When a customer uses a debit card online, the card payment is authenticated by a system of payment gateways and money transferred from the card issuing Bank to the Merchant so that the Merchant can release the service. Normally the authentication happens instantly and the customer can avail the service without any delay.
However, there could be occasions when the authentication process encounters technical problems such as lack of connectivity and the authentication may fail. In some cases, the bank account is not debited and the Merchant also has received the payment and hence the customer may re-try the payment and complete it.
Occasionally the amount gets debited from the Bank account but the Merchant reports non receipt of money. In one of the recent instances the undersigned encountered, the merchant even issued an invoice confirming the completion of the transaction but when the subject service did not come through and I raised a query, indicated that the authentication had failed.
This could mean that the Merchant is lying in which case it is a question of fraud.
It is also possible that the authentication was first confirmed and then reversed by the agency responsible for authentication. This could be a correction of a mistake or a result of a bug. The responsibility however lies with the Card issuing Bank.
If the authentication is through in the first instance and the Merchant releases the service it becomes a dispute between the Merchant and the Card issuing Bank. If the service is not delivered, the customer has a double jeopardy. He loses the execution of the service and if it is a time sensitive transaction, he may suffer a real and substantial loss. Additionally, the customer would have to fight for refund with the Bank.
In the recent transaction which the undersigned encountered, though the Merchant who had issued an invoice confirmed after a delay of about a day that the transaction had failed, the Bank has refused to provide the charge back instantly.
They have suggested that the charge back may take upto 36 days.
As a customer, this means that I will be denied of the service and the money for 36 days. If so, the question arises about who enjoys the money during this interim period.
We all know that Banks work under an opportunity cost of about 3% per month and it therefore enjoys the wrongful gain of 3% per month until the amount is reversed back into the account of the customer. Since we can expect that there could be lakhs of failed transaction at any point of time it appears that a substantial amount of money of umpteen customers lie with the Bank as “Unsettled” amounts. Though the individual amounts may be small, collectively it may be substantial.
If the Card is a Credit Card and the customer is not vigilant, the amount would be debited to the account and interest charged there on in the usual course of accounting. If it is a debit card, it will deny the customer of interest for say upto a month on the SB account when the amount is debited even for a day.
I have therefore requested the RBI to clarify their own views on how such float monies are accounted for by the Banks.
I have also asked RBI to let me know an estimate of such float but it is possible that RBI may not have such data.
I have also asked for clarification from the Card issuing Bank and the Merchant who are yet to respond.
I request visitors to let me know if they have come across similar experiences.