Peach Payments

Understanding the difference between performing a Reversal (RV) and a Refund (RF) is essential for correct financial processing. Using the wrong flow for a transaction can lead to potential penalties from card schemes like Visa and Mastercard.

The core difference is simple:

• A Reversal is used to cancel a transaction before the funds have been settled.
• A Refund is used to return funds to a customer after the funds have already been settled.

The Payments Association of South Africa (PASA) provides the following guidelines.

When to Perform a Reversal (RV)

A Reversal is used to "void" or cancel an authorized transaction before it is settled into your merchant account. This effectively stops the payment from ever being completed.

Primary Use Case:

• A Reversal should be used to cancel a Pre-Authorization (PA). This is common when a customer changes their mind immediately after a purchase or if an order is cancelled on the same day.

Correct Transaction Flow:

• Pre-Authorization (PA) -> Reversal (RV)

PASA Guideline:

"A reversal transaction takes place when the cardholder requests the merchant from whom he purchased the goods or services to reverse or cancel the original credit card purchase transaction. This would generally occur immediately after the original purchase, or preferably on the same day – at least before the transactions on the terminal or store server have been “banked” with the acquiring bank. In such a case the purchase transaction is effectively canceled or aborted before its completion."

Important: Performing a Reversal on a completed Debit (DB) transaction is incorrect and can lead to scheme penalties.

When to Perform a Refund (RF)

A Refund is used to send money back to a customer for a payment that has already been completed and settled into your account.

Primary Use Case:

• A Refund should be used when a customer returns goods, a service was not satisfactory, or for any other reason you agree to return funds for a completed Debit (DB) or Capture (CP) transaction.

Correct Transaction Flow:

• Debit (DB) -> Refund (RF)
• Capture (CP) -> Refund (RF)

PASA Guideline:

"A refund transaction occurs when the cardholder approaches the merchant from whom the goods or services were purchased and, for whatever reason (return of goods, non-delivery of goods, incorrect goods or services, etc.), wishes the merchant to refund or rebate the full original amount. If the merchant agrees, the result is a “credit” transaction from the acquiring bank to the issuing bank, which then reimburses the cardholder the full amount."

Summary of Rules

For quick reference, follow this simple guide:

A Note on Disputes:

As mentioned in the PASA guidelines, if you and a cardholder are unable to agree on a refund, the cardholder has the right to declare a dispute with their bank. This initiates the chargeback process.