Improving Refund Experience for redBus users

When it comes to the e-commerce industry, there is often a constant pursuit by the product teams to convert as many users as possible on their platform by optimizing different stages of the funnel. But what remains one of the most important but neglected aspects of the overall user experience is how you deal with cancellations and refunds, as this is an unavoidable part of the customer journey today, especially when you sell anything online. A seamless refund experience can create happy customers who are more likely to shop again with you in the future, while customers who experienced friction while trying to get refunds are likely to not return back. In general, refunds are treated as lost business, but if used properly they have the potential to boost brand perception among its users and increase repeat customers.

Typical to any travel e-commerce business, even at redBus we see around 5–7% of bookings, where the user has to be refunded the money back, either partial or full amount, because of various reasons like users canceling the ticket, or bus operators canceling the service, or failure in issuing tickets for some reason. Now with anything that involves money in India, a customer gets very anxious and always wants to be on top of what is happening with his/her money. Since, refund is a complicated process in the backend, it is very easy for the customer to fall in an information vacuum, leading to the customers calling our customer care, escalating issues to social media, Any such bad experiences eventually impact trust and loyalty of the brand.

How refunds work ?

Before we dive into the problems faced by customers around refunds and how we address them at redBus, I will first talk briefly about how the conventional refund back to source process works. This is what happens behind the scenes -

1. The online merchant makes the refund request through the payment gateway.
2. The payment gateway conveys this information to the acquiring bank (the bank in which merchant has its account).
3. The acquiring bank communicates with the issuing bank (the bank in which the customer has the account / card is held) which was used for the payment.
4. Finally issuing bank has to accept this request and process the refund to the customer.

Since, any online refund request involves an exchange of information between 3–4 different parties and each of these parties have their own processes and mechanisms to handle the refund requests (which might also not be fully automated in some cases and might require manual oversight), it may usually take up to 5–7 working days (again varying depending on the mode of payment like UPI, Cards, Net banking, etc.) for the refund to reflect in the customer’s account.

Problems faced by e commerce customers

Now for any e-commerce company today, one of the major contributors to the number of inbound calls / complaints received by its customers continues to be the refund related queries. And redBus is no different. Hence, we decided to break down the refund journey of our users and identify the major challenges that these users face today.

1. Delays in getting the money back into account

As discussed before, depending on the payment instrument used by the customer, it may take up to 5–7 working days for the refund to be credited in the customer’s account. This slow and long process can be frustrating for customers, especially in cases of big-budget transactions, where their money gets stuck for the duration of this process.

2. No way to track the status of refunds and get real time updates

More often than not, both customers and merchants are unaware of the steps that go into processing a refund. While customers rely on the timeline provided by the merchant, the latter in turn is totally dependent on the mercy of the payment gateway. While the entire process is executed behind the scenes, the customers are often left in the dark, and it can take a toll on customer service and diminish customers’ trust in your brand.

Things we have done at redBus

1. Lightning fast refunds — Reducing refund TAT

One of the most important initiatives that we undertook to improve the overall refund experience for our customers was — to ensure that the refunds that we process to our customers gets instantly credited in their bank account, We term all such refunds which are credited to the user’s account within 5 mins as “Lightning fast refunds”.

We worked very closely with our payment partners to support and enable newer and alternate refund mechanisms apart from the traditional modes so as to ensure that we achieve our end goal. Today in India, the payment ecosystem is equipped to support instant refunds for UPI and Cards (not all cards are supported — only a set of banks, cards networks support this). In fact UPI and Cards together constitute for around 90% of our transactions on redBus and that is exactly what we set out to target.

The logical question is next how these refunds are processed instantly. In most of these new age refund mechanisms, the payment gateway tries to bypass all the intermediaries in between (which are there otherwise present during the forward payment flow) and directly trigger refund requests to the issuing bank over UPI / IMPS rails. Let’s take few examples,

a. UPI — For every transaction done, the PG stores the VPA ID of the customers used during payment. Now when a refund request comes for any transaction, the PG does a direct UPI payout to the stored VPA ID instead of going via the traditional back to source mechanism. Since these payouts are based on UPI rails, these are instant in nature.

Impact — Given these instant refund mechanisms in the backend, today more than 95% of UPI refunds on redBus platform are credited back to customer’s account within 5 mins.

b. Cards — For every transaction, the PGs used to store the card details of the customer used while payment. And they had worked out a way with all the major banks to process refunds instantly using either IMPS (to credit card account) or direct integrations with major banks (for Debit card refunds)

Impact — As a result, we were able to process more than 70% of card refunds instantly.

This coverage has gone down post RBI guidelines around Card tokenization have kicked in on 1st Oct. as PGs can no longer save card numbers. Now it seems the only possible options in the market for the time being to process instant refunds for cards are the products offered by Visa and Mastercard, called Visa Direct and Mastercard Send respectively. The commercials for both these products are on the higher side today and are a costlier option for the e-commerce merchants, if they wish to offer a better refund experience.

2. Improve Refund Status Visibility — Whatsapp notifications for refund updates

Before we start, I would just like to highlight that there are broadly two different stages of any online refund. 1. Refund initiation, where the merchant initiates a refund request with the PG, and PG does a few basic checks and accepts the request from the merchant, to forward it to subsequent parties depending on the refund mechanism. 2. Refund credited, ie., when the issuing bank acknowledges the request and the refund amount actually gets credited back to the customer’s account.

In order to further improve the Refund experience of our users and also to address the problem of customers having no visibility of their refunds and getting anxious, we now proactively share real time updates regarding refunds with our customer over Whatsapp. This has helped us reduce the number of refund related calls we get at our customer service.

Refund Initiated notification

Refund Credited notification

Also users can access the same when they come on our app/website to view their bookings, where we now specifically highlight the refund details and current status of the refunds along with ETA, if applicable.

Impact of the initiatives

As a result of all the above initiatives that we undertook in order to make refund experience better for our customers, we have seen a very good positive impact -

1. The % of customer calls that we get for refund related queries has gone down by more than 20%.
2. The number of refunds processed instantly (credited within 5 mins) by redBus has gone up from <20% around 6 months back to now around 80%. In fact, when it comes to UPI, we are able to process more than 95% refunds instantly within 5 mins and which is one of the reasons why we also nudge and promote more and more users to use UPI as a payment instrument.

To conclude, refunds are an essential part of all e-commerce businesses and can never be treated like an “afterthought”. Having an efficient refund process can improve the overall customer experience, boost brand loyalty and trust among its users and increase repeat customers.