Failed Payments. Why does a successful payment take some seconds but a failed payment/transaction takes days or weeks to refund? https://qr.ae/TSSJ71

Any digital payment goes through a long value chain comprising multiple entities. Taking credit card as an example, the entities include Consumer (e.g. You), Merchant (e.g. Amazon), Acquirer (the bank that supplies the POS terminal and enables the merchant to accept card payments e.g. ICICI), Card Network (e.g. Visa / MasterCard), Issuer (the bank that issues the card and enables the Consumer to make card payments e.g. Citi), Electronic Payment Gateway (e.g. Bill Junction), Payment Service Provider (e.g. PayZapp) and Mobile Network Operator (e.g. Vodafone).

Each player processes a part of the payment and forwards it along to the next player in the value chain. To that extent, the card payment rails resembles a power train made up of several moving parts.

Each moving part is fully computerized, so, when everything works fine, a successful payment goes through in seconds.

But, in the real world, everything does not work fine all the time. So payments fail sometimes.

Failed payments fall into a “CyberAbyss” of sorts, which comprises Collection Account of Merchant, Nostro Account of Sender Bank at Scheme Operator, Nostro Account of Beneficiary Bank at Scheme Operator, Internal Collection Accounts at Sender Bank and Beneficiary Bank, Scheme Operator Account, Unintended Beneficiary’s Account, and dozens of other nooks and crannies in the payment value chain.

Some Merchants / Issuers use sophisticated tools and are mindful about Customer Experience. They will be able to ferret out failed payments from the CyberAbyss and reprocess them quickly. Others don’t and won’t, so failed payments will remain stuck in the CyberAbyss for a long time.

Consumers of the first cohort will get their money back in their accounts automatically within a few days. Consumers of the second cohort will be made to run from pillar to post between the Issuer and the Merchant for several months to get a refund.

The above was for a credit card payment (also applicable to debit card).

The problem is exacerbated when it comes to digital payments like FPS, NEFT, IMPS, UPI, etc. Called Account-to-Account Real Time Payments, these digital payments face all the aforementioned challenges encountered by a credit and debit card payment but, in addition, they’re hampered by more problems like leakage and inconsistency of data between the various moving parts.

Take IMPS for example.

Sender may enter a narration for the payment. But as the payment flows through the systems of the Sender’s Bank, Scheme / Payments Service Provider and Receiver’s Bank, the narration – and even Sender’s mobile phone number – may not survive the trip, as you can see from the following exhibit.

As a result, the Receiver receives wrong / incomplete information. This makes troubleshooting and retrieval of failed A2A RTP payments even harder.