When a card transaction occurs, it typically starts with authentication checks to establish trust in the transaction and confirm that the user is who they claim to be. The authorisation, on the other hand, determines if the payment can proceed, with the user’s bank deciding whether to approve, decline, or refer the transaction for further checks. Although these processes are aimed to work together to balance security, user experience, and increase payment approval rates, their interconnection is not always as seamless in practice.
This is because the effectiveness of this process hinges on every step of the data-sharing flow working seamlessly in an interconnected manner, ensuring that critical flags applied at the start of a transaction are accurately carried through to the final processing stages. In this context, payment protocols act as the backbone to provide a standardised approach to transaction data, credential validation, and rule application, but that’s a topic for another post.
When a payment is authorised, the card issuer reserves the transaction amount on the cardholder’s account (authorisation hold), ensuring that the merchant can capture the funds later. However, this hold is not indefinite, as authorisations have specific timeframes within which they must be captured. If not captured in time, the authorisation expires, and the reserved funds are released back to the cardholder.
If the merchant still needs to capture the payment, there are a number of ways this can be handled:
◾𝗔𝘂𝘁𝗵𝗼𝗿𝗶𝘀𝗮𝘁𝗶𝗼𝗻𝘀 𝗔𝗱𝗷𝘂𝘀𝘁𝗺𝗲𝗻𝘁𝘀 are pre-authorisations that enable merchants to modify the authorised amount before it is captured. This is often used in scenarios such as updating shipping costs in e-commerce to reflect the actual amount or adding tips to the bill in restaurants. These adjustments ensure the final charge aligns with the actual transaction amount before settlement.
◾𝗜𝗻𝗰𝗿𝗲𝗺𝗲𝗻𝘁𝗮𝗹 𝗔𝘂𝘁𝗵𝗼𝗿𝗶𝘀𝗮𝘁𝗶𝗼𝗻𝘀 are used to cover additional amounts beyond the initial authorisation and are common in industries like travel and hospitality for room service charges or extended rental periods.
◾𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻 𝗥𝗲𝘃𝗲𝗿𝘀𝗮𝗹𝘀 are used to release a previously authorised amount (partially or fully) back to the cardholder, often due to cancellations, over-authorisations, or voided transactions.
◾𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲 𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻𝘀 are charges that get processed as new transactions, rather than altering the original authorisation.
👉🏽#Paymentexperts, any thoughts to share on the #authorisations frameworks🎙️?
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𝑾𝒐𝒏𝒅𝒆𝒓 𝒘𝒉𝒐 𝒘𝒆 𝒂𝒓𝒆?
𝘞𝘦 𝘢𝘳𝘦 𝘢 𝘵𝘦𝘢𝘮 𝘰𝘧 𝘗𝘢𝘺𝘮𝘦𝘯𝘵𝘴 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘴𝘵𝘴 𝘣𝘭𝘦𝘯𝘥𝘪𝘯𝘨 𝘰𝘶𝘳 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺 𝘦𝘹𝘱𝘦𝘳𝘵𝘪𝘴𝘦 𝘸𝘪𝘵𝘩 𝘢 𝘤𝘳𝘦𝘢𝘵𝘪𝘷𝘦 𝘢𝘱𝘱𝘳𝘰𝘢𝘤𝘩 𝘵𝘰 𝘢𝘴𝘴𝘪𝘴𝘵 𝘰𝘶𝘳 𝘤𝘭𝘪𝘦𝘯𝘵𝘴 𝘵𝘩𝘳𝘰𝘶𝘨𝘩 𝘊𝘰𝘯𝘴𝘶𝘭𝘵𝘪𝘯𝘨, 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘺, 𝘙𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘢𝘯𝘥 𝘛𝘩𝘰𝘶𝘨𝘩𝘵 𝘓𝘦𝘢𝘥𝘦𝘳𝘴𝘩𝘪𝘱 𝘱𝘳𝘰𝘫𝘦𝘤𝘵𝘴.
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