What is a reversal transaction?

A reversal transaction refers to a process in which a previously completed transaction is undone or reversed. This can happen in various contexts, such as in banking, finance, and e-commerce.

In banking, a reversal transaction occurs when a transaction that has been credited to an account is reversed by a person or an institution, either due to a fraud attempt or some sort of error. For instance, if someone deposited an extra amount by mistake in their bank account and later realizes the mistake, they can request a reversal transaction to return the surplus amount back to the sender.

In credit card transactions, a reversal can take place when a customer requests a chargeback or disputes a transaction, citing fraud or a faulty product. In such cases, the amount gets reversed from the merchant's account to the customer's account.

In e-commerce, refund transactions are commonplace as customers may return products for various reasons like defects, delivery errors, or dissatisfaction. Here, a reversal transaction takes place when an amount that was initially paid by the customer gets refunded back to their account, reversing the original transaction.

In summary, a reversal transaction is the reversal of a previously completed transaction, typically employed to correct errors or fraudulent activities in banking, finance, and e-commerce.