How are refunds and chargebacks handled through Indian payment gateways?
Refund Process
- Merchants can initiate full or partial refunds from their payment gateway dashboard or via API.
- Refunds typically take 5–7 business days to reflect in the customer’s bank account.
- Some gateways offer instant refund APIs (e.g., Razorpay, Cashfree) for premium users.
- Refund requests should be processed only after validating order cancellations or service issues.
- Gateways notify users via email or SMS once the refund is successfully processed.
Gateway Fees and Refund Policies
- Most Indian gateways do not refund the original transaction fee to the merchant after a refund.
- Some platforms offer fee reversal if the refund is initiated within 24 hours.
- Refunds are processed through the same payment mode used by the customer.
- GST on transaction charges may still apply, even if the refund is issued.
- Refund logs and reports are available in the merchant dashboard for accounting.
Chargeback Process
- A chargeback occurs when the cardholder disputes a transaction with their issuing bank.
- The gateway forwards a chargeback notification to the merchant with details and a deadline.
- Merchants must provide proof (invoice, delivery confirmation, communication) to contest the claim.
- If the bank rules in favor of the customer, the transaction amount is debited from the merchant’s account.
- Chargebacks may also include an administration fee of ₹300–₹500 per case.
Risk Mitigation Measures
- Use 3D Secure authentication for card transactions to reduce fraudulent chargebacks.
- Maintain proper customer communication, order tracking, and service documentation.
- Include detailed terms and conditions, return/refund policies, and customer support contact.
- Ensure billing names match the brand to reduce customer confusion.
- Use fraud detection tools offered by gateways to flag high-risk transactions.
Gateway-Specific Support
- Razorpay, Paytm, and CCAvenue have dedicated dispute resolution teams.
- Refund status and chargeback timelines are tracked via dashboard and email alerts.
- Some platforms integrate with CRM to automate refund or complaint workflows.
- Chargeback reports can be exported for audit and reconciliation purposes.
- Merchants can escalate unfair chargebacks if proper documentation is submitted in time.
