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Explaining Authorize, Capture, refund, cancel and chargebacks
This is the step in which the customer (who is using credit/debit card for payment) is authorized by the bank and the money on the card is blocked for a maximum period of 8 days. Lets say, the customer has a credit card limit of Rs 50,000 and the transaction is for Rs 2000. When a transaction is authorized, Rs 2000, is blocked on the card for a period of 5 days. The customer, for the next 5 days, can only use the remaining limit i.e. (Rs 50000 - Rs 2000 = Rs 48,000). This Rs 2000, which has been blocked, are now ready to be Captured by the merchant.
In this step, the money that has been blocked in the Authorize step (explained above), is captured i.e. transferred from the bank to the merchants account. The merchant has a period of upto 5 days to capture a transaction.
An authorized transaction can be canceled by the merchant. In this case the money that was blocked on the customer's card is freed up.
If for some reason, merchant has captured the amount and later want to refund it, then this is needed for that. By using the refund option, merchant can return the entire or part of the money of the user.
What is settlement?
Settlement is the process by which the money gets transferred into the bank account of the merchant. PayU follows a T+2 settlement scheme where T is the date on which the transaction is captured .
The Chargeback Risk in E-commerce business - Why they can come?
This is a scenario, where the customer disputes the transaction and wants the money back. The reason for dispute can be two:
- Fraud transaction i.e. the customer did not make the transaction. In India, this risk is close to zero since a password is required to make any transaction. A transaction can not be done using only the credit card number and the CVV number.
- Non delivery of promised goods and service. If the merchant does not deliver the promised good or service then the user can raise a dispute and demand money back.
They can come from upto 180 days of doing the transaction. The arbitration, if any, is done by the bank to whom proofs are submitted both by the customer and the merchant.
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