Summary

Unreferenced refunds are occasionally a necessary evil. With a normal refund, the payment is returned to the card used to make the original payment. With an unreferenced refund, the funds are not tied to the original payment method and the return can happen to any card. There are sometimes circumstances where this is helpful, such as if a merchant recently migrated POS systems and doesn’t have the original card information or if the original card can’t be used for whatever reason. With that said, this can easily be abused and fraudsters will use this to scam retailers and, in some cases, fraudulent merchants will try to scam us. For these reasons, we have strict restrictions to protect the merchant and ourselves.

<aside> 💡 Note: This is not a feature that should be mentioned in a sales call or advertised on marketing materials but it is something we’ll get questions about and should be able to answer.

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Availability

Some features, like Unreferenced Refunds, are available on the PayFac but may not be available to all Brands. This may be due to additional integration work that might be required and/or other factors such as customer demand, dev priorities, or more. In this case, see the table below for which brands have access to this feature as of this moment.

Brand	Available
Bottle POS	✅
Comcash	✅

<aside> 💡 Note: Unreferenced Refunds requires additional development to implement. Please have a supervisor speak with your local Product team if you feel this feature may be of interest to your industry or Brand and we can get it enabled.

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Processor

Brand	Available
Adyen	✅
Stripe	❌

Rules

(PayFac rule) An account cannot have more than $500 in unreferenced refunds in a 24 hours period. If this happens, any additional unreferenced refunds will be declined.
(PayFac rule) A single unreferenced refund cannot exceed 150% of the merchant's average ticket size (over past 7 days). If this happens, any additional unreferenced refunds will be declined.
(POS rule) Only an administrator user permission can process an unreferenced refund (if a POS doesn’t have permission-based roles today, they would need to develop it before enabling this feature)

Note: These should not be shared with the merchant, we do not want people trying to find ways to circumvent them- if questioned about it, we should just say that the system will attempt to block unreferenced refunds if it thinks it might be getting overused

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Risks

It’s important to understand the inherent risks involved with unreferenced refunds for both us and the merchant, to be able to express to the requesting merchant all the potential liability they are opening up for potential fraud and misuse. Below you will find details on the risks and what we have in place to provide as much protection as possible to this inherently risky practice:

Risk to Merchant

They could end up owing us money. With referenced refunds, we know that they won't go negative because they've processed everything they've sold. For example, let's say someone buys a $50 item but the clerk messes up and refunds $500. Our system would still allow it through since it's under the threshold but if they've only processed $100 in sales that day then they would owe us $400 which they'd have to pay back.
Too many refunds could equal higher penalties/fees. Refund rates over 1% of gross volume is one of the contributing factors to classify a merchant as 'High Risk' which would likely lead to higher fees, delayed payouts, or other headaches. Making refunds slightly harder by requiring them to be referenced or by refunding them through other payment methods such as store account or gift card reduces that risk and helps keep them out of that categorization.