars on which online shopping has picked up pace in India.

Over the decade, many Indian online shoppers have more or less agreed to let go of the first three perks of online shopping. However, easy return and refund is something that they don’t want to compromise on.

For most customers, a convenient return policy means getting an instant refund and free pickup of the product. In case, a customer wants to return the product for a different item, online merchants should be prepared to schedule a hassle-free replacement.

However, the work for the merchants is not done yet. They may also need to return the buyer the difference in amount, if any, between the two products.

Top three challenges merchants face with refunds

While arranging for returns of goods is tricky, adding refunds in the mix can increase stress on the merchant side. These two aspects involve a myriad of challenges.

Let’s outline the common refund challenges that e-commerce businesses face and what you can do to tackle them:

  • Slow and complicated refund process

Refund policies vary from one company to another. The so-called “instant refund” that e-commerce companies claim to offer takes anywhere between three to 10 days for the customer to see that money in their account. Usually, most businesses start processing the refund only after the customer has returned the product.

This slow and long process can be frustrating for customers, especially in cases of big-budget transactions. Online refunds take time because they are not sanctioned by a payment gateway.

A digital commerce study shows that 77% of respondents were less likely to recommend retailers that have a long refund process. To stay relevant, this is a major challenge you need to overcome.

Solution: Choosing a payment gateway that provides complete transparency on the refund process can give you a better picture of what’s happening behind the scenes.

This will allow you to provide a refund status to the customers. You can integrate Paytm Payment Gateway to get detailed information about refunds via the Refund Status API.

As a merchant, you just need to sign up for Paytm Payment Gateway and start using the Instant Refunds product to send refunds to the customers within minutes.

  • Opaque refund process

More than often, both customers and merchants are unaware of the steps that go into processing a refund. While customers rely on the timeline provided by the merchant, the latter in turn is totally dependent on the mercy of the payment gateway. However, the actual returns are to be processed by the customer’s bank.

While this process is executed behind the scenes, you and your customers might feel like being left in the dark about what is happening. The lack of transparency in the refund process can take a toll on customer service and diminish customers’ trust in your brand.

Solution: Choose a payment gateway partner that provides complete transparency on the refund process.

With Paytm Payment Gateway, you can easily track the refund status. Our Refund Status API seamlessly gives detailed information which can be relayed to the customers.

It also provides Instant Refunds which eliminates the need to track the refund altogether by crediting money immediately into the customers’ bank accounts.

  • Refund declined

Sometimes, even after the merchant’s bank and payment gateway process the refund, it gets declined by the issuing bank. Such an issue may arise due to a number of reasons, such as:

  • an error in handling transactions by the bank
  • account closure
  • the account was frozen due to fraud
  • the account does not support refunds

If you do not have a plan in place for declined transactions, you may find yourself in a difficult situation with customers.

Solution: Having multiple options regarding returns can solve this issue. For instance, you can explore offering store credits to customers in case the refund doesn’t go through.

For customers who insist on instant refunds, you can rely on Paytm Payment Gateway. Our suite of offerings is crafted to take care of all the possibilities. It provides alternatives such as a refund on another verified customer bank account via merchants’ dashboard and API.

The final takeaway

Refunds are an essential part of all e-commerce businesses. Having an efficient refund policy can improve customer experience, promote brands’ trust and encourage customers to transact with ease.

Partnering with Paytm Payment Gateway can eradicate almost all the refund-related issues that you might come across. Instant Refunds offered by Paytm Payment Gateway are quick, transparent and easy to navigate. They allow you to process refunds into customer accounts almost immediately. Our strong account validation process also ensures fewer to no fraudulent transactions.

Get Paytm Payment Gateway now for a range of services across all fronts!

Switch to Paytm Payment Gateway

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