Manual Authorization , Capture and Recording - How and When to Use it
The capture and authorization process are the two main components which make up the payment processing. While an automated method is the most common choice but sometimes it's needed to make use of manually authorized authorization and capture.
What's at stake?
Being paid.
You'll soon discover, for certain kinds of sales transactions, getting the money from the buyer can be difficult. If you manage this properly, you'll assure that you get what you're due and reduce friction for your customers.
This article will help you determine whether automated or manual authorization and capture is the best for your business online, and how to use it. It is important to clarify these concepts.
What are authorization and capture?
The two events that are distinct happen when a client makes an online purchase with a credit card. In most cases, they happen at the simultaneously. However, they do not have to be, and in some situations, you as the merchant could decide to segregate them depending on the use case.
Authorization
Authorization happens when the payment processor contacts the bank that holds the card to check if they have enough money to cover the fees owed and to confirm that the card is active.
In the moment, the funds have not yet transferred from the customer's bank to the business, but they're, in essence intended for the purpose of that transfer.
Authorizations last for a short time. They typically expire after seven days, so no funds change into the hands of anyone if the process to capture does not begin prior to expiration.
Capture
Capture, also known as the settlement of the transaction takes place when the cash is actually transferred between the bank that the customer is using as well as the retailer. The bank will instruct the payment processor to collect money from the bank of the client and deposit them into your account.
Where do authorization and capture fit in the process of payment?
In most cases, both processes happen at the same simultaneously, which is ideal for most companies. But for certain use cases, as you're about to see, it's important to differentiate them into separate events.
Manual Vs. automatic authorizations and the capture
When we begin to look at how to separate them, let's be sure that you know what you're doing.
When authorization and recording occur simultaneously, they'll always be automated.
But if you want to divide them into two distinct events, you can automatize the process of capture. In this case, you'll need to log into the payment processor you use and manually initiate the process of capture. If you want to enable payments, enable this within the admin settings.
What are the best times to use manual capture?
Let's look at some scenarios that can help you determine if the manual capture method is a good idea for your business.
Petro or gas
Once you have filled the tank with gas The authorization process takes place prior to the pumping of any gas. The fuel company will then authorize your credit card, and permits you to pump but doesn't record the transactions yet since it isn't aware of the amount of gasoline you'll need to purchase.
Hotels
Most hotel transactions, the guests' card will be authorized before or at check-in for an estimated amount based on the amount of time they've reserved the accommodation. However, the process of capturing occurs at the time of checkout, and the amount actually owed to the guest is established.
Equipment rental businesses
In the case of expensive equipment, the majority of companies authorize the customer's card before providing the equipment to be rented. This will ensure that they are able to pay charges. Certain businesses allow payment for the actual value of the item, and not just the rental fee should it be damaged or lost. Then, when the item has been returned, the actual amount to be to be charged is recorded.
Artisans
Many artisans do customized work and rates vary from job task. The amount to be charged isn't known until the work is done, especially when the labor is charged by an hour. Sometimes they may want to authorise and take a part of the charge up front, 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 business where the separation of authorization from capture might be essential.
If you're filling out online for orders that you then ship generally, there's no need to separate authorization and capture. If the final value of the transaction isn't determined prior to the time that the item is shipped at the end of the month there may be a need be able to approve payment before and not always take it in the at the same time.
Manual capture disadvantages
There are some risks when using manual capture. Let's review a few things to be aware of.
The first is that you cannot capture more than the amount you authorize. The only limit is the exact amount or less. So if you're not sure about the final price by approving the charge upfront, it could result in undercharging. So you'd have to make an additional charge, or cancel the first one and restart the process with the greater amount. Both options are unlikely to make the customer happy.
In addition, the authorization is valid within seven days. Therefore, in cases of long wait time between placing an order and completion, if you do not wait for payment to be processed until fulfillment of the order there is a chance of the transfer being declined. When that happens there is a chance that you'll end up being able to ship the item but not able to get the money.
You'll need call the customer in order to start the process again.
So, unless you have an excellent reason for separating authorization from capture and understand the risks of doing so, you shouldn't do it.
Finally manually capturing is only possible with cards, and not with local payment methods or apps like Venmo.
Enhancing manual authorization as well as capture in payments
Keep in mind that you're able to take the amount you have authorized, but not more. If you're doing the process by hand, you'll need to manage this within your processing company.
Best practices to handle manual authorization and capture
Here are a few key tips to remember when using the manual process.
1. Do not use manual authorization or capture without justification.
This adds friction to the site, which increases burden, and could put you at risk of some of the scenarios described above. If you have a good reason to use manual capture, then you just need to stay at the top of your game and you'll be safe.
2. More than you have to collect
In the above paragraph, you are able to take less or the exact amount, but not over what you've authorized. If the total price of the purchase isn't available at the date of purchase, make sure you make sure you authorize more than what you anticipate you'll with.
3. Do not delay in resolving the authorization for cancelled orders
If the customer cancels their purchase, don't let it sit for seven days to allow the authorization to expire. It is best to cancel the order immediately.
4. Check your payments dashboard regularly
In particular, in businesses with higher transactions It is important not to be unable to capture any payment that you're trying to capture using the manual approach. Make sure you check your dashboard regularly. Manual authorization and capture, you must incorporate this process into your regular routine.
Payments: streamlined flexibility for your store
The main benefit Payments is the ability to integrate with the systems that best fit your store. When it comes time to get paid, more merchants have embraced payments due to its ease in use and its flexibility.
You can take payments across 18 countries, and you can accept greater than 135 currency types. Let customers use digital wallets like Apple Pay which reduces friction and boosting conversions. Merchants can also complete transactions on the go with Mobile App Mobile App and card reader.
Payments integrates fully with your store's dashboard so you can manage everything in one place. There's no need to switch tabs or log in and out of accounts. Additionally, it's designed and supported by our team, and is backed by prioritised assistance.