Manual Authorization and Capture - Which and How to Apply It

Mar 1, 2023

Authorization and capture are two of the components which make up the payment processing. And while an automated approach is the most common choice however, there are times when it is necessary to use manual authorization and capture.

What's going on?

Paying yourself.

In the next paragraph, you'll find out, in specific types of sales transactions, getting the money from the buyer can be difficult. If you manage this properly, you'll 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 identify whether manual or automated authorisation and data capture are best for your online company as well as how you can use it. It is important to clarify the words.

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

These two distinct events occur when a consumer initiates an online payment using a credit card. In the majority of cases these two events occur at simultaneously. However, they do not have to be, and in some situations, you as the merchant could decide to segregate them according to the purpose.

Authorization

Authorization happens when the payment processor calls the bank of the cardholder to confirm that they've got enough money to cover the amount due, and also to verify the card's active.

At this point at this point, the funds are not yet been transferred from the customer's bank to the business, but they remain, at the very least, reserved for that purpose.

Authorizations last for a short time. Most often, they expire within seven days, so no funds change hands if the capture process doesn't begin before the expiration.

Capture

Capture, also known as the settlement of the transaction takes place when the cash actually transfers between the customer's bank as well as the retailer. Your bank instructs the processor of payments to take money from the bank of the client and deposit them into your account.

How do capture and authorization sit within the payment process?

As a rule, both processes happen at the same simultaneously, which is ideal for most businesses. But for certain use cases, as you're about to learn, it's crucial to differentiate them into separate instances.

Manual vs. automated authorization and capture

Before we look at separating them, let's be sure that you know what you're doing.

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

If you wish to divide them into two distinct events, you can create a manual capture procedure. In that situation, you'd need to go into the payment processor you use and initiate the process of capture. If you want to enable payments, enable this within the admin settings.

When is manual capture helpful?

We'll look at a few scenarios to help you see when using a manual capture process is a good idea for your business.

Fuel or gasoline

If you are filling your tank of gas it will be authorized prior to the pumping of any gas. The fuel supplier approves your card and permits you to pump but doesn't record the amount yet as it isn't aware of the amount of gas you will buy.

Hotels

In most hotel transactions, the guests' card gets authorized before or at check-in for an approximate amount, based on the days that they've reserved the room. The capture procedure usually happens at checkout, when the amount actually owed to the guest is known.

Equipment rental businesses

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

artisan crafting with wood

Artisans

A lot of artisans perform custom work and their prices vary from job to project. The cost to be charged will not be established until the job is finished, particularly if labor charges are charged per an hour. Sometimes they may want to approve and collect a portion of the cost upfront before completing all the remaining work after it is complete.

If you keep these instances in mind, you can begin to imagine scenarios in your business where separating capture from authorization may be essential.

If you're just filling online orders for goods that you then ship, you typically won't need to make a distinction between authorization and capture. However, if the exact value of the transaction isn't determined up front or the product is shipped at the end of the month it is possible to first authorize the payment however, you don't have to capture it at the exact time.

Manual capture disadvantages

There are some risks that come with using the manual capture. We'll review some of the things to look out for.

In the first place, you aren't able to take more than what you authorize. The only limit is the same or lesser. So if you're not sure about the final price, authorizing up front puts you at risk of undercharging. Therefore, you'll need to either make an additional charge, or even cancel the initial one and start the process again with the higher amount. Neither option will likely satisfy the client.

Second, the authorization expires after seven days. Therefore, in cases of more time between placing an order and fulfillment, if you wait to capture payment until the delivery of your order has been completed then you risk the possibility of having the transfer rejected. When that happens, you may find yourself being able to ship the item but not able to get the funds.

Now, you'll have call the customer in order to restart the payment process and again.

This is why it is not recommended to do so unless there's an excellent reason for separating authorization from capture and understand the risks of doing so don't make the move.

Additionally the manual capture option can only be achieved with card payments, not local payment methods or apps like Venmo.

Improving manual authorization and capture in the payment process

Remember, you can capture more than you've authorized however, you cannot capture more. If you're doing the process manually, you'll have to manage this within the processing company.

The best practices to manage manually authorized authorization and recording

Here are some key suggestions to be aware of when performing the manual procedure.

1. Use manual authorization only and capture without justification.

This adds friction to the site, which increases workload, and puts your site at risk for some of the scenarios described above. If you have a good motive to utilize manual capture, then it's just a matter of staying at the top of your game and you'll be fine.

2. More than you require to keep

Like we said, you may capture less or the same amount, but you can't charge more than you authorize. If the total price of the purchase isn't available at the date of purchase, make sure you authorize a higher amount than you think you'll end in charging.

3. Do not delay in resolving the authorization for cancelled orders

If a customer decides to end their order, don't wait seven days for the authorization to run out. 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 when you're employing the manual method. So check your dashboard consistently. Manual authorization and capture, you have to build this step into your regular routine.

example of manual authorization in

Flexible payment options: designed to work with your online store

One of the main benefits it is that you can connect to the technologies that best fit your store. In terms of getting the money they deserve, more businesses than ever before are turning to payments due to its ease in use and its flexibility.

It is possible to make payments in 18 countries and accept over 135 different currencies. Allow customers to use digital wallets like Apple Pay which reduces friction and boosting conversions. Merchants can also make transactions while on the move with Apple Pay's Mobile App and card reader.

Payments seamlessly integrates with your store's dashboard so it is possible to manage all of your accounts in all one location. No more swapping tabs and logging in and out of your accounts. Plus, it's built and supported by the team, and includes the highest level of help.