19 APR 2016

Refunds and carrier billing: how to keep your customers happy?


Aino-Silvia Tali

Customer Support Team Lead, Fortumo

image for Refunds and carrier billing: how to keep your customers happy?

Consumers ask for refunds mainly because of two reasons. Either they changed their mind about something they purchased or they were charged but did not receive the goods and would like to be refunded for the amount spent. When something like this happens, what do you do?

Before launching an online business, you should have a refunding process in place. For example, Google refunds all apps purchased from Google Play within 2 hours of purchasing time if the user has changed their mind. After this period the developer of the app is responsible for deciding whether the user is eligible for a refund. This approach provides a balance between keeping customers happy and avoiding an overwhelming amount of refund requests.

In addition to having an internal refund process, you should also clearly communicate your policy out to users. If a user cannot easily find information about how to request a refund or how to cancel a subscription, they will turn to their bank or mobile operator and demand the refund from them. In this case, your reputation with the payment provider is at stake and you might even risk losing your billing provider. Therefore, your checkout and refund flows should be built up in a way that the user knows to turn to you at first when they want to dispute a charge.

Refunding is expensive: you need not only pay the user back the money that they were charged but also pay a transfer fee. In general, bank transfers should be used as a last resort as their fees are the highest. We recommend using wire transfers as a last resort option, instead it’s more cost efficient to use PayPal and local alternative money transfer methods.

Due to the high cost of refund fees, you should initially offer the consumer an alternative benefit instead of a refund. For example, if you have a music subscription service, you can give the user 30 days of free access. If you are developing an online game, offer the user virtual items inside the game. In case of carrier billing, you can use Fortumo’s voucher distribution platform and create a batch of free service vouchers for potential refund cases. You can also consider benefits not related to your service, for example an iTunes gift card.

If the user accepts such an offer, their experience with you will be positive and they might become a paying user again in the future. In addition, you do not have to deal with the hassle and cost of going through a refund.

The recommendations above are meant for cases where a user has made a purchase and changed their mind afterwards. But what to do if they have made the payment but have not received what they paid for?

Carriers and Fortumo make the best effort to notify you after a successful payment but sometimes things just go wrong. For example, there can be a hiccup between Fortumo’s server and yours. In case of a charging error, you should simply try to give the service out again instead of offering a refund.

You can do this by implementing a feature to your platform through which you are able to manually deliver goods and services to your users, separate from the automated carrier billing processing solution. This is the quickest way to keep your paying users happy as you do not have to rely on Fortumo or the mobile operator investigating the transaction or confirming the purchase from our back-end again.

But if the user is still determined to get their money back and give up whatever it is that they purchased, it’s best to manage the refund yourself. The longer the refund process takes, the unhappier the customer will become. But before you try sending money back to the user, make sure you have all the information necessary for a successful refund. If the payment bounces back, transfer fees will be charged. The key things to consider are:

  • Correct spelling and contact details of the user (for example, the user might give you a Western name while their bank account name is in Cyrillic or Arabic script)
  • User bank’s ability to accept currency that you are sending the refund in; if a user in Brazil has a bank account that only accepts incoming Brazilian Real payments, your payment in U.S. Dollars will bounce back
  • Including the transfer fee in the refund amount; if you only wire the cost of the item purchased, the user might receive less money than they paid and will end up unhappily coming back to you

Refunds are an inevitable part of processing payments. You should try to keep them to a minimum by establishing a reasonable refund policy and trying to offer alternative benefits to users before proceeding with refunds. Using Fortumo’s turn-key products also helps reduce the amount of refunds as the checkout process has been optimized to make sure the user clearly understands what they are buying.

Revenue calculator
Do the math: how much would your revenue increase with carrier billing?
Revenue calculator preview image

Content categories