For: All merchants
Date effective: Beginning April 17, 2020
Mastercard is introducing refund authorization support to the Mastercard Network to encourage faster refund processing and reduce refund-related customer service burdens on merchants, acquirers, and issuers.
Effective dates:
- April 12, 2019 - Acquirer and issuer support of refund transaction authorizations is required.
- April 17, 2020 - Issuers must display pending refund transactions in cardholder-facing applications
- April 17, 2020 - All merchants except airlines must initiate an online authorization request for each refund transaction.
Background
A refund transaction is initiated by a merchant to credit funds for returned products, cancelled services, or a price adjustment to a prior purchase. Mastercard’s new standards apply to refunds on a Mastercard, Debit Mastercard, or Maestro card product.
Acquirer Technical Support Requirement
Acquirers must ensure that they are technically able to support refund transaction authorization request processing for any merchant who chooses to initiate refund transaction authorization requests. The acquirer must be able to obtain the request from the merchant, transmit the request to the Mastercard Network, and forward the issuer’s response back to the merchant.
Acquirers must ensure that if a merchant has chosen to submit refund transaction authorization requests for any payment card type, the merchant supports refund authorizations for any Mastercard form of payment accepted.
Merchant Support Requirement and Considerations
All merchants except airlines, Merchant Category Code (MCC) 3000–3350 and MCC 4511, must initiate an online authorization request for each refund transaction conducted on or after April 17, 2020. Prior to this date, a merchant may optionally initiate a refund transaction authorization request.
Merchants who initiate refund transaction authorization requests:
- Are strongly recommended to have a return policy that limits the time frame for processing a refund to no more than six months after the date of the original purchase.
- In a card-present environment, should ask the cardholder for the transaction receipt from the original purchase that has a truncated primary account number (PAN) for the payment card used, in order to ensure the refund is submitted to the same card. (If a non-card payment device such as a contactless-enabled mobile phone was used for the purchase, the truncated PAN on the receipt may represent a device token that differs from the PAN on a physical card linked to the same account.)
- Must submit the refund transaction authorization request no later than 24 hours after the merchant has notified the cardholder the refund will be completed and provided the cardholder with a refund transaction receipt.
- Should be aware refunds may not be supported by the issuer for certain cards (including non-reloadable prepaid cards) or transaction types. If a refund authorization request is declined, the merchant should have and use a store policy to manage the return of the goods or services.
An issuer may respond with a decline code value of 57 (transaction not permitted to issuer/cardholder) upon receiving a refund authorization request in connection with a cash disbursement or sale of quasi-cash (for example, sales of money transfers, money orders, foreign currency, and gambling chips), as these transactions do not represent the purchase of goods or services. This applies to the following MCCs:
- 4829 (Money Transfer)
- 6010 (Manual Cash Disbursements—Customer Financial Institution)
- 6011 (Automated Cash Disbursements—Customer Financial Institution)
- 6050 (Quasi-cash—Customer Financial Institution)
- 6051 (Quasi-cash—Merchant)
- 7801 (Internet Gambling [U.S. Region Only])
- 7802 (Government Licensed Horse/Dog Racing [U.S. Region Only])
- 7995 (Gambling Transactions)
Identification of Refund Transactions
Refund transactions are identified with a value of 20 (Purchase Return/Refund) in Data Element (DE) 3 (Processing Code), subfield 1 (Cardholder Transaction Type Code) of dual message authorization and clearing messages. The same field and value is also used for single message refund and correction transactions. The acquirer should identify a dual message authorization request for a refund transaction as a final authorization by using:
- A value of 0 in DE 61 (Point-of-Service (POS) Data), subfield 7 (POS Transaction Status).
- A value of 1 in DE 48 (Additional Data), subelement 61 (POS Data Extended Condition Codes), subfield 5 (Final Authorization Indicator).
Sending the unique identifier from the original purchase
The presence of the unique identifier will assist the issuer in matching the refund to the original purchase, increasing confidence the refund authorization request is valid and potentially expediting the release of funds to the cardholder. Acquirers and merchants capable of obtaining details from the original purchase when processing a refund are strongly recommended to populate DE 48, subelement 63 (Trace ID) of the refund transaction authorization request message with a unique identifier consisting of the values in DE 63 (Network Data), subfield 1 (Financial Network Code); DE 63, subfield 2 (Banknet Reference Number); and DE 15 (Date, Settlement) of the original purchase transaction authorization request response message.
Reversal messages
A refund transaction reversal must only be submitted when the acquirer’s host system is unable to communicate an authorization response to the POS terminal, or following settlement, to correct a documented clerical error with the agreement of the issuer. Any reversal or adjustment to correct an error must occur within one calendar day of the date the refund transaction was submitted to Mastercard for posting. Reversible clerical errors include, but are not limited to, the erroneous capture of transaction data, a duplicate transaction, or an error caused by the transposition of data. Additional information about reversal processing requirements will be provided when available.
Chargebacks
Chargeback rights are currently available to an issuer if the merchant has agreed to accept a return of goods or cancellation of services but a refund transaction has not been processed to the cardholder's account. A “Credit Not Processed” chargeback may be submitted 15 calendar days after the return or cancellation date.
For refund transactions occurring on or after April 17, 2020, an issuer may also exercise a valid authorization-related chargeback right. As described in the Chargeback Guide, an authorization-related chargeback may be submitted when one of the following has occurred:
- Authorization was required but not obtained.
- The primary account number (PAN) does not exist.
- The authorization chargeback protection time period had expired for the presentment (the time period is seven calendar days following a refund transaction authorization, which must be submitted as a final authorization) and one of the following:
- For a transaction occurring at a merchant located in the Europe region, the account was permanently closed before the chargeback was processed.
- For a transaction occurring at a merchant located in any other region, the issuer deemed the account not to be in good standing (a "statused" account) before filing the chargeback.
Frequently Asked Questions (FAQ)
| Question | Answer |
| Does this change apply to messages on both the Dual Message System (Authorization) and Single Message System? | The Mastercard Network currently supports Maestro transaction correction messages, which are identified with a Cardholder Transaction Type Code value of 20 in DE 3, subfield 1 (the same value as used for refunds). The Mastercard Network will be enhanced to additionally support the value of 20 to identify refund authorizations when submitted by:
|
| Will refund authorization support shorten the time frame in which cardholders can expect to receive refunds? | Yes. A merchant supporting refund transaction authorizations must initiate the authorization request within 24 hours of the refund transaction receipt date, and the acquirer should promptly submit the transaction into clearing. Currently, a merchant may take up to 15 calendar days to submit the transaction to its acquirer for clearing. Furthermore, the issuer’s matching of the refund to the original purchase may be expedited by including the unique identifier from the original purchase authorization in the refund authorization request message. |
Revised standards
The revised Standards will be incorporated in a future version of the Transaction Processing Rules and Mastercard Rules manuals.
| Effective date | Changes to standards in… | Will be published in… |
| April 12, 2019 | Transaction processing rules | Chapter 2 – Authorization and Clearing Requirements Chapter 3 – Acceptance Procedures |
| April 12, 2019 | Mastercard rules | Chapter 15 – United States Region |
Implementation
Depending on the equipment and/or software you use to process transactions, one or more actions may be necessary, such as contacting your independent software vendor (ISV), updating First Data specifications if you code directly, and updating your terminals other products and applications supplied by WFMS. We will provide you with these details as soon as they become available.