Returned Payment
A returned payment is a transfer sent back toward the payer because it could not be completed or accepted. The returned amount may be reduced by fees or foreign-exchange differences incurred during the original and return journeys.
A payment is returned when an institution in the chain cannot or will not complete it. Common reasons include an invalid or closed account, a beneficiary name that does not match the account, a currency the account cannot receive, missing information, or a compliance decision at the beneficiary or an intermediary bank. The funds then travel back along the route toward the payer's bank.
Returns are rarely free. Each bank that handled the payment may keep its fee, and if the payment was converted from one currency to another, converting it back will usually be done at a different rate, creating a loss. The return can take days or weeks to arrive, and the payer may receive less than it sent with limited explanation unless it asks its bank for the return reason.
Before resending, the payer should obtain the exact reason for the return, correct the underlying problem with the supplier, and confirm the beneficiary details through an independent channel. Resending to the same details without understanding the reason often produces a second return. Returns are also distinct from a recall, which the payer requests rather than the bank initiating. Keep the return advice with the original confirmation, since both are needed to reconcile the loss.
In practice
A returned amount is often lower than the original payment because of fees and foreign-exchange differences on the outbound and return legs. Find out why the payment was returned before sending it again.
Example
A buyer converts $20,000 to CNY 143,000 and sends it to a supplier, but the account cannot receive the payment and it is returned. The renminbi is converted back to dollars at a less favorable rate and two banks keep fees, so the buyer's account is credited $19,620.
See also
- Payment RecallA payment recall is a request by the sending institution to recover or stop a transfer after it has been released. A recall is not guaranteed because the funds may already have been credited, withdrawn or made subject to the beneficiary bank’s procedures.
- Short-Paid PaymentA short-paid payment occurs when the beneficiary receives less than the amount expected under the invoice or instruction. The difference may result from bank charges, intermediary deductions, unexpected conversion or an incorrect charge code.
- Payment InvestigationA payment investigation is a formal inquiry into a delayed, missing, rejected, misapplied or incorrectly processed transfer. Banks may exchange messages to verify routing, beneficiary details, compliance holds, fees or the disposition of funds.
- Beneficiary BankThe beneficiary bank is the financial institution that holds the account intended to receive a payment. It may review the beneficiary, currency, payment purpose and supporting documents before making funds available.