Manual Authorization , Capture and Recording What and when to use it
Authorization and capture are two of the components that make up payment processing. And while an automated approach is typically the default but sometimes it's necessary to use manual authorization and capture.
What's at stake?
Getting paid.
In the next paragraph, you'll find out, in specific types of sales transactions, getting the money from the buyer can be difficult. If you manage this properly, you'll assure that you be paid what you owe while minimizing friction for customers.
This article can help you decide if manual or automated authentication and recording is the best for your business online, and how to use it. Let's begin by clarifying these terms.
What exactly is authorization and what's the difference between capture and authorization?
These two distinct events take place whenever a customer is making an online transaction using a credit card. In most cases, they happen at the same time. They don't need to but in some instances, you as the merchant may want to separate them according to the purpose.
Authorization
Authorization occurs when the payment processor contacts the bank that holds the card to verify that they have enough funds to cover fees owed and to confirm that the card is active.
In the moment it is not yet been transferred from the customer's bank to the company, however they are, in essence to be used for this purpose.
Authorizations last for a short time. They typically expire in seven days which means no money changes hands if the capture process doesn't begin before the expiration.
Capture
Capture, also called the settlement of the transaction, happens when the money actually changes hands between the bank of the client and the merchant. Your bank instructs the payment processor to gather funds from the customer's bank and transfer them to your account.
Where do authorization and capture are located in the payment process?
As a rule, both procedures occur at the same simultaneously, which is ideal for the majority of firms. But in certain situations like the ones you're about learn, it's crucial to differentiate them into separate events.
Manual against. Automated authorization, capture and
When we begin to look at how to separate them, let's be sure you understand your choices.
When authorization and recording occur simultaneously, they'll always be automated.
However, if you'd like to split the two occasions, you may automatize the process of capture. If you do, then you'd need to go into your payment processor and then manually start the capture process. For Payments, you can set this up in your admin settings.
When is manual capture helpful?
Let's look at some scenarios to help you see when employing a manual process for capture could be the best option to your company.
Petro or gas
If you are filling up your gas tank The authorization process takes place prior to pumping all the fuel. The fuel supplier approves your card and permits you to pump but doesn't record the transactions yet since 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 during check-in, for an estimate of the amount due to the number of days they've reserved the hotel room. But the capture process usually happens at checkout, when the amount actually owed to the guest is established.
Equipment rental businesses
Especially with expensive equipment, the majority of companies credit the card of the client prior to providing the equipment to rent. This ensures they can cover the charges. Certain businesses allow payment for the actual value of the item, and not only the rental cost should it be damaged or stolen. Then, when the item is returned, the exact amount to be charged is captured.
Artisans
A lot of artisans perform custom work and their 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 labor charges are charged per an hour. It is possible to authorise and take a part of the charge up front in order to complete the remainder after the work has been completed.
With these examples in mind, you are able to begin to imagine scenarios in your personal business in which the separation of authorization from capture might be essential.
If you're just filling online orders for goods and then shipping them, you typically won't need to separate authorization and capture. But any time the final amount of the payment isn't clear up front or the product is delivered at an earlier date it is possible to authorize payment first however, you don't have to take it in the at the same time.
Manual capture disadvantages
There are some dangers when using manual capture. We'll review some of the things to look out for.
First, you can't capture more than the amount you authorize. The only limit is the same or lesser. So if you're not sure regarding the amount you'll be charged making the decision to authorize it upfront could result in undercharging. So you'd have to make an additional charge, or even defer the first and then re-start the process using the greater amount. This isn't likely to leave the customer satisfied.
In addition, the authorization is valid at the end of seven days. So, in situations with longer wait times between the time of order placing and delivery, if it is not possible to capture payment until the delivery of your order has been completed then you risk the possibility that the transaction will be denied. If that happens it is possible that you will end up shipping the item, but unable to collect the money.
Then, you'll need to contact the customer for a new payment procedure again.
This is why it is not recommended to do so unless there's sufficient reason to differentiate the authorization and capture, and are aware of the potential risks involved don't make the move.
Lastly manually capturing can only be done with credit payment cards. It is not possible to capture applications or payment methods that are local like Venmo.
Improving manual authorization and capture in the payment process
Keep in mind that you're able to take more than you've authorized however, you cannot capture more. If you're doing the process manually, you'll have control this through your payment processor.
Best practices to handle the manual authorization process and capture
Here are a few key suggestions to be aware of when performing the manual process.
1. Do not use manual authorization or capture without a good reason
This adds friction to the site, which increases workload, and puts the site at risk of some of the scenarios described above. If you're able to provide a compelling justification to employ manually captured capture, it's just a matter of staying at the top of your game and you'll be safe.
2. Authorize more than you might have to collect
In the above paragraph, you are able to take less or the exact amount, but no greater than what you have authorized. If the total amount of payment is not known at the moment of purchase, you can authorize a higher amount than you think you'll end with.
3. Do not delay in resolving your authorization to cancel orders
If the client decides to cancel their order, don't wait seven days to allow the authorization to run out. It is best to cancel the order immediately.
4. Check your payments dashboard regularly
Especially in higher transaction businesses, you don't want to miss capturing any payment that you're trying to capture using the manual approach. Make sure you check your dashboard regularly. Utilizing manual authorization and capture is a requirement. You must incorporate this process into your routine.
Flexible payment options: designed to work with your store
A major benefit of Payments is the ability to connect to the technologies most suitable for your store. When it comes time to get payments, more retailers than ever before are turning to Payments due to its simplicity in use and its flexibility.
You can take payments across 18 countries, and you can accept more than 135 currencies. Allow customers to use digital wallets, such as Apple Pay, reducing friction and boosting conversions. Many merchants are able to conduct transactions anywhere with Apple Pay's Mobile App and card reader.
Payments integrates fully 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. Plus, it's built and supported by the team and comes with the highest level of support.