Purchase Return Authorization Enablement

Recent card brand mandates require a new authorization to occur for purchase 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.

Merchant Impacts/Benefits

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 settlement. With this in mind, below are key items to consider regarding system, device and processing impacts.

  • Evaluate your internal/external processes to understand the impacts of the update.
  • Evaluate correct handling of a return transaction response. (See Section on POS Responses).
  • Employee training may be necessary (See FAQ guide for assistance).
  • POS systems may not currently support obtaining an authorization for a return
  • Supported applications are in the process of being updated. Additional information will be communicated as details and delivery dates become available.
  • Merchants on unsupported or third party products need to contact their POS support team to determine what action is necessary to upgrade their system.

This change should reduce the number of cardholder inquiries/claims of credits not processed by you.

Cardholder Impacts/Benefits

Cardholders will be able to view returns in real time. A reduction in the number of incoming cardholder inquiries to understand the status of a transaction is expected which in turn increases transaction processing satisfaction.

Typical Transaction Scenarios


  • Cardholder returns product for credit. When the merchant processes the return the POS would not dial out and just store the transaction in the system. The cardholder is unable to view the return transaction information until after a merchant settlement is processed, and posted by the card issuing bank.

New Rule:

  • Cardholder returns product for credit. When the merchant processes the return the POS will dial out and the merchant will receive a response on their POS similar to how purchase transactions work today. The cardholder will be able to view the transaction information immediately in their online account.
  • In most cases the response from the terminal will be an approval.
  • In some cases a decline will be issued. This is typically when the issuing bank decides it is a fraudulent card, or the account is closed or does not exist.

Merchant Handling of Decline Response

Preparedness of merchants to handle decline scenarios is essential to mitigate operational risks. It is important that merchants are prepared with necessary policies, procedures, and training to be able to handle return decline scenarios, as this is a new function of the POS.

When requesting a return / refund, the cardholder typically provides a receipt or proof of purchase showing the account used to make the purchase. The merchant must first attempt to process a return authorization using the same account that was used for the original purchase transaction. If the authorization request is declined:

  • The merchant can choose another form of credit depending on refund policy, including check, in-store credit, bill credit or a prepaid card.
  • The merchants can also offer cash for refunds.

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.

IMPORTANT NOTICE: If you are experiencing declines when issuing a return on a credit or debit card through our Transaction Central, ePay or Transaction Express gateways, you have the option to choose another form of credit depending on your refund policy, including check, in-store credit, bill credit, a prepaid card or a cash refund.  Following is additional information on the card brands new authorization requirement on returns. 

Important Dates

  • October 19, 2019: All merchants in the USA, Canada, and Latin America must send credit return authorization messages on Visa transactions.
  • April 14, 2020: Issuers will be entitled to initiate chargebacks on return transactions when the merchant fails to obtain an authorization for Visa transactions. The issuer holds liability for an authorized return submitted for settlement. The merchant holds liability for an unauthorized return submitted for settlement. Merchants need to ensure their POS will authorize returns.
  • July 2020: All merchants in the USA, Canada, and Latin America must send credit return authorization messages on Mastercard and Discover transactions.
  • July 1, 2020: Return / Refund Visa transactions will be included in the Zero-Floor Limit and Authorization Misuse Process Integrity Fee Assessment. Unauthorized returns submitted for settlement will be reported as a Zero-Floor Limit non-compliance transaction. Authorized returns not submitted for settlement and are not reversed will be reported as Visa authorization Misuse non-compliance and merchants may notice higher fees on their merchant statement.
  • July 17, 2020: Issuers may initiate a late presentment chargeback for a Mastercard refund transaction submitted after the refund transaction presentment time (5 Days) 

Please contact your Relationship Manager for more information.