It’s easier than ever to buy online, offline, to pick up in store or have things delivered. It’s easier than ever to check out, using all manner of payment options, from Apple Pay to Tap to Pay, Scan and Go and everything in between.
But Jeremy Balkin, founder and CEO at TodayPay, told Karen Webster that there’s a gap in the commerce continuum.
“Refunds,” he said in an exclusive interview, “are a massively inflexible, broken part of the payments ecosystem. And I want to see if we can fix this.”
One-fifth of everything bought in the U.S. is returned every year — equating to $1.4 trillion in sales refunded. But, as Balkin described it, the back end has been sorely neglected, which comes as a price to merchants. A frustrating wait for refunds may endanger customer loyalty.
Balkin’s observations of refund pain points come firsthand. He recounted that, upon moving to the States a few years ago from Australia, and having had twins, his wife had (like many parents) used the tried-and-true of buying clothes and baby items online in many different sizes via a “bracketing” approach — returning four onesies, while keeping two, for example.
And one day, he said, at a retailer in Manhattan, he went to pay for baby items with an Amex, only to be stopped mid-purchase by his wife, who steered him to use a debit card instead. The reason? Refunds were getting put back on the debit card in just a matter of days.
“But with the credit card,” Balkin’s wife said, with the voice of experience, “I’m constantly checking the statement — and the refund only appears on the next month’s billing cycle. I never know when the money’s coming back.”
Part of the problem lies with the returns/refund connection, where some merchants issue refunds once they’ve received confirmation that an item has shipped or even back in the warehouse, before issuing the refund.
Simply put, there are a million ways to pay for things — but a very limited set of conduits across which we can get money back.
The greenfield opportunity to fix that rigidity and unpredictability, and the challenge, led Balkin to leave his role at JPMorgan as global head of Innovation and Corporate Development, Payments to his current tenure at the helm of TodayPay.
In order to move refunds beyond the simple practice of reversing payments back to the original payment method, TodayPay said at Money 2020 on Monday (Oct. 23) that it has emerged from stealth mode with “Refunds as a Service,” which enables merchants to offer customers instant refunds across multiple payment methods, and though a TodayPay wallet, if they so choose. A debit card is in the works, too, broadening the realm of payment options.
Refunds as a Service is a feature that the company has tagged “my money, my choice.” The offering, as Balkin noted, is designed to work with merchants, marketplaces, logistics firms, and insurers, in plug and play fashion, connected via APIs to their transaction flows. Through that connectivity, said Balkin, TodayPay has access to shipping label data, tracking the flow of the return itself — and the consumer receives a pending value in their wallet, issued at the point of scan.
“It’s about speed and choice,” he said, adding, “those are the keys.” Depending on the solution the merchant chooses — including Refund Now, Pay Later, to be launched toward the end of the year — TodayPay advances the refund (through its capital partners), and the merchant has as long as 90 days to pay the funds back.
Other products in development, such as Better Refund, as Balkin said, may offer consumers cash back on their refunds, depending on the payment redemption method that is chosen.
Asked by Webster how the TodayPay makes money, he said that the company captures value through its wallet, and on interchange fees — and “small SaaS fees for the merchant.” There’s a fee for faster payments too — “an instant gratification fee” — in the event that they choose a payment method other than the original method of payment for the purchase. Faster payouts can make a difference in the lives of consumers living in the paycheck-to-paycheck economy, said Balkin, hitting their wallets and bank accounts in a positive way.
Through the new service, the refunds are decoupled from the logistics of the returns themselves and severs the refund from having to be done over the card rail, said Balkin. That’s a point of vulnerability where refunds may get “lost” because a card’s been cancelled or expired or stolen (and sits on the merchant’s accounting books, forever unused).
For the merchant, he said, TodayPay’s Refunds as a Service is essentially a B2B solution, lowering their cost of payments acceptance — and leveling the playing field in terms of competing with the marketplaces that promote easy and fast returns and refunds as key part of the end -to-end commerce experience.
And, critically, as Balkin told Webster, merchants securely onboard their customers, sidestepping the proverbial “rocks in a box” scenario. In that case, at least some consumers take steps to game the returns/refund process, sending back items in boxes they’d not purchased, or finding ways around return policies while still getting money sent back to their cards.
Fraud and disputes cost merchants and consumers around $100 billion annually, said Balkin, and while some estimates peg fraud at nearly 11% of online purchases, the actual impact may be much higher. He added that when merchants receive damaged goods or empty boxes, there’s no way to recoup the refund or charge a fee.
“There are a number of fraud tollgates that we have put in place, very purposefully,” he said, adding that the Refunds as a Service model lets merchants receive goods and inspect them as funds are on hold, which can in turn help in disputes — and keep good customers in the ecosystem.
In addition, calls into call centers, demanding to know where a refund might be, are cut down drastically, which cuts down, too, on merchants’ costs.
Refunds as a Service he said, “will be better for the economy, it will be better for merchants, and it will be better for consumers … what TodayPay is doing is creating an alternative payment refund rail.”