*** Still Under Construction***

Summary

The refund cap limits how far a merchant's account can go into a negative balance as a result of refunds. before automated risk controls kick in to protect both Quilt and the merchant. Each merchant is assigned a dollar cap; if their outstanding negative balance approaches or exceeds that cap, the system either queues the refund for Risk review or initiates a withdrawal from their bank account.

Processor

What is Merchant Refund Cap

The refund cap system places a ceiling on how far a merchant’s account can go into negative balance as a result of refunds or chargebacks. Previously we allowed merchants to process refunds even if they didn't have sufficient funds. This resulted in merchants accumulating negative balances which needed to be collected by withholding payouts until the balance was covered, often leading to confusion and frustration.

Going forward, all (new and existing) merchants on Adyen will have a cap assigned automatically. This cap is part of our internal risk strategy and may differ based on industry, merchant, and risk profile. For this reason, and others, the exact cap amount will not be shared but information about how we calculate it can be seen below.

This feature is not implemented yet on Stripe.

What the Merchant Cap is NOT

It is not a daily refund count, a per-transaction limit, or a restriction on how many refunds a merchant can issue. It tracks only the net outstanding negative balance.

How the Merchant Refund Cap is Calculated

For new merchants, their negative balance cap is based on their specific industry. After around 30 days of transaction history, the cap recalculates and may adjust every daymonth based on their sales volume of the previous 30 days.

• Minimum: The balance threshold will never be below the amount set for their industry which is based on averages we’ve seen historically.
• Maximum: Each merchant will have a customized maximum limit up to $10,000. The refund limit is capped at $10,000 Hhowever our Risk team can make case by case exceptions if trusted merchants repeatedly reach that limit.
• Insufficient history: If a merchant has fewer than 30 days of sales data, the cap stays at the default amount for that industry until enough history accumulates to trigger the formula to auto adjust the limit.

What is a Negative Balance?

When a merchant issues a refund, Quilt covers it upfront and then recovers the funds by withholding that amount from the merchant’s future payouts. If recovery does not happen quickly enough, the merchant account carries a negative balance meaning Quilt carries that negative balance until the funds are recuperated.

A merchant’s current balance can be viewed by them on the Payouts page under the ‘Pending Deposit’ section.