From a legal standpoint, that money was taken, and deprived me of the use of it while it was taken.
Monzo is then returning me the use of that money, so i can spend it again, even though the retailer can then re-take it at a later date.
In the worst case, this will cause people to think they have more money than they do, overspend, then end up in debt.
I made a post about the general view here just yesterday. The reality is most people absolutely love this and it’s one of their favourite things about Monzo, so it is what it is Still, I agree… it’s confusing. Authorisations are just that and should be separate.
Accounting works on the basis of an immutable ledger. You cant remove anything from it - this would be almost fraudulent.
Errors are accounted for in chronological order, where transactions can cancel each other out, but should never be removed.
I agree they could be marked as ‘cancelled’ or ‘reversed’ subsequently though.
I hear you. I’d like to think we could make this look better and less ‘broken’. I’m not sure if there’s a technical limitation on us doing so, but I’ve fed this back to the right people internally.
As much as I understand the thought process behind this, it wouldn’t really work in practice
We’d end up in a situation where extending the authorisation expiry to 30 days would leave a lot of people stuck without access to their money in cases where it genuinely should have been reversed and available for them to use; one example would be where a merchant has declined a payment at the point of sale, despite us receiving the authorisation request and approving it on our end. It wouldn’t really be fair for us to keep a hold on this money for 30 days in this kind of scenario. Sure, they could get in touch with COps to release the hold on it, but this would drive a pretty substantial increase in the workload for COps that really could be better addressed through design to make things clearer in the first place.
When you make a payment by card, you’re providing your authorisation for the merchant to take money from your account. When this authorisation is approved on our end, we move the money into a ‘hold’ account to ring-fence it from the rest of your money, typically for 7 days as most merchants come to collect it within around 2-5 days. This makes things clearer for you, since (assuming the merchant collects within 7 days) you can’t spend the same money twice.
It’s worth bearing in mind here that as far as a merchant is concerned, they never see that we’ve ring-fenced the money in your account and deducted it from the balance you can spend, and at this point, technically no money has been taken from your account - the money you see as ‘taken’ from your perspective is really just ring-fenced within your account. From the merchant’s perspective, you pay by card and authorise the payment, and some number of days later they come to collect the money owed - it’s pretty simple on their end.
If they don’t collect the money within 7 days, the ring-fenced money is automatically released and available to spend again, but at no point yet has it actually been collected by the merchant.
You’ve still given them authorisation to debit your account, though, and presumably have the goods you paid for, so you still owe them the money; this is why they can come in and (from your perspective) take the payment a second time. In reality, they’ve only ever taken the payment once - in the meantime the money was just ring-fenced by us to stop you from spending it twice, and automatically released from this status because the merchant has collected it later than they really should have.
Instead of changing the expiry limit for everything, would it be possible to come up with some way of letting the use re-ringfence the sums for any of these ‘refunds’?
Say I’ve spend £50 on something and know I’ve received what I’ve paid for, but the merchant doesn’t collect on time so I get a ‘refund’. Knowing that I have ‘spent’ the money, I tap on the transaction in my feed, and tap on the ‘keep ringfenced/awaiting collection/still owing/call it what you will’ button, and the refund is reversed and the money ringfenced for another 7 days (or, given that I’m confirming this is a genuine transaction at this point, 30 days or even up to six months).
Another way to expand on this could be giving us back hotel deposits. I use credit cards for hotel deposits but it would be good to not need them for this. There will also be people who can’t get a credit card and don’t have this option, they are then forced to pay hotel deposits and “loose” money for up to 10 days.
Any transaction that is pending if the merchant category code comes up as a hotel or even car rental company a customer could have the option of clicking a button to return ring fenced money.
In theory, there might be a way for us to do something like this - the problem is whether or not such a thing would really work in practice. I for one would love this kind of control over my money, and as a company, it’s no secret that we want you to feel in complete control of your finances. In an ideal world, we could do something like this.
But the problem here is that we’re connecting to global payment processing networks (i.e Mastercard, VISA etc) that we don’t control, so we can’t fundamentally change the way a payment works. It’ll always be made in the following stages:
Cardholder makes a payment and creates an authorisation.
Monzo, having approved this authorisation request, moves money from your main balance into an authorisation hold to stop you from spending it twice, make things clearer for you, and make sure the merchant can collect cleared money that doesn’t result in you being taken overdrawn.
The merchant will make a presentment to collect the money owed usually within 7 days.
We don’t have a mechanism in place whereby tapping on something in-app would move money from your main balance into an authorisation hold - this can only be done following an authorisation request (following a card payment). Could we abstract this in such a way as to give the money the same appearance as having been placed in an authorisation hold? Maybe! I can’t really say for sure, and there may be legitimate technical limitations on doing so, although I definitely see the merits of the idea. Maybe we could creatively use Pots
With this in mind though, it’s worth remembering that in the grand scheme of things, the vast majority of merchants do collect within 7 days and the only transaction you’ll ever see in your feed is the one that was created at the time you made the payment. Trying to fundamentally change the behaviour of payment processing is a really interesting concept, and if we had the opportunity to tear up the existing scheme and design something from scratch, I’m sure we’d come up with some cool ideas! But since this is such a relatively rare issue, I personally think it would be better approached through design and education, rather than a change that could potentially introduce risks that we aren’t necessarily thinking of right now.
I could imagine something similar to the “Details on ATMs” information button within the transaction detail screen of each ATM transaction you make - it gives you information on how withdrawing cash affects Monzo and why we believe you should use card payments instead where possible; but what if we applied the same button to authorisation reversals in the feed, explaining what has happened in clear detail? I think there’s a strong argument that education around the matter, and allowing the feed to remain as it is now (albeit nicer looking) would fit in really nicely with our goal of giving you complete visibility of your finances. You’re seeing how the payment processing really works, unlike a legacy bank that may not give you this kind of insight.
It’s an interesting topic though, and I’m loving the discussion around this! It’s stuff like this that makes our community so great
Definitely true, I’ve learnt so much through Monzo and now I’m really interested in all this sort of stuff. Finance and banking was all so boring and rubbish before that
It would be great to have an automated flow for auth-reversals that’s displayed whereever the info that a transaction is pending and the info on what this means is . I bet you’d still have to have humans COps involved in processing the queue but it would be more streamlined and much lower friction from a user standpoint
I really hope this happens one day (soon?). Maybe not Monzo on their own, but a group of banks banding together. Do you have any idea if Pay by Bank could evolve into a more modern payments system that doesn’t have these problems, or will it, too, be hampered by legacy systems?
Thanks for the detailed response and the explaination of what is happening under the hood (as it were). I figured it might not be something you could do following official procedures, but using a special pot certain sounds like it could be done.
I appreciate it’s a rare situation, but it’s not an abstract one for me. When I was using the pre-paid card, SWT ‘refunded’ over a week’s worth of train tickets to me, and I spent a few weeks struggling to account for expecting this money going out before I gave up and just used my card as normal after having been assured by COps that the worst that could happen is having to top the card back up to a positive balance. When SWT finally took the money - after a couple of months - it did put my card into a minus balance. I’m also mindful of the recent Tesco news where customers had their payments processed six months later.
It would be great if such a situation were to happen again I could put the funds in a special pot and not have to worry about potentially going into overdraft.
I’m not 100% sure on exactly how this works on the back end, but it’s a really interesting concept! I would always think that any kind of fundamental change like that would need to be a collective effort though, so it would be dependent on a lot of people buying into it.