Manual Authorization and Capture Which and How to Apply it
Authorization and capture are just two of the elements that make up payment processing. Although an automated process is usually the preferred choice, sometimes it may be necessary to use the manual method of authorization and capture.
What's at stake?
Getting paid.
You'll soon see, in certain types of sales transactions, receiving the payment from the client isn't always easy. If you manage this properly, you'll ensure you're able to properly be paid what you owe while minimizing friction for customers.
This guide will assist you to determine whether automated or manual authorization and capture is the best for your online company, and how to use it. We'll begin by defining the terms.
What exactly is authorization and what's the difference between capture and authorization?
These two distinct events take place whenever a customer initiates an online payment with a credit card. In the majority of cases these two events occur at identical time. However, they do not have to be, and in some situations it is the case that you, as the seller might want to break them apart in accordance with the specific use.
Authorization
Authorization takes place when the credit card processor contacts the cardholder's bank to confirm that they've got sufficient funds to pay for the amount due, and also to verify that the card is in active use.
In the moment at this point, the funds are not yet transferred from the bank of the client to the business, but they're, in essence to be used for this purpose.
Authorizations last for a short time. Most often, they expire in seven days so no funds change into the hands of anyone if the process to capture isn't completed prior to expiration.
Capture
Capture, also called the settlement of the transaction, happens when the money actually transfers between the bank of the client and the seller. The bank will instruct the payment processor to collect funds from the account of the customer and transfer them to your account.
What are the places where authorization and capture sit within the payment process?
By default, these two events occur simultaneously at in parallel, which is the best for all firms. But for certain use cases like the ones you're about discover, it's essential to differentiate them into separate processes.
Manual against. automated authorization and capture
Before we look at separating them, we should make sure that you know what you're doing.
If authorization and capture occur in tandem, they'll always be automated.
However, if you'd like to divide the two events, you can create a manual capture procedure. In this case, you would have to go into your payment processor and initiate the process of capture. In the case of payments, you could enable this within the admin settings.
How can manual capture be helpful?
We'll look at a few scenarios to help you see when employing a manual process for capture could be the best option for your organization.
Gas or petrol
If you are filling your tank of gas, the authorization process happens before you have pumped any gas. The fuel provider will then authorize your credit card, and allows you to pump, however, it isn't able to record the charges yet because it isn't aware of the amount of fuel you'll be able to buy.
Hotels
Most hotel transactions, the guests' card will be authorized before or at check-in for an approximate amount, based on the number of days they've reserved the room. However, the process of capturing is completed at check-out, after the actual amount owed is determined.
Equipment rental businesses
Particularly with costly equipment, most companies will charge the customer's credit card prior to giving them the item to rent. This will ensure that they are able to pay the charges. Certain businesses allow payment for the actual value of the item, not only the rental cost, in case it gets damaged or stolen. Then, when the item is returned the amount that is paid is refunded.
Artisans
A lot of artisans perform custom-designed work, and the rates vary from job project. Most of the time, the amount that will be charged won't be known until the work is finished, particularly if the labor is charged by the hour. In some cases, they might want to authorise and take a part of the amount upfront before completing all the remaining work after it has been completed.
With these examples in mind, you can consider scenarios for your personal business in which the separation of authorization from capture might be essential.
If you're simply filling online for orders that you then ship generally, there's no need to create a separate authorization or capture. However, if the exact amount of payment isn't known at the beginning or when the item is delivered at an earlier date, you may need to first authorize the payment and not always capture it at the exact time.
Manual capture disadvantages
There are some risks with manually captured. Let's review a few things to watch out for.
In the first place, you aren't able to collect more than what you authorize. The only limit is the exact amount or less. So if you're not sure of the price you'll end up paying, authorizing up front puts you at risk of overcharging. So you'd have to make an additional charge, or even defer the first and then re-start the process using the greater amount. Neither option will likely make the customer happy.
The authorization then expires at the end of seven days. So, in situations with long wait time between order placement and order delivery, if it is not possible to capture payment until the order is fulfilled, you run the risk that the transaction will be denied. In that situation, you may find yourself shipping the item, but unable to collect the funds.
You'll need to contact the customer to restart the payment process again.
So it is not recommended to do so unless there's a good reason to separate the authorization and capture, and are aware of the potential risks involved not to do so.
Additionally, manual capture is only possible with payment cards. It is not possible to capture mobile payment options or applications like Venmo.
Improved manual authorization and capture in Payments
Remember, you can capture the amount you have authorized and not take more. If you're doing the process manually, you'll have take care of this in your processing company.
The best practices to manage manual authorization and capture
Here are a few key suggestions to be aware of when performing the manual process.
1. Use manual authorization only and capture without a good reason
This adds friction to your site, increases your burden, and could put you at risk of some of the scenarios described previously. If you're able to provide a compelling motive to utilize manual capture, then you just need to stay on top of it and you'll be fine.
2. You can authorize more than you need to capture
Like we said, you may take less or the exact amount, but not greater than what you have authorized. So if the final price of the purchase isn't available at the date of purchase, make sure you authorize a higher amount that you believe you'll in charging.
3. Don't wait to terminate the authorization for cancelled orders
If a customer decides to end their purchase, don't let it sit for seven days to allow the authorization to run out. Cancel it immediately.
4. Check your payments dashboard regularly
Particularly in high transaction companies It is important not to miss capturing any payment if you're using the manual process. Therefore, you must check your dashboard frequently. Utilizing manual authorization and capture, you should integrate this procedure into your routine.
Flexible payment options: designed to work with your online store
The main benefit is your ability to join with the technology which best suit your business. When it comes to getting paid, more merchants than ever are turning to Payments for its ease of use as well as its versatility.
Pay from 18 different countries and take more than 135 currencies. Customers can use electronic wallets, such as Apple Pay to reduce the amount of friction while also increasing conversion. And many merchants can conduct transactions anywhere using the Mobile App and card reader.
Payments seamlessly integrates into your store's dashboard, so you can manage everything in all one location. No more swapping tabs and log in and out of your accounts. It's also built and supported by the team and comes with prioritised support.