Refund API · Guide
Refunds, reversals and chargebacks, explained
Money goes back to a customer in three different ways. A refund is your decision, after a payment succeeded. An auto-reversal happens on its own when a payment failed but the customer was debited. A chargebackis the customer disputing a payment through their bank. This guide explains each, then follows a refund from request to the customer's account: amounts, timing, statuses, failures, fees and how refunds are reconciled.
Three money paths
Three ways money can go back to a customer
After a successful payment: a return, a cancellation, a goodwill gesture
- Your business
- Payment provider
- Customer's bank or card
- Customer
Goes back the way the payment came. You decide the amount: full, partial, or several partials up to what was paid.
The payment failed, but the customer's account was debited anyway
- Customer's bank
- Payment never completed
- Customer
You don't issue it. RBI's turnaround-time framework sets the deadline, e.g. T+5 for a UPI or card payment to a merchant that wasn't confirmed.
The customer disputes a payment with their card issuer
- Your business
- Payment provider
- Card network
- Card issuer
- Customer
Raised against you, not by you. You respond with evidence; if the dispute goes your way, the amount comes back to you.
Chapter 01
Refund, reversal, chargeback, void
These four terms get mixed up in support tickets all the time, and each one follows a different path. The difference that matters most is who starts it: you, the banking system, or the customer. That tells you whether you need to act, and whether acting would make things worse.
| Compared on | Refund | Auto-reversal | Chargeback | Void |
|---|---|---|---|---|
| Who starts it | You | The bank or network, automatically | The customer, through their card issuer | You or the provider |
| When | After a successful payment | After a failed payment that debited the customer | After a payment the customer disputes | Before a card payment is captured |
| Your role | Decide and request it | None: don't refund it as well | Respond with evidence | Cancel the authorisation |
| Money path | Back through the original provider | Customer's bank returns it | Debited from you, credited to the customer | The hold on the customer's card is released |
| Typical cost | Depends on your agreement | None to you | The amount, plus any fee your provider charges | Usually none |
Chapter 02
The refund lifecycle
A refund has a short life. It is requested, checked, sent back through the provider, and then either lands or fails. The part customers care about, the credit showing in their account, happens last and outside your control.
| Step | What happens | Who controls it |
|---|---|---|
| 1. Request | You ask for a refund against the original payment, with an amount and a reason. | You |
| 2. Check | The amount is checked against what's still refundable on that payment. | The refund system |
| 3. Submit | The refund is sent to the provider that processed the original payment. | The provider |
| 4. Process | The provider passes it on through the card network or UPI to the customer's bank. | Provider, network and bank |
| 5. Credit | The customer's bank or card issuer posts the credit. | The customer's bank |
| 6. Reconcile | The refund is deducted from a settlement and matched to its original payment. | You and the provider |
- requested
Accepted and checked against the refundable balance.
- processing
Sent back through the provider; on its way to the customer's bank.
- processed
Sent successfully. The customer's bank may still take time to show it.
- failed ← from processing
It couldn't be completed, with a reason. The money stays with you.
Chapter 03
Full, partial and multiple refunds
A refund doesn't have to be the whole payment. One item comes back from a three-item order, or a customer downgrades mid-month, and you refund part of it. You can refund a payment several times, as long as the total never exceeds what was paid. That ceiling is what stops a double-click, or two support agents, from refunding twice.
| Refund | Amount | Refundable before | Result | Refundable after |
|---|---|---|---|---|
| Item returned | ₹800.00 | ₹2,450.00 | Accepted | ₹1,650.00 |
| Delivery fee waived | ₹150.00 | ₹1,650.00 | Accepted | ₹1,500.00 |
| Second item returned | ₹1,600.00 | ₹1,500.00 | Rejected: more than what's left | ₹1,500.00 |
| Second item returned (corrected) | ₹1,500.00 | ₹1,500.00 | Accepted | ₹0.00 |
Chapter 04
Where a refund goes
A refund goes back to the method the customer paid with, through the provider that processed the payment: to the same card, the same UPI-linked bank account, or the same bank account for netbanking. That's how refunds work across the industry, and it's what lets each party match the refund to the original payment.
It also means a refund can't be moved elsewhere. If the original account is closed, or you owe the customer money for something they didn't pay for, that isn't a refund. It's a payout to an account you verify first.
No failover for refunds
Chapter 05
How long the customer waits
"Processed" means the refund has left. When it shows up for the customer depends on where it is going, and each party in the chain sets its own pace. There's no single deadline for a refund you issue, so set the customer's expectation by method.
| Paid with | Refund goes to | What sets the timing |
|---|---|---|
| UPI | The bank account linked to the UPI ID | The provider and the customer's bank. Usually the quickest |
| Card | The same card | The card issuer posts the credit to the card account, which can take several working days |
| Netbanking | The bank account that paid | The customer's bank |
| Wallet | The wallet balance | The wallet provider |
Give customers the method-specific expectation and a reference when you confirm the refund. It prevents most 'where's my refund?' follow-ups.
Chapter 06
Auto-reversals: money you don't refund
Sometimes a customer's account is debited but the payment never completes: the connection drops, the session times out, or the merchant never receives the confirmation. That's a failed transaction, and the money comes back on its own as an auto-reversal. RBI's turnaround-time framework sets deadlines for it, counted in calendar days from the transaction date (T), with compensation to the customer if the bank is late.
The framework covers failed transactions only. It doesn't cover refunds you choose to issue, or chargebacks.
| Situation | Auto-reversal due | If the bank is late |
|---|---|---|
| UPI payment to a merchant: debited, but the merchant didn't get the confirmation | Within T+5 | ₹100 per day to the customer |
| Card payment at a shop: debited, but no charge slip was generated | Within T+5 | ₹100 per day to the customer |
| UPI or IMPS transfer: debited, but the beneficiary wasn't credited | By T+1 | ₹100 per day to the customer |
Source: RBI circular RBI/2019-20/67 (20 Sep 2019). T is the calendar date of the transaction.
Check before you refund a 'failed' payment
Chapter 07
Statuses, notifications and pending refunds
A refund's status changes after you ask for it, sometimes minutes later, sometimes longer. Rather than asking repeatedly, systems are usually told when the status changes, by a notification such as a webhook. Treat that notice as a prompt: look up the refund's current status before acting on it.
A refund that stays in processingisn't failed. Don't issue a second refund for the same amount while the first is still open; the ceiling on the refundable balance will usually stop it, and if it doesn't, the customer is paid twice.
Chapter 08
Why refunds fail
Most refunds go through. The ones that fail usually do so because the path back to the customer no longer exists.
| What happened | Usual cause | On whose side | Retry on another route? | What to tell the customer |
|---|---|---|---|---|
| Bank account closed | The account behind the UPI ID or netbanking payment has been closed | Customer | Pay another way | Ask for current bank details and send a payout |
| Card closed or replaced | The issuer can't post to the old card | Issuer | Depends | Ask the customer to check with their bank; the issuer may still route it |
| Payment too old to refund | Beyond the window the provider or network allows | Provider | Pay another way | Explain and pay by payout to a verified account |
| Refund exceeds refundable balance | Earlier refunds already used it up | You | Correct amount | No impact; fix the amount |
| Provider unavailable | An outage at the original provider | Provider | Wait | Tell them it's queued, not lost |
When the money can't go back the way it came, a payout to a verified account is the usual fallback.
Chapter 09
Chargebacks
A chargeback starts when a customer disputes a card payment with their card issuer, instead of asking you for a refund. The dispute travels through the card network to the provider and reaches you as a notice with a deadline to respond. The rules and time limits come from the card network and your provider.
If you have evidence the customer got what they paid for, such as a delivery confirmation, a signed-for parcel, usage logs or a clear cancellation policy they accepted, you submit it. If the decision goes your way, the amount comes back to you. If not, it stays with the customer.
| Habit | Why it helps |
|---|---|
| Refund quickly when the customer is right | A customer who gets a refund has no reason to dispute |
| Use a business name customers recognise on their statements | Many disputes are 'I don't recognise this charge' |
| Keep delivery and usage evidence for every order | You can only win with evidence |
| Make cancellation and refund terms easy to find before payment | Fewer 'I didn't agree to this' disputes |
| Watch the settlement adjustments | Chargeback debits show up there, often before you've read the notice |
Chapter 10
Fees on refunds
The customer always gets back the amount you refund. The open question is what happens to the fee you paid on the original payment. Some providers return it when you refund, some keep it, and some charge a separate fee for handling refunds or chargebacks. It depends on your provider and agreement, so check before you plan refund-heavy promotions.
- Refund to the customer
- Original fee at an illustrative 2%Returned or kept, depending on the provider
- Your cost if the fee is kept
Chapter 11
Reconciling refunds
Refunds rarely arrive as separate debits. They are deducted from a settlement as negative lines against their original payments. Reconciling them means proving that every refund you asked for was deducted once, and only once.
| Match | On what | What a mismatch means |
|---|---|---|
| Refund request ↔ refund | Your own reference, such as the return or RMA number | A refund asked for but never created, or created twice |
| Refund ↔ original payment | The payment ID | A refund you can't explain to finance or the customer |
| Refund ↔ settlement line | The refund's reference and amount | A refund not deducted yet, or deducted twice |
How Peneu matches refunds across providers: reconciliation.
Chapter 12
Talking to customers
Most refund complaints aren't about the money. They're about not knowing where it is. A short message at each stage, with a reference, answers the question before it's asked.
Your written refund and cancellation policy also matters, both for customers and under consumer-protection rules for online sellers. What it has to include is a legal question; check it with your adviser.
| When | What to tell them |
|---|---|
| You approve the refund | The amount, the method it's going back to, and when to expect it for that method |
| The refund is processed | The date, and a reference their bank can trace |
| It hasn't arrived after the expected time | Ask them to check with their bank using the reference; card refunds are traced by the issuer |
| The refund failed | Why, and how you'll pay them instead |
Chapter 13
Integration considerations
Refunds can be issued from a dashboard by support staff or from your own systems. For system-issued refunds, a few habits keep them safe:
- Always refund against the original payment's ID, and record a reason.
- Use your own reference, such as the return number, so a retried request can't create a second refund.
- Check the refundable balance before offering a refund in your own interface.
- Treat notifications as prompts, and look up the refund's status before updating the order.
- Never issue a second refund while the first is still processing.
For developers
Illustrative pseudo-code: the flow, not Peneu's API. Field and event names are confirmed in the API reference.
refund = create_refund(payment_id, amount, reason = "item_returned", reference = "RMA-5521")
save(refund.id, refund.status)
on status_update(notice):
status = get_refund(notice.refund_id).status # confirm before acting
if status == processed: tell_customer(refund, reference)
if status == failed: offer_payout_to_verified_account()
else: wait() # don't refund againChapter 14
Refunds by business type
The mechanics are the same everywhere. What changes is why refunds happen and how the amount is decided.
An online store handling returns
A partial refund for each item as it comes back, up to the order total
A travel business handling cancellations
A refund calculated from your cancellation policy, issued once it's met
A SaaS company handling downgrades
An education provider refunding course fees
A marketplace refunding a buyer
Refund the buyer, then recover the seller's share before their next payout
A customer charged for a failed payment
Not a refund: check the payment, and let the auto-reversal run
FAQ
Refund questions
What is the difference between a refund and a reversal?
A refund is money you choose to return after a successful payment. A reversal happens automatically when a payment failed but the customer's account was debited; you don't issue it.
What is a chargeback?
A dispute the customer raises with their card issuer. It is started against you, not by you, and you respond with evidence such as proof of delivery.
Can I refund part of a payment?
Yes. You can refund part of a payment, and make several partial refunds, as long as the total doesn't exceed the amount paid.
Can a refund go to a different account or card?
Normally no. A refund goes back to the original payment method through the provider that processed it. Paying someone elsewhere is a payout, not a refund.
How long does a refund take to reach the customer?
It depends on the payment method and the customer's bank. UPI refunds are usually the quickest; card refunds depend on when the issuer posts the credit, which can take several working days.
Does RBI set a deadline for refunds?
RBI's turnaround-time framework sets deadlines for failed transactions, which are auto-reversed, for example T+5 for a UPI or card payment to a merchant that wasn't confirmed. It doesn't cover refunds a merchant chooses to issue.
A customer says they were charged for a failed payment. Should I refund it?
Check the payment first. If it failed, the money comes back as an auto-reversal and a refund would pay them twice. If it actually succeeded, deliver the order or refund it.
What does 'processed' mean for a refund?
That the refund has been sent back through the provider. The customer sees it once their bank or card issuer posts the credit, which can be later.
Why did a refund fail?
Usually because the original account or card is closed or changed, or because the payment is too old for the provider to refund. The money stays with you, and you can pay the customer another way.
Do I get the original payment fee back when I refund?
It depends on your provider and agreement. Some return the fee on a refund, others keep it. Check before you plan refund-heavy promotions.
How do refunds show up in settlement?
They are netted from a settlement batch as negative lines against their original payments, so a short credit usually means refunds were deducted.
What should I tell a customer who is waiting for a refund?
The amount, the date it was processed, the method it's going back to, and the reference. For card refunds, a reference the issuer can trace saves a second enquiry.
How it works underneath
- Unified WebhooksOne normalised event streamView details
- Unified APIOne request & status modelView details
- Reconciliation & ReportingMatch payments & settlements across providersView details
- Multiple Payment ProvidersGateways, aggregators & acquiring banksView details
Related products
Sources
- RBI — Harmonisation of turnaround time and customer compensation for failed transactions (RBI/2019-20/67, 20 Sep 2019)Covers failed transactions (auto-reversals), not refunds a merchant issues or chargebacks.
Last reviewed . Examples, rates and traces marked illustrative are not Peneu figures.
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