# Pending refunds By default, refunds are submitted immediately when created. A merchant may also be configured to have refunds withheld until the merchant's settlement balance can cover them. This guide explains the pending refund lifecycle, how Finix funds pending refunds, and what happens if a refund cannot be covered before it expires. ## Merchant pending refund strategies On the Merchant resource, the `pending_refunds_strategy` field controls how refunds are held. When a merchant's `pending_refunds_strategy` is set to `SEVEN_DAY_DELAYED_ADJUSTMENT` or `SAME_DAY_ADJUSTMENT`, refunds enter a `PENDING` state while Finix verifies that there are sufficient funds in the merchant's settlement to cover them. - `SEVEN_DAY_DELAYED_ADJUSTMENT`: Refunds are held in `state: PENDING` for up to 7 days to be covered by settlement funds. After 7 days, Finix debits the merchant's bank account to cover the refund. - `SAME_DAY_ADJUSTMENT`: Finix issues a debit adjustment near settlement close if the settlement can't cover the refund. Only users with `ROLE_PARTNER` credentials can set `pending_refunds_strategy`. ## Pending refund lifecycle ### 1. Refund created If a Merchant has a `pending_refunds_strategy` configured, refunds are not processed immediately. In the response, the Transfer reversal (i.e., refund) contains `state: PENDING` and an `expires_at` datetime 45 days after creation. Finix sets and enforces this expiration window. Refund - held ```json Refund - held { "id": "TRhop5SzZD5AbRGz6HC6qB5w", "created_at": "2026-09-25T20:36:25.76Z", "updated_at": "2026-09-25T20:36:25.79Z", "3d_secure_session": null, "additional_buyer_charges": null, "additional_healthcare_data": null, "additional_lodging_data": null, "additional_motor_vehicle_rental_data": null, "additional_purchase_data": null, "address_verification": null, "amount": 1000, "amount_requested": 1000, "application": "APc9vhYcPsRuTSpKD9KpMtPe", "created_via": "UNKNOWN", "currency": "USD", "destination": "PI6iQcTtJNCS8GZAVKYi5Ueb", "expires_at": "2026-11-09T20:36:25.76Z", // [!code highlight] "externally_funded": "UNKNOWN", "failure_code": null, "failure_message": null, "fee": 0, "fee_profile": "FPuizPqrhzYLbmJm88u7aqfj", "idempotency_id": null, "ip_address_details": null, "merchant": "MUmfEGv5bMpSJ9k5TFRUjkmm", "merchant_identity": "ID6UfSm1d4WPiWgLYmbyeo3H", "messages": [], "network_details": null, "operation_key": "CARD_NOT_PRESENT_REFUND", "parent_transfer": "TRqvNLUdn3aPmdwLMSKs3Gxz", // [!code highlight] "parent_transfer_trace_id": null, "processed_at": null, "raw": null, "ready_to_settle_at": null, "receipt_last_printed_at": null, "security_code_verification": null, "source": null, "split_transfers": [], "state": "PENDING", // [!code highlight] "statement_descriptor": "FLX*FINIX FLOWERS", "subtype": "API", "supplemental_fee": null, "tags": {}, "third_party_details": null, "tip_amount": null, "trace_id": "9fc0c015-0d97-49f1-93a6-b845d4e50c01", "type": "REVERSAL", // [!code highlight] "_links": { "application": { "href": "https://finix.sandbox-payments-api.com/applications/APc9vhYcPsRuTSpKD9KpMtPe" }, "self": { "href": "https://finix.sandbox-payments-api.com/transfers/TRhop5SzZD5AbRGz6HC6qB5w" }, "parent": { "href": "https://finix.sandbox-payments-api.com/transfers/TRqvNLUdn3aPmdwLMSKs3Gxz" }, "destination": { "href": "https://finix.sandbox-payments-api.com/payment_instruments/PI6iQcTtJNCS8GZAVKYi5Ueb" }, "merchant_identity": { "href": "https://finix.sandbox-payments-api.com/identities/ID6UfSm1d4WPiWgLYmbyeo3H" }, "payment_instruments": { "href": "https://finix.sandbox-payments-api.com/transfers/TRhop5SzZD5AbRGz6HC6qB5w/payment_instruments" }, "fee_profile": { "href": "https://finix.sandbox-payments-api.com/fee_profiles/FPuizPqrhzYLbmJm88u7aqfj" } } } ``` If the refund is not funded by the expiration, it expires. ### 2. Daily funding check Before a Settlement belonging to a Merchant moves to `status: AWAITING_APPROVAL`: 1. Finix checks whether the Settlement balance covers each pending refund, starting with the oldest pending refund. 2. If it does, Finix submits the refund, moves the refund `state` to `SUCCEEDED`, and deducts it from the Settlement. 3. If the balance cannot cover a refund, the refund `state` stays `PENDING`. How long Finix waits before collecting via bank account debit depends on the merchant's [pending_refunds_strategy](#merchant-pending-refund-strategies). Pending refunds are processed in the order they were created. If the oldest pending refund cannot be covered, the refunds behind it wait, even if they are smaller. ### 3. Finix collects the refund If incoming sales cannot cover the refund and it reaches the maximum days allowed in `state: PENDING`, as set by the [pending_refunds_strategy](#merchant-pending-refund-strategies), Finix debits the Merchant's bank account for the refund amount. To collect the refund, Finix: 1. Creates a debit adjustment Transfer for the amount of the refund which will be deducted from the next Settlement. 2. Submits the refund 3 business days after the debit clears and creates an offsetting credit adjustment Transfer so the two adjustments net to zero for the Merchant. For more information, see [Refund Adjustments](#refund-adjustments). End customers do not need to take action The pending refund process is between Finix and the merchant. The refund is submitted to the cardholder's or bank account holder's financial institution only after it is funded; if funding is not secured by `expires_at`, the refund fails. ### 4. Refund expiration If the bank account debit fails and the refund still cannot be covered by the `expires_at` datetime, the refund's `state` is set to `FAILED` with a `failure_code` of `REFUND_EXPIRED`. ```json Refund - Expired { "id": "TR8fezr4xCMFJvH5rzCqrUkF", "created_at": "2026-10-24T17:38:19.09Z", "updated_at": "2026-12-08T17:38:19.09Z", ... "expires_at": "2026-12-08T17:38:19.09Z", "failure_code": "REFUND_EXPIRED", "failure_message": "The refund has expired.", "state": "FAILED", "type": "REVERSAL" } ``` ## Refund adjustments If necessary to collect funds, Finix may create adjustment Transfers with two possible `operation_key` values. These adjustments are system-generated and are always in `state: SUCCEEDED`. | Subtype | Type | Description | | --- | --- | --- | | `REFUND_MERCHANT_DEBIT_ADJUSTMENT` | `DEBIT` | Deducts the refund amount from the Merchant's Settlement. | | `REFUND_MERCHANT_CREDIT_ADJUSTMENT` | `CREDIT` | Offsets the refund amount when the refund is submitted, or returns pending funds if the refund expires. | ```json Refund adjustment { "id": "TRaB91xboyy8mfFxZNFWf1F", ... "parent_transfer": "TR8fezr4xCMFJvH5rzCqrUkF", "state": "SUCCEEDED", "operation_key": "REFUND_MERCHANT_DEBIT_ADJUSTMENT", "type": "DEBIT" } ``` Both adjustments reference the pending refund in the `parent_transfer` field. ```json Debit adjustment { "id": "TRaB91xboyy8mfFxZNFWf1F", ... "parent_transfer": "TR8fezr4xCMFJvH5rzCqrUkF", "state": "SUCCEEDED", "operation_key": "REFUND_MERCHANT_DEBIT_ADJUSTMENT", "type": "DEBIT" } ``` ```json Credit adjustment { "id": "TR4Lxcmkn1py9him81swz4FD", ... "parent_transfer": "TR8fezr4xCMFJvH5rzCqrUkF", "state": "SUCCEEDED", "operation_key": "REFUND_MERCHANT_CREDIT_ADJUSTMENT", "type": "CREDIT" } ``` On the Settlement Entry: - `subtype` matches the adjustment `operation_key`. - The `parent_entity_id` field matches the adjustment `parent_transfer`. ## Webhooks You may subscribe to [Transfer webhooks](/additional-resources/developers/webhooks/webhook-events#refund-debit) to receive a notification each time a pending refund changes state: - `PENDING` to `SUCCEEDED`: The refund was submitted. - `PENDING` to `FAILED`: The refund could not be funded. The webhook payload includes `failure_code: REFUND_EXPIRED` and the `expires_at` timestamp when this is due to expiration.