When processing refunds through Adyen, there are two different refund types that partners may encounter: Referenced Refunds and Unreferenced Refunds. While both return funds to the shopper, they function differently and have different use cases, risks, and reporting implications.
✅ Referenced Refunds (Standard Refunds)
A referenced refund is directly tied to an original payment transaction. The refund references the original payment PSP reference in Adyen.
Key characteristics
Initiated from the original payment
Automatically links the refund to the original transaction
Refund amount cannot exceed the original payment amount
Uses the same payment method as the original transaction
Fully traceable in Adyen reporting and reconciliation
When to use
Standard refunds for completed payments
Partial or full refunds of a known transaction
Situations where clear transaction-level reporting is required
Benefits
Lower risk and fraud exposure
Clean reconciliation and reporting
Strong audit trail for disputes and chargebacks
Recommended and preferred refund method
⚠️ Unreferenced Refunds
An unreferenced refund is not linked to a specific original payment. Instead of referencing a transaction, funds are sent directly to the shopper's payment method.
Key characteristics
Not tied to an original transaction
Requires manual entry of payment details (depending on payment method)
Higher risk and compliance requirements
Additional controls may be required by Adyen
Limited availability depending on payment method and merchant setup
When to use
The original transaction cannot be located
The payment was processed outside of Adyen
Exceptional or edge-case refund scenarios
Important considerations
Unreferenced refunds may require explicit enablement by Adyen
Some payment methods do not support unreferenced refunds
Increased scrutiny for fraud and compliance reasons
Reporting and reconciliation are more complex than referenced refunds
🔍 Key Differences at a Glance
Feature | Referenced Refund | Unreferenced Refund |
Linked to original payment | ✅ Yes | ❌ No |
Recommended by Adyen | ✅ Yes | ❌ No (exception-only) |
Fraud risk | 🟢 Low | 🔴 Higher |
Reporting & reconciliation | 🟢 Straightforward | 🔴 More complex |
Enablement required | ✅ No | ⚠️ Often yes |
Common use case | Standard refunds | Exceptional cases only |
🔐 Refund Authorization
Before processing a refund, Adyen automatically checks with the card issuer to verify that the shopper's card or account is still valid. This happens without any action needed on your end.
Supported card networks
American Express
Discover
Mastercard
Visa
Benefits
When the issuer authorizes the refund, the funds appear on the shopper's account right away. This leads to higher customer satisfaction, fewer shopper inquiries about refund status, and a reduction in refund-related chargebacks — since issuers typically return funds to the shopper sooner.
When a refund authorization is declined
Issuers may decline a refund authorization for reasons such as:
Lost or expired card
Invalid card number
Closed account
Suspected fraud
Note: If a refund authorization is declined, Adyen will still attempt to process the refund.
💡 Valpay Recommendation
Valpay strongly recommends using referenced refunds whenever possible. They provide the best experience for merchants, customers, and partners by ensuring accurate reporting, reduced risk, and faster reconciliation.
Unreferenced refunds should only be used when a referenced refund is not possible and after confirming the merchant is properly enabled for this functionality in Adyen.
If you are unsure which refund type to use or need help enabling unreferenced refunds, please contact Valpay Support.