Manual 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 usually the preferred choice but sometimes it's needed to make use of manually authorized authorization and capture.
What's at stake?
Being paid.
In the next paragraph, you'll discover, for certain kinds of sales transactions, getting the money from the buyer isn't always easy. Achieving this goal in a timely manner can make sure you're in a position to get what you're due while minimizing friction for customers.
This article can help you determine whether automated or manual authorization and capture is best for your online company and the best way to utilize it. Let's begin by clarifying the words.
What is authorization and capture?
Two distinct occasions happen when a client makes an online purchase using a credit card. Most of the time both occur at the simultaneously. But they don't have to however, in certain situations your role as a merchant may want to separate them according to the purpose.
Authorization
Authorization takes place when the credit card processor contacts the bank that holds the card to confirm that they've got sufficient funds to pay for the fees owed and to confirm that the card is in active use.
As of now it is not yet transferred from the customer's bank into the business. However, they're, in essence, reserved for that purpose.
Authorizations are only temporary. Typically, they expire after seven days, which means no money 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 is actually transferred between the bank of the client and the seller. Your bank instructs the processor of payments to take money from the bank of the client and then transfer them to your account.
Where do authorization and capture fit in the process of payment?
By default, these two events occur simultaneously at in parallel, which is the best for all firms. However, for specific use-cases like the ones you're about discover, it's essential to separate them into distinct processes.
Manual Vs. automatic authorizations and the capture
Prior to separating them, let's be sure you understand your choices.
When authorization and capture happen in tandem, they'll always be automated.
But if you want to separate these two separate occasions, you may make the capture process manual. If you do, then you'd need to go into the payment processor you use and initiate the process of capture. For Payments, you can enable this within the admin settings.
How can manual capture be helpful?
Let's take a look at some examples to show you when using a manual capture process might be a smart strategy for your business.
Gas or petrol
When you fill your tank of gas, the authorization process happens prior to the pumping of all the fuel. The fuel provider will then authorize your credit card, and allows you to pump, but it doesn't capture the amount yet as it isn't aware of the amount of gasoline you'll need to purchase.
Hotels
In most hotel transactions, the guests' card gets authorized before or at check-in for an estimate of the amount due to the amount of time they've booked their hotel room. But the capture process usually is completed at check-out, after the actual amount owed is determined.
Equipment rental businesses
In the case of expensive equipment, the majority of companies authorize the customer's card before giving them the item to be rented. It ensures that they will be able to cover the charges. Certain businesses allow payment for what is actually worth of the item, not only for the rental amount, in case it gets stolen or damaged. Then, when the item is returned, the exact amount to be charged is captured.
Artisans
Many artisans do custom work and their costs vary from job to project. Oftentimes, the final amount that will be charged won't be determined until after the project is completed, especially if the labor is charged by the hour. In some cases, they might want to authorize and capture part of the charge up front, and then do the remainder after the work is completed.
With these examples to think about, you could begin to imagine scenarios in your business where separating capture from authorization may be essential.
If you're filling out online orders for goods and then shipping them, you typically won't need to separate authorization and capture. But any time the final value of the transaction isn't determined at the beginning or when the item is delivered at a later date it is possible be able to approve payment before, but not necessarily take it in the same time.
Manual capture disadvantages
There are some risks with the manual capture. Here are a few issues to watch out for.
First, you can't take more than what you have authorized. It's only possible to capture the exact amount or less. So if you're not sure about the final price by approving the charge upfront, it could result in overcharging. So you'd have to make a second charge, or even cancel the initial one and start the process again with more money. Neither option will likely make the customer happy.
Second, the authorization expires at the end of seven days. In situations that have longer wait times between the time of order placing and completion, if you do not wait to capture payment until the delivery of your order has been completed, you run the risk that the transaction will be denied. If that happens there is a chance that you'll end up being able to ship the item but unable to collect the money.
Then, you'll need to contact the customer to start the process again.
So, unless you have an excellent reason for separating permission from the capture of data and comprehend the risks of doing so not to do so.
Finally, manual capture is only possible with payment cards. It is not possible to capture applications or payment methods that are local like Venmo.
Improved manual authorization as well as capture in the payment process
Be aware that you are able to capture less than you authorize however, you cannot capture more. If you're performing the transaction manually, you'll have control this through your payments processor.
The best practices to manage manual authorization and capture
Here are a few key tips to remember when using the manual process.
1. Use manual authorization only and capture without having a valid reason
It creates friction on the site, which increases workload, and puts you at risk of some of the scenarios described in the previous paragraphs. If you have a good justification to employ manual capture, then you just need to stay up to date and you'll be fine.
2. More than you require to keep
Like we said, you may get less or the same amount, but not more than you authorize. If the total amount of payment is not known at the date of purchase, make sure you authorise a greater amount that you believe you'll up charging.
3. Don't wait to terminate your authorization to cancel orders
If the client decides to cancel the order, don't delay seven days to allow the authorization to expire. Cancel it 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 process. So check your dashboard consistently. Manual authorization and capture, you should integrate this procedure into your regular routine.
Payouts: flexible and streamlined for your store
One of the main benefits it is that you can join with the technology most suitable for your store. When it comes time to get payments, more retailers than ever are turning to payments due to its ease in use and its flexibility.
Pay from 18 different countries and take more than 135 currencies. Customers can use electronic wallets such as Apple Pay, reducing the friction of transactions and increasing conversion. Merchants can also make transactions while on the move with Apple Pay's Mobile App and card reader.
Payments is fully integrated with your store's dashboard so you can manage everything in one place. There's no need to switch tabs or accessing and logging out of your accounts. It's also built and backed by the team and comes with the highest level of assistance.