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This information gap is solved by modifying the original payment journey of the Single Instant Payment as shown below, to allow on demand refund information, which is referred to as Asynchronous Refund Information.
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The CBUAE Open Financen Standards aim to support the communication between TPPs and LFIs, but they do not intend to define the parameters of the relationship and the mechanisms used between the merchants/service providers and TPPs, in relation to refunds. However, we have summarized below models that are being considered within the industry todayworldwide. These models are intended to be for illustrative purposes only. Entities wishing to engage in these types of models will need to ensure that they have appropriate regulatory permissions and meet applicable regulatory obligations.
The following are some example of potential models for refund fulfilment:
Example Model 1: Merchants/Service Providers receive User original payment account details from their LFIs
Example 2: Organisation with appropriate authorisation to hold funds, offers “merchant account” to Merchant/Service Provider
- Example 3: Organisation with appropriate authorisation to hold funds, offers “refunds account” to Merchant/Service Provider
There are cases where merchants/service providers, especially large corporate organisations, receive information services files from their servicing LFIs, which include details of payments in and out of their bank accounts. These details very often include the payment account details of the payers of incoming payments. In these cases, the merchants/service providers already have the User original payment account details and when a User requests a refund payment, merchants/service providers can fulfill the refund request by using any existing payment channels (e.g. their business online banking, host-to-host payment solutions, batch/bulk file processing etc). These merchants/service providers do not require the Asynchronous Refunds Information functionality to support refund payment fulfilment as they already have the required refund information.
Model 2: TPPs acting as Payment Institutions offer “merchant accounts” to Merchants/Service Providers
There are worldwide industry models where organisations holding multiple licenses (such as authorized Payment Institutions) have contractual agreements to offer “merchant account” services, similar to the acquirers’ model in card payments, holding incoming payment funds on behalf of the merchants/service providers. These organisations also provide reconciliation and settlement services with the merchants for their receivables on regular intervals (e.g. daily or every few days). In these cases, when a refund is requested by the User to the merchant/service provider, and the multi-licensed organisation receives the refund request from the merchant/service provider, the organisation will search its records for the original Open Finance Service Initiation transaction and identify the User’s account details. It will then be able to initiate the refund payment from the funds holding account of the merchant/service provider to the User using existing payment channels (such as business online banking, host-to-host payment solutions, batch file processing etc). In circumstances where the multi-licensed organisation does not have the User’s original account details (such as when the User selected their debit account at the LFI during the original Bank Service Initiation payment), the organisations can use the Asynchronous Refund Information capability mentioned above to acquire the User’s original payment account details for the purpose of refund. The details of the models will be covered under the contractual agreements between the multi-licensed organisations and the merchants/service providers. Please note that this model assumes that the original payment to the merchant/service provider was initiated from the User’s original payment account by the same multi-licensed organisation as the one requested to process the refund payment.
Model 3: TPPs acting as Payment Institutions offer “refunds accounts” to Merchants/Service Providers
Worldwide industry research also identifies that, as a variation of 5.4.2, the organisation holding multiple licenses, including a license which enables an organisation to hold funds, may have a contractual agreement to offer “refund account” services to merchants/service providers, by providing or holding specific funds to be solely used for the purposes of refunds. When requested by the merchant/service provider, the multi-licensed organisation will be initiating the refund payments from the refunds account using existing payment channels (such as business online banking, host-to-host payment solutions, batch file processing, direct submission etc). Finally, the multi-licensed organisation will be settling with the merchant/service provider as would be described in the contractual agreement with them. As above, the multi-licensed organisation could use the Synchronous Refund Information to receive the PSU’s account details, provided that the original payment to the merchant was initiated from the PSU’s account by this organisation.
Participants engaging in the models described in Examples 2 and 3 will need to ensure they meet relevant regulatory obligations specifically relating to the services they are providing.
Example 4: Use of Open Financen APIs to initiate refund payments from the merchant/service provider’s LFI account
Example 5: Use of the Merchant/Service Provider’s LFI host-to-host solution – (Under consideration)
Example 6: Use of ‘assisted’/’shared’ SCA model for Refund Payments – (Under consideration)
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