Paytm now enables merchants to provide instant refunds to their customers in their bank accounts. Historically, depending on the payment method used by the customer, the time taken to refund the amount would vary between 3-5 days. This delay undoubtedly provides bad customer experience and higher customer escalations.
Please note: Instant refund is only available to select enterprise merchants who have integrated online or in-app payments with Paytm for their Business. Get in touch to request access to an instant refund for your account.
Getting started with instant refunds
Instant refund is a three-step process:
Step 1: Check eligibility of a transaction for an instant refund
The instant refund should only be provided for payments made via Debit Card, Netbanking, and UPI. Instant refund for Credit Card transactions should be enabled with caution - you should prevent customers from availing free credit by cancelling orders and accepting refund in a bank account. Refunds for orders paid via Paytm Wallet and Paytm Postpaid are always instant by default and made to the respective method.
Step 2: Getting refund destination details for a customer
The merchant is expected to create a flow wherein you take customer’s bank account details to initiate a refund. These bank account details have to be validated with Paytm. On successful validation, Paytm return a customer asset token to initiate the refund.
Step 3: Initiate a refund
Pass the customer asset token in the refund request. Paytm processes the refund in the bank account of the customer after validating this token.
Types of refunds
Merchant Initiated Refund
These refunds occur when the merchant is unable to fulfil the order due to stock unavailability or any other reason.
Customer Initiated Refund
These refunds happen when a customer has changed their mind about purchase or service pre/post order fulfilment.
Note: In case of customer-initiated refund, bank account details should be taken as soon as the customer has initiated the refund (by cancelling an order) in your app or website. In merchant initiated refund, a notification (SMS, Email, push) needs to be triggered by the merchant with a direct link to app or website where customers can input the bank account information. The sample user journey is provided for reference below:
Demo of Paytm checkout flow in your app
Overview of instant refunds
The customer initiates a refund request.
You check the payment method of the transaction. If the payment method is Paytm Wallet, Paytm Postpaid, or Credit Card, the instant refund should not be presented as an option (reasoning detailed later). Payment method is provided after completion of a transaction in Paytm Payment Callback. This can also be fetched using the Transaction Status API.
If the payment method is eligible for instant refunds, present an option to the user to input bank account details.
Validate the bank account details with Paytm using our Validate Asset API. On successful validation, Paytm will return an asset token. This bank account information and the token can be stored against a customer for future refund requests.
Request the refund with the asset token using our Refund API.
Find the detailed interaction of each system component in the flowchart below:
Steps in processing instant refunds
Step 1: Checking eligibility of a transaction for an instant refund
Eligibility of instant refund depends on the payment method of the order. This is provided in the callback URL or can be fetched using our Transaction Status API.
The merchant should not allow instant refunds on the following payment methods:
Paytm Wallet: Refund for payment made via Wallet is always credited back immediately in the user’s Wallet. Additionally, disbursal of refunds for wallet payments is a breach of compliance. Hence, the merchant should not take the bank account details for a Wallet transaction. In case the merchant passes the asset token in the refund request for a Wallet payment, we will override the same and process the refund into the wallet.
Credit Card: While Paytm supports instant refund of a credit card payment into the customer’s bank account, the merchant should use this very carefully. Customers can use the order cancellation flow in your application to take free credit into their bank account. You should handle it so this feature is not abused.
Postpaid: Refund for payment made via Paytm Postpaid is always credited back immediately in the user’s postpaid account.
Step 2: Getting refund destination details for a customer
The merchant should collect the following bank account details from a customer:
Bank account number
Bank IFSC Code
Account holder’s name
While only bank account number and IFSC code are mandatory to complete the instant refunds, the other two fields are good to have as well.
After collecting the bank account information, call the Validate Asset API. Paytm will run multiple risk checks on your request. On successful validation, an asset token which is shared with you should be sent using the Refund API to process an instant refund. You can store this token and bank account details for the customer and use it for future refunds.
Caution: Wrong mapping of asset token to the customer can lead to refunds getting processed to a different bank account.
Step 3: Initiating a refund
To initiate the refund into the customer’s bank account, pass the asset token in the refund request. There are scenarios wherein we will change the instant refund destination to original payment destination even if you share otherwise:
If the token is passed for a transaction where the payment was done via Paytm Wallet. In this case, Paytm will refund the money into the customer’s wallet
In case of failure of a refund to the requested bank account, Paytm will automatically refund to the destination from which the payment was made delaying the process of refund
In case the refund destination is flagged by cybersecurity authorities, then a refund will be sent to the destination from which the payment was made