A refund is a payment reversal that occurs after a transaction has been fully processed. When a customer requests a refund, it means they’ve been charged, and the money has already been deducted from their account and deposited into the merchant’s account. At this point, the only way to return the funds to the customer is to initiate a refund. How refunds work Customer Request: A refund begins when a customer contacts the merchant to request their money back, often due to dissatisfaction with the product or service, a mistaken purchase, or an error in billing. Refund Initiation: The merchant approves the refund and instructs their payment gateway or processor to reverse the transaction. Processor and Bank Communication: The payment processor communicates with the card networks (e.g., Visa, Mastercard) and the customer’s issuing bank to process the refund. Money Transfer: The amount is then debited from the merchant’s account and credited back to the customer’s account. Depending on the payment method and the banks involved, this can take anywhere from a few days to over a week. Discover how real-time payments work and their advantages for businesses in Understanding Real-Time Payments: Key Insights and Benefits."