Manuel Authorization and Capture What and when to use it

The capture and authorization process are the two main components of payment processing. And while an automated approach is the most common choice but sometimes it's needed to make use of the manual method of authorization and capture.

What's in the balance?

Getting paid.

As you're about to find out, in specific types of sales transactions, getting the money from the buyer can be difficult. Managing this process properly can make sure you're in a position to receive what you're owed and reduce friction for your customers.

This guide will assist you to determine whether automated or manual authorisation and data capture are better for your online company as well as how you can use it. Let's begin by clarifying the words.

What exactly is authorization and what's the difference between capture and authorization?

These two distinct events happen when a client makes an online purchase by using a credit or debit card. In the majority of cases, they happen at the simultaneously. However, they do not have to be but in some instances your role as a merchant might want to break them apart according to the purpose.

Authorization

Authorization takes place when the credit card processor contacts the cardholder's bank to confirm that they've got enough money to cover the fees owed and to confirm that the card is active.

In the moment at this point, the funds are been transferred yet from the bank that the customer uses into the business. However, they remain, at the very least, reserved for that purpose.

Authorizations are temporary. Typically, they expire after seven days, which means no money changes 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 occurs when the payment actually transfers between the customer's bank and the merchant. The bank will instruct the payment processor to collect money from the bank of the client and then 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 time, and that's best for all firms. But for certain use cases like the ones you're about learn, it's crucial to differentiate them into separate instances.

Manual Vs. automatic authorizations and the capture

Prior to separating them, let's be sure that you know what you're doing.

If authorization and capture occur simultaneously, they'll always be automated.

But if you want to split the two events, you can automatize the process of capture. If you do, then you would have to go into your payment processor and initiate the capture process. In the case of payments, you could activate this feature in the administrator settings.

How can manual capture be helpful?

We'll look at a few scenarios that can help you determine if the manual capture method is a good idea for your organization.

Fuel or gasoline

If you are filling the tank with gas it will be authorized prior to the pumping of any gas. The fuel provider will then authorize your credit card, and permits 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

For most hotel transactions, the guest's credit card is authorized prior to or during check-in, for an approximate amount, based on the amount of time they've booked the room. However, the process of capturing is completed at check-out, after the exact amount due is determined.

Equipment rental businesses

In the case of expensive equipment, the majority of companies authorize the customer's card before providing the equipment to rent. It ensures that they will be able to cover charges. Some businesses authorize payment for the value of the item, and not just the rental fee, in case it gets damaged or stolen. Then, when the item is returned, the actual amount to be to be charged is recorded.

Artisans

There are many artisans who do custom work and their rates vary from job job. Most of the time, the cost to be charged will not be established until the job is done, especially when labor charges are charged per an hour. Sometimes they may want to authorise and take a part of the amount upfront before completing the rest once the job has been completed.

By keeping these scenarios in mind, you are able to begin to imagine scenarios in your business where separating capture from authorization may be required.

If you're filling out online for orders before shipping them out generally, there's no need to separate authorization and capture. But any time the final value of the transaction isn't determined up front or the product is delivered at the end of the month there may be a need be able to approve payment before and not always capture it at the same time.

Manual capture disadvantages

There are some dangers when using manual capture. Let's review a few things to look out for.

In the first place, you aren't able to collect more than what you've authorized. You can only capture the exact amount or less. If you're not certain about the final price, authorizing up front could result in overcharging. So you'd have to make an additional charge, or even defer the first and restart the process with the greater amount. Both options are unlikely to leave the customer satisfied.

Second, the authorization expires at the end of seven days. So, in situations with longer wait times between placing an order and fulfillment, if you wait to collect payment until order is fulfilled then you risk the possibility that the transaction will be denied. In that situation, you may find yourself having shipped the product however, you are unable to receive the funds.

Then, you'll need to contact the customer to restart the payment process once more.

So it is not recommended to do so unless there's a good reason to separate authorization from capture and understand the potential risks involved not to do so.

Additionally the manual capture option can only be done with credit cards, and not with applications or payment methods that are local such as Venmo.

Enhancing manual authorization and capture in payments

Keep in mind that you're able to take the amount you have authorized however, you cannot capture more. If you're doing the process manually, you'll have take care of this in the payments processor.

The best practices to manage manual authorization and capture

Here are some key guidelines to keep in mind when you are using the manual procedure.

1. Don't use manual authorization and capture without justification.

It creates friction on the site, which increases workload, and puts the site at risk of some of the scenarios described in the previous paragraphs. If you have a good justification to employ manual capture, then simply stay on top of it and you'll be fine.

2. More than you require to keep

In the above paragraph, you are able to capture less or the same amount, but no over what you've authorized. If the total payment amount isn't known at the moment of purchase, you can authorize a higher amount that you believe you'll in charging.

3. Don't wait to terminate your authorization to cancel orders

If a customer decides to end their purchase, don't let it sit for seven days for the authorization to run out. It is best to cancel the order immediately.

4. Check your payments dashboard regularly

In particular, in businesses with higher transactions You don't want to overlook capturing any payments if you're using the manual method. Therefore, you must check your dashboard frequently. Utilizing manual authorization and capture, you must build this step into your daily routine.

Payments: streamlined flexibility for your store

One of the main benefits Payments is the ability to integrate with the systems which best suit your business. When it comes to getting the money they deserve, more businesses than ever are turning to Payments for its ease of use and flexibility.

Pay across 18 countries, and you can accept more than 135 currencies. Let customers use digital wallets like Apple Pay to reduce the amount of friction while also increasing conversion. Many merchants are able to complete transactions on the go using Mobile App Mobile App and card reader.

Payments is fully integrated with your store's dashboard so you'll be able to control everything from one place. It's not necessary to swap tabs or logging in and out of accounts. Plus, it's built and supported by the team and comes with priority support.