What is authorize and capture?

What is authorize and capture?

Authorization and capture is a two-step process for completing credit card payments. Authorization ensures the account has the funds to cover the transaction and holds the funds as pending without charging the card. Capture is the process of transferring funds from the customer’s account to the merchant account, moving it from pending to complete.
Authorization and capture verify funds and charge the customer for the transaction amount. Both are essential for processing a transaction.

Steps in the Authorization and Capture Process

There are three steps when authorizing and capturing transactions:

Step 1: Create the payment

The process starts with initiating a transaction with the payment application programming interface (API). If your business process can authorize and capture transactions, this occurs at the point of sale.

Step 2: Request for authorization

After payment initiation, the merchant’s payment gateway contacts the customer’s issuing bank to hold the funds. The amount of time a transaction spends in the authorization stage depends on the payment processor as well. The maximum amount of time funds can be held is 30 days, after which the authorization requests expire, and a new authorization is needed.

Step 3: Capture funds

Once the card is authorized, the capture request is issued starting the funds transfer from the customer’s bank to the merchant account. Once the funds are captured, the transaction is complete.

Can authorization and capture take place at different times?

Yes, authorization and capture can occur at different times. For instance, if a product is not immediately available for shipment, the authorization can be initiated with the capture taking place later when the goods are ready to ship.

What are the benefits of using authorization and capture in payment processing?

One benefit of using the authorization and capture method is that it adds an extra layer of protection for all involved parties. Merchants can verify the payment methods without charging them, preventing costly chargebacks. Customers are protected as their cards are not charged until the transaction is ready for completion.

What is the role of the payment gateway in the authorize and capture process?

The payment gateway plays a crucial role in the authorization and payment process. Once a transaction is initiated, the payment gateway contacts the customer’s issuing bank to hold the pending funds. A capture request is then issued to transfer the funds from the customer’s bank to the merchant’s account.