Manuel Authorization and Capture - How and When to Use It
The capture and authorization process are just two of the elements that make up payment processing. And while an automated approach is typically the default, sometimes it may be needed to make use of manual authorization and capture.
What's at stake?
Being paid.
You'll soon find out, in specific types of transactions in sales, getting the customer's payment isn't always easy. If you manage this properly, you'll ensure you're able to properly get what you're due and reduce friction for your customers.
This article can help you determine whether automated or manual authentication and recording is best for your online business as well as how you can use it. It is important to clarify the concepts.
What are authorization and capture?
These two distinct events take place whenever a customer initiates an online payment using a credit card. Most of the time these two events occur at simultaneously. They don't need to however, in certain situations it is the case that you, as the seller might want to break them apart depending on the use case.
Authorization
Authorization takes place when the credit card processor contacts the bank that holds the card to confirm that they've got enough funds to cover amount due, and also to verify that the card is in active use.
At this point, the funds have not yet transferred from the bank of the client to the business, but they are, in essence, reserved for that purpose.
Authorizations are only temporary. Most often, they expire in seven days meaning that no cash changes in the event that the capture process does not begin prior to expiration.
Capture
Capture, also known as settlement of the payment occurs when the payment actually transfers between the bank that the customer is using and the merchant. Your bank instructs the payment processor to collect money from the bank of the client and deposit them into your account.
What are the places where authorization and capture are located in the payment process?
In most cases, both processes happen at the same simultaneously, which is ideal for all firms. But for certain use cases like the ones you're about discover, it's essential to separate them into distinct processes.
Manual Vs. automated authorization and capture
Prior to separating the two, make certain that you are aware of your options.
When authorization and capture happen at the same time, they'll always be automated.
If you wish to divide the two occasions, you may make the capture process manual. In this case, you'll need to log into the payment processor you use and initiate the capture process. For Payments, you can set this up in your admin settings.
How can manual capture be helpful?
Let's look at some scenarios to show you when using a manual capture process could be the best option to your company.
Gas or petrol
Once you have filled up your gas tank, the authorization process happens before you have pumped any gas. The fuel supplier authorizes your card and then allows you to pump, but doesn't record the charges yet because it isn't aware of the amount of gas you will buy.
Hotels
For most hotel transactions, the guests' credit card is authorized prior to or during check-in, for an estimate of the amount due to the number of days they've booked the accommodation. The capture procedure usually occurs at the time of checkout, and the exact amount due is known.
Equipment rental businesses
In the case of expensive equipment, many companies charge the customer's credit card prior to they give them the device to be rented. This ensures they can cover charges. Certain businesses allow payment for the value of the item, and not only the rental cost, in case it gets damaged or stolen. After the item is returned the amount that is charged is captured.
Artisans
Many artisans do custom work and their prices vary from job to task. The amount to be charged isn't determined until after the project is completed, especially if the work is charged according to the hour. It is possible to authorize and capture part of the cost upfront, and then do the rest once the job is complete.
By keeping these scenarios to think about, you could begin to imagine scenarios in your personal business in which separating capture from authorization may be necessary.
If you're simply filling online orders for products that you then ship normally, you don't have to separate authorization and capture. However, if the exact amount of payment isn't known prior to the time that the item is shipped at the end of the month it is possible to first authorize the payment however, you don't have to take it in the same time.
Manual capture disadvantages
There are some risks with manual capture. Here are a few issues to look out for.
First, you can't take more than what you authorize. It's only possible to capture more or less. If you're not certain of the price you'll end up paying making the decision to authorize it upfront puts you at risk of undercharging. So you'd have to make a second charge, or even cancel the initial one and restart the process with the higher amount. This isn't likely to satisfy the client.
Second, the authorization expires after seven days. In situations that have longer wait times between placing an order and completion, if you do not wait to collect payment until order is fulfilled then you risk the possibility of the transfer being declined. If that happens, you may find yourself being able to ship the item but unable to collect the payment.
You'll need to contact the customer to restart the payment process and again.
That's why, unless you have a good reason to separate permission from the capture of data and comprehend the potential risks involved not to do so.
Lastly the manual capture option can only be achieved with cards, and not with local payment methods or apps such as Venmo.
Improving manual authorization and capture in Payments
Be aware that you are able to capture more than you've authorized, but not more. If you're doing the process manually, you'll have take care of this in your processing company.
Best practices for managing the manual authorization process and capture
Here are some key guidelines to keep in mind when you are using the manual procedure.
1. Do not use manual authorization or capture without having a valid reason
This creates additional friction for your site, increases your burden, and could put your site at risk for some of the scenarios described previously. If you have a good motive to utilize manual capture, then it's just a matter of staying on top of it and you'll be fine.
2. More than you require to keep
Like we said, you may take less or the exact amount, but you can't charge more than you authorize. So if the final payment amount isn't known at the date of purchase, make sure you make sure you authorize more than what you anticipate you'll in charging.
3. Don't wait to terminate the authorization for cancelled orders
If the customer cancels their order, don't wait seven days for the authorization to run out. You can cancel it right away.
4. Check your payments dashboard regularly
Especially in higher transaction businesses, you don't want to be unable to capture any payment if you're using the manual approach. Therefore, you must check your dashboard frequently. Utilizing manual authorization and capture is a requirement. You must integrate this procedure into your routine.
Payouts: flexible and streamlined for your store
A major benefit of it is that you can join with the technology that best fit your store. In terms of getting paid, more merchants than ever are turning to payments due to its ease of use as well as its versatility.
Pay in 18 countries and accept over 135 different currencies. Allow customers to use digital wallets like Apple Pay which reduces the amount of friction while also increasing conversion. Merchants can also complete transactions on the go with the Mobile App and card reader.
Payments seamlessly integrates to your store's dashboard. This means it is possible to manage all of your accounts in one place. It's not necessary to swap tabs or log in and out of your accounts. It's also built and backed by the team, and is backed by priority assistance.