What is Reversal? Definition and Meaning - Ikajo Glossary



In banking, the term reversal is applied to define a process during that the payment structure obtains an inquiry for a refund of the transfer which was funded by the account. Generally, the customer who holds an account in the financial establishment has the authority to ask for the reversal.

At the time when such inquiry is received by the bank, the representative of the financial organization usually conducts an investigation and may ask for the supplementary data from the customer and the trader. If it is proved that the transaction is dishonest, the money will be reversed.

Actually, there are three types of reversals, among them authorization reversal, refund along with chargeback. The first one happens when the authorization fails, or the error arises, in such situation the reversal process can take place. The second type can appear when the funds have already changed hands but the client isn’t satisfied with the goods or services, he/she can ask for a refund. Those disputes eventually decide either to make a refund or not. Finally, the last type occurs when the transfer is processed, the issuer has to reverse the charges in order to receive the first transaction’s money.

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