Roughly £3.5bn ($4.8bn) worth of online refunds owed to customers in the UK was “held hostage” by businesses over the past year, new data revealed.
Some 40% of respondents said they had to wait three to five working days for money to come back into their account, a survey by payments platform Trustly found.
Nearly half (45%) said slow refunds were making financial planning harder.
Delayed refunds can increase the likelihood of taking out a loan or paying interest on debts, the report said.
“Online retail moves quickly, but unfortunately our financial systems can be quite slow,” said William McMullan, director of ecommerce at Trustly.
“When consumers are denied fast refunds from merchants unnecessarily, it impacts on their ability to manage their expenditure. It’s not surprising to find that many are struggling."
Nearly one third (28%) of those surveyed said their ability to pay bills, rent and mortgage payments was directly impacted as a result of having money tied up in online refunds
According to the study, the biggest driver of these refund requests came from clothes or accessories (50%), technology (20%) and home and garden (19%).
The data also showed the strain that slow refunds are having on the younger generation.
Some 29% of 18- to 24-year-olds said they had been impacted in their ability to pay for food, compared to 5% of those aged 55 or older.
As 71% of UK shoppers now prefer to pay via debit, consumers want the reassurance that their choice of payment method isn’t going to land them in debt, said McMullan.
He said retailers should offer convenient refunds, one click-payments, scheduled payments and a better customer experience.
“Relying on legacy systems and age-old processes will see merchants get left behind. Faster refunds get shoppers back online sooner and more often,” he added.
The data found that 63% of those surveyed are more likely to spend money with the same provider, if they receive a refund quickly.
Since March last year, the UK's Competition and Markets Authority (CMA) has received over 23,000 complaints about cancelled flights and holidays.
The competition regulator launched a probe earlier this year to see if British Airways (IAG.L) and Ryainair (RYA.L) have broken consumer law by not offering refunds for flights that customers were unable to take due to legal reasons.
It was reported in November last year that an estimated £1bn in holiday refunds from cancelled travel due to the COVID-19 pandemic were yet to be paid to consumers.
Jet2 alone has handed out £1.4bn in customer refunds since the start of the pandemic.
The CMA has also asked package travel firms to ensure refund options are clear and accessible following a deluge of complaints from customers who have struggled to claim refunds over the last year.
If an item is bought online, over the phone or by mail order, customers have returns rights under the Consumer Contracts Regulations, consumer group Which? said.
The regulations give them a cancellation period that starts the moment they place their order and ends 14 days from the day they receive their goods.
Customers then have a further 14 days from the date they notify the retailer that they would like to cancel the order to return the goods to them.
They also have the legal right to a refund if they return a faulty good within 30 days of receiving it, regardless of what the store's return policy says.
Watch: Airline refunds: What are your rights as a consumer?