The Open Banking Challenge Series: The Complex Refund Process

In this piece, we will delve into the intricacies of this challenge and propose a solution that could revolutionise the refund landscape within the Open Banking ecosystem.

The Complex Refund Process

In my ongoing exploration of the challenges hindering the widespread adoption of Open Banking Payments by merchants, I come to another critical juncture – the complex refund process. 

Unlike established card schemes that offer streamlined and delegated refund procedures, Open Banking Payments struggle to provide merchants with an efficient and standardised mechanism for processing refunds. In this piece, we will delve into the intricacies of this challenge and propose a solution that could revolutionise the refund landscape within the Open Banking ecosystem.

The Refund Conundrum

Refunds are an integral part of any payment system, ensuring flexibility and customer satisfaction. However, in the realm of Open Banking Payments, the process of issuing refunds presents significant hurdles, particularly when compared to the established simplicity of card scheme refunds. 

Large-scale refund transactions, crucial for titans of industries, often face roadblocks due to the absence of specified standards and authority to execute.

The Missing Link

One of the key issues is the lack of uniformity and ease in refund processes within the Open Banking framework. Unlike card schemes that offer clear guidelines and established protocols for merchants to follow, Open Banking Payments leave much to be desired. Banks frequently do not provide the necessary account details for seamless refunds, adding complexity to an already intricate process. 

Additionally, obtaining consent from both merchants and customers poses challenges, leading to friction and inefficiency. There is no non-consented refund process that is available to Merchants in the card schemes.

The Framework for Streamlined Refunds

To overcome this hurdle and bring Open Banking Payments in line with the efficiency of card scheme refunds, a new framework is needed. By leveraging industry expertise including TPPs, EMIs and banks could jointly develop a streamlined refund process that is intuitive, standardised, and reliable for large merchants. 

The key to allowing Merchants to provide a refund where they know who they want to refund and are allowed to do so without a specific Merchant bank account or Customer Secure Customer Authentication (SCA)

Virtual Accounts

  • EMIs can offer a solution by facilitating the creation of virtual accounts for merchants but this excludes regulated Open Banking TPPs.

Faster Payments (FPS) Capabilities

Banks can capitalise on their Faster Payments capabilities to expedite the refund process. But again, this excludes Regulated Open Banking TPPS.  

Unlocking Merchant Confidence

Implementing a streamlined refund process would have profound implications for Open Banking Payments. Large merchants, initially hesitant due to the refund complexities, would gain confidence in the system’s ability to handle refunds efficiently. 

This enhanced reliability could incentivise titans of industries to embrace Open Banking Payments, driving wider adoption and positioning Open Banking as a competitive alternative to traditional payment methods.


The complexity of refund processes within Open Banking Payments is a barrier that must be overcome to fully realise the potential of this innovative payment method. By collaborating to develop a streamlined refund framework, we can create a system that empowers merchants with efficient and standardised refund procedures. 

This pivotal change could not only boost merchant confidence but also position Open Banking Payments as a frontrunner in the evolving payment landscape, bridging the gap between innovation and practicality. The key is to ensure that Regulated TPPs have the capability to deliver, otherwise, we are in danger that Open Banking TPPs, which are regulated to perform PISPs, will not be able to work with the titans of the Merchant world.

In my next piece, I will focus on another pressing matter within the realm of Open Banking: the performance gap. 

It remains evident that the processing performance of Open Banking Payments lags significantly behind that of well-established card schemes. This performance disparity prompts legitimate reservations regarding the dependability and effectiveness of Open Banking Payments, particularly when handling high-volume transactions.

Our focus will delve further into this critical concern, scrutinising the root causes of the performance gap and presenting viable solutions that could be employed to address this challenge effectively.

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