Worldpay: Refunds key to winning retail loyalty battle

Editorial credit: Dontree_M / Shutterstock.com

During the festive season, consumer spending reaches its peak as people rush to buy gifts and manage holiday stress. With the surge in purchases, refund requests also increase as shoppers make errors, creating additional challenges for retailers during an already hectic period.

To address this, Worldpay launched near-instant refunds via Mastercard and Visa last month, aiming to ease the burden on both merchants and consumers in the UK. The company emphasised the importance of seamless refund processes, noting that they can be the deciding factor between losing a customer or earning their long-term loyalty.

Payment Expert spoke with John McNaught, Head of Payouts at Worldpay, to learn more about how the new near-instant refund system aims to support retailers during the holiday season and encourage repeat business.

John McNaught, Head of Payouts at Worldpay.
John McNaught, Head of Payouts at Worldpay

Payment Expert: How does the introduction of near-instant refunds align with evolving consumer expectations, particularly during high-return periods like Black Friday and Christmas?

John McNaught: The introduction of near-instant refunds aligns with evolving consumer expectations, especially during high-return periods like Black Friday and Christmas. Consumers increasingly prioritise convenience and speed, and a swift refund process enhances their overall shopping experience.

Our research shows that 40% of shoppers expect refunds within 24 hours, but often the process can take days from when goods are received.

Implementing near-instant refunds serves as a differentiation factor between brands, particularly in the retail and fashion sectors. Consumers are more likely to return to retailers that offer seamless and prompt refund processes, fostering loyalty and repeat business. 

PE: In what ways could faster refunds enhance customer retention and drive repeat purchases, particularly during high-return periods like the holiday season?

JM: In 2023, Worldpay data shows that merchants particularly within the retail, entertainment and hospitality sectors saw over £1.3bn worth of refunds over the seasonal period. By getting that money back into consumer’s pockets more quickly, there is further opportunity to drive loyalty and potential future sales.

Offering near-instant refunds can boost consumer purchasing power and overall experience. While it may lead to increased returns, many retailers have already integrated return expectations into their business models, such as “try before you buy” options, which can enhance conversion rates. The higher sales from improved customer satisfaction often outweigh the negatives.

For younger consumers, who may have less disposable income and manage funds closely, the expectation of instant refunds aligns with their financial habits. A swift refund process enhances the overall user experience, making it more compelling for them to shop online.

PE: Could near-instant refunds lead to innovations in refund policies or promotional strategies for participating retailers?

JM: By offering faster refunds, retailers can create better customer interactions, potentially reducing calls to customer service to track funds. Retail is a fiercely competitive sector with brands fighting out for consumer loyalty with often tight margins  – ultimately it is the experience that will set merchants apart from the competition.

In the context of flight cancellations, near-instant refunds can significantly improve customer satisfaction. Travellers often face delays and cancellations, and a prompt refund process can alleviate some of the inconvenience, enhancing the overall customer experience.

PE: Could near-instant refunds encourage an increase in returns or ‘return abuse,’ and how can retailers manage this potential challenge without compromising customer satisfaction?

JM: While near-instant refunds may encourage an increase in returns or ‘return abuse’, retailers can manage this potential challenge without compromising customer satisfaction. Similar to the impact of free returns, retailers can implement fair-use policies to mitigate risks. Additionally, offering instant refunds can reduce customer acquisition costs by increasing customer lifetime value. 

PE: What role do Mastercard and Visa play in ensuring scalability, security and reliability for near-instant refunds across the payments ecosystem?

JM: Mastercard and Visa play a crucial role in ensuring scalability, security, and reliability for near-instant refunds across the payments ecosystem. They facilitate existing processes to operate in real-time, supporting innovations like near-instant refunds. 

PE: With plans to expand this service to the European Union in 2025, what challenges or opportunities might Worldpay encounter during this rollout?

JM: With plans to expand this service to the European Union in 2025, Worldpay may encounter challenges such as consumer awareness and demand from merchants. The fragmented nature of financial institutions in the EU requires collaboration across the ecosystem to educate and implement the service effectively

PE: How could the potential cost savings for merchants, such as fewer refund-related customer service queries, influence broader pricing strategies or service charges for consumers?

JM: Faster refunds can enhance customer retention and drive repeat purchases, particularly during high-return periods like the holiday season. A seamless refund process builds trust and encourages repeat business. For example, offering flexible return policies and multiple return options can gain customer trust and lead to repeated sales.

Potential cost savings for merchants, such as fewer refund-related customer service queries, can influence broader pricing strategies or service charges for consumers. Reducing customer service costs and friction can lead to increased spending for seamless and immediate refunds.