To refund a Donation, you need to be on that Donation's page in the Fundraise Up dashboard. There are plenty of ways to get there - the easiest way is to use the global search bar, but you can also find it via the filters on the Donations tab, in the corresponding Supporter record, and in the installments as shown on the Recurring plan if applicable.
Once on the page for the Donation you'd like to refund, you can click a button in the top right labeled Refund Donation, which will show you a popup dialog. As shown below, the popup notifies you that while Fundraise Up always returns processing fees to your organization for refunded donations, Stripe and PayPal will no longer return their initial fees.
From there, clicking the red Refund Donation button will initiate the refund properly, and send out the Refund email template as enabled on the Campaign they gave towards.
As part of our global receipting compliance, we include a PDF Receipts in the Refund email template that bear a "Cancelled" stamp and are clearly marked with the date the update to the donation Receipt was issued.
The payment method the donor used will determine the amount of time it takes for the refunded funds to be available to the donor; Stripe indicates that their refunds usually process in 5-10 business days, whereas PayPal refunds can take up to 30 days.