Void Transaction

Void Transaction
See also

Void transaction - it is a banking transaction consisting in stopping payments in a kind of “void". This means that the funds debited from the consumer's bank account are neither on the credit nor on the debit side of the consumer's bank account. This may occur, for example, if he makes certain purchases by mistake, uses his account for fraudulent purposes or uses money for financial crime (money laundering or terrorist financing). The essence of such a transaction is to leave sufficient time for the bank to verify it. For example, in the case of fraudulent transactions, he is able to prevent the customer from losing money forever.

Void transactions in business

In everyday use, void transactions can be recognised in retail trading. When we purchase a specific product for which payment is made by debit or credit card, there are two options. Introducing it into a specially prepared tab or using a microchip in the middle of the card and then bringing it closer to the terminal. During this process we may be asked to enter the appropriate:

  • PIN
  • other security password.

In the meantime, the transaction will remain “void"; so that the funds in the consumer's account are blocked and debited from his debit side, but the bank will not transfer the payment to the merchant's credit side before authorising it[1] .

In view of the above, it can be observed that void transactions play an important role in the modern economy as they help to counteract the abuse of banking digitisation. They are most common in mobile or e-banking, as these means of transferring monetary value are the most vulnerable to third party interference.

Specifications of void transactions

As mentioned above, the void transactions mechanism is mainly used in the era of digital payments. By implementing appropriate logical gateways, it is possible to avoid ill-considered transfers. As indicated in the literature, the relevant software codes can be used to cancel a transaction that has been successfully completed (put into the void) by the seller himself and then give the consumer a refund. This is possible thanks to a request sent by the device processor to the machine API[2] .

Moreover, it often happens that on the panels supporting a given payment, the seller has a choice of several options. One of them is, among others, “VOID". This means that during a pending or selected transaction he is able to stop the transaction. At this stage, it may return a part of it to the buyer, and transfer a part of it to the buyer for implementation. This makes it possible to bring the transaction to the desired state without unnecessary need to extend the payment process (e. g. dividing such a transaction into credit - debit, debit -credit)[3].

Therefore, it is recommended that retailers in retail stores (as well as in other stores) use only terminals that allow transactions to be stopped in a “VOID" state. This is mainly due to the concern for the safety of transactions of both parties (consumer and seller), but also for good practices in trade. Hence, the proposals to introduce a law requiring the possession of terminals with the “void' option seem justified.

Footnotes

  1. Close P. 2012, p. 17-20
  2. Nagasubramanian R. 2012, p. 33-34
  3. Nagasubramanian R. 2012, p. 35-38

References

Author: Dominika Pałkowska