In this article, we’ll cover setting up a Reserve in your Adyen Merchant account. We’ll also explain what a Reserve is and why you should set one up. You’ll also find information on monitoring and managing your Reserve.
Before you read this article, you should be familiar with:
What is a Reserve?
A Reserve is funds set aside in your Merchant Account to cover refunds, chargebacks and disputes.
When you refund a payment, the refund is initially taken from your available funds.
Available funds consist of:
- Pending: The gross amount of Sales and Refunds that have not yet been settled by the card scheme or payment method
- Next Payout: The amount to be transferred to your bank account at the next payout
If you don’t have enough available funds to process the refund, the refund amount is deducted from the Reserve.
The Reserve consists of a Reserve Balance and a defined Threshold.
- Reserve Balance: The current balance of your Reserve
- Threshold: The amount you set your Reserve at
The Reserve balance is usually equal to your Threshold, unless:
- Refunds or chargebacks have been deducted from your Reserve
- You’ve requested to change the Threshold amount
When there are differences in the Reserve Balance and Threshold, the Reserve Balance will always work to meet the Threshold amount by deducting from available funds or paying out to available funds whenever possible.
For example, setting your Threshold at £500 means that £500 should always be available in the Reserve. When the Reserve balance drops, funds will be deducted from your available funds as soon as they’re available and transferred to your Reserve until the Threshold reaches £500.
Why should I set up a Reserve?
A Reserve can help you manage the financial impact of refunds, chargebacks and disputes. A Reserve can help your organisation:
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Mitigate financial risk
Most organisations in the arts and cultural sector experience peaks and troughs in ticket sales. This variation can expose organisations to financial risks. For example, when processing a high volume of payments, the number of refunds and chargebacks may also increase.
A Reserve ensures that funds are available to cover any refunds, chargebacks or disputes without affecting your available funds and payouts.
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Manage your cashflow
Without a Reserve, refunds or chargebacks are deducted from your available funds. Your cashflow may be affected due to reduced payout amounts.
Additionally, if a refund amount is greater than your available funds, the refund will fail in Adyen. You'll need to add funds to your Adyen account through a top-up.
Setting up a Reserve means any refunds or chargebacks are deducted from your Reserve Balance instead of your available funds.
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Align with industry best practice
A Reserve aligns your organisation with industry standards in payment processing. A Reserve can also help safeguard your finances and contribute to robust financial management.
Why a small Reserve can help
Smaller organisations might hesitate in setting up a Reserve due to concerns about cash flow or perceived low-risk exposure. However, a small Reserve can make a significant difference for the following:
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Flexibility for small disputes
A small Reserve can cover one-off issues. For example, minor refunds or accidental chargebacks. This may help your cashflow as refunds will be deducted from your Reserve if you don’t have enough available funds, instead of your payout.
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Incremental Risk Management
You can start with a small Reserve and adjust as your organisation grows.
Considerations when deciding on a Reserve amount
Before you request a Reserve, consider the following factors when deciding on a Reserve amount:
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A large number of transactions may lead to an increase in refunds. You’ll need to ensure you have enough funds in your Reserve to cover any requested refunds.
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When processing high value transactions, there will be occasions where a refund is requested. You might want to consider a higher Reserve Balance to cover both high value and low value transaction refunds.
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International card payments carry a higher risk of fraud than domestic transactions. If you process international card payments, you might want to consider a higher amount based on the potential risk of chargebacks and disputes.
TIP: Our Support Team can help you decide on an appropriate Reserve based on your specific needs.
How to set up a Reserve
Once you’re ready to request a Reserve, contact Support.
You’ll need to provide the following:
- Your Merchant Account name
- Reserve Threshold amount
TIP: The Reserve Threshold is the amount you set your Reserve at.
The Reserve will activate once you have enough available funds to transfer to your Reserve
How do I fund my Reserve?
When a Reserve is set up, funds will be transferred from your next payout into your Reserve. This means your next payout will be lower than expected.
If your Reserve drops below the threshold. Funds will be taken from your next payout and transferred to your Reserve. For example, your Reserve Threshold is set at £500 and your Reserve balance is £500.
You have no available funds and process an £80 refund. As there are no available funds to process the refund, the £80 is refunded from your Reserve.
Your Reserve Balance then drops to £420. The next time you have enough available funds, £80 will be taken from your available funds and transferred to your Reserve Balance to meet the Threshold (£500). This means your next payout will be £80 less.
TIP: If you don’t have enough available funds to meet the Threshold, you can either wait until you have enough available funds, or top up your Adyen account.
When topping up your account, USD and EUR payments will be deposited within two business days. GBP, CAD and other currencies will be deposited within three business days.
Monitoring your Reserve
We recommend checking your Reserve on a daily basis so your Reserve doesn’t drop below the Threshold.
Once your Reserve drops below the Threshold, funds will be transferred from your available funds to your Reserve to meet the Threshold.
REMINDER: If you currently don’t have enough available funds, your Reserve will be topped up the next time you have enough available funds to cover the difference between the Reserve Balance and Threshold.
You can top up your available funds by creating a top up. USD and EUR payments will be deposited within two business days. GBP, CAD and other currencies will be deposited within three business days.
To check your Reserve, log into your Adyen account and view the Reserve on the homescreen:
It’s important to make sure you have enough available funds to top up your Reserve and enough funds in your Reserve to process refunds.
Managing your Reserve
There may be occasions where you want to increase or decrease your Reserve balance.
For example, you might want to increase the Reserve for a popular Event or high value transactions to cover any refunds or chargebacks. Alternatively, you might want to decrease the Reserve during less busy periods.
In order to change your Reserve balance, you’ll need to change the Threshold amount.
Increasing the Reserve
When the Threshold is increased, funds will be deducted from your next payout and added to the Reserve until the Threshold has been met. This will be displayed as a ReserveAdjustment in your Settlement Details Report.
For example, your current Reserve Balance is £500 and you want to increase the Threshold to £800. This means the Reserve Balance is £300 lower than the Reserve Threshold.
£300 will be transferred from your available funds to meet the Threshold. Your next payout will decrease by £300.
To increase the Reserve Threshold at any time, contact Support.
TIP: The Threshold will only be increased if you have enough available funds to transfer to your Reserve. If you currently don’t have enough available funds to meet the Threshold, the increase will be delayed until the funds are available.
Decreasing the Reserve
When the Threshold is decreased, the difference between the Reserve Balance and Threshold is transferred to your available funds and included in your next payout. This will be displayed as a ReserveAdjustment in your Settlement Details Report.
For example, your Reserve Balance is £500 and you want to decrease the Threshold to £300. The £200 difference between the Reserve Balance and Threshold is transferred to your available funds. Your next payout will increase by £200 if no further refunds are processed on that day.
To decrease the Reserve Threshold at any time, contact Support.
REMINDER: When you refund a payment, the refund is taken from your available funds. If you don’t have enough available funds to process the refund, the refund amount is deducted from the Reserve.
How to card reconcile payments with a Reserve
When reconciling payments, you’ll need to take into consideration that your payouts may be less than the amounts displayed on your Payments & Activities Report.
When a Reserve is set up or topped up, the funds are transferred from available funds. In your Adyen Settlement Details Report, you’ll see a separate line for any adjustments. These will appear under the Type column as ReserveAdjustment.
You’ll see amounts in the Credit and Debit columns depending on whether funds were transferred to top up the Reserve or transferred to available funds if a Reserve has been reduced.
You’ll also find this information by following these steps:
- In Adyen, go to Finance > Sales to Payouts:
- In the Payouts tab, scroll down to the Details section
- In the Adjustments column, you’ll see the amount transferred to/from available funds:
- You can use the Batch number and amount to reconcile with the Settlement Details Report in Adyen:
Further Reading
This article should give you the information you need to set up and manage a Reserve in your Adyen Merchant Account.
To learn more, visit the Spektrix Payments section of the Support Centre.