Glossary
Prior Authorization Capture
Prior authorization capture is a crucial step in the payment processing cycle, particularly when an initial transaction has been authorized but not yet settled. This process involves the merchant sending a request through their payment gateway to finalize the settlement of funds for a transaction that was previously authorized under an "authorize only" or "pre-auth" arrangement.
In "authorize only" transactions, a merchant obtains approval to hold a specified amount against a customer's credit card to ensure funds are available, but the amount isn't immediately charged. The actual transfer of funds occurs only when the merchant completes the prior authorization capture request. This might be done once the goods or services are ready to ship or be delivered, ensuring the merchant can guarantee payment before the final provision of service.
The process of prior authorization capture may require the merchant to manually input a specific code provided during the initial authorization; however, modern payment systems often automate this by retaining and automatically including the necessary authorization information.
Merchants must be mindful of the timeframe for completing a prior authorization capture, as they typically have a limited window in which to submit their capture request after receiving the initial authorization. This timeframe varies by payment processor but is generally between a few days to a week. Failing to complete the capture within this period can result in the authorization becoming void, meaning the merchant would need to request a new authorization to process the transaction.
This system helps manage credit risk, improves cash flow by confirming funds availability before shipment or service provision, and reduces the potential for fraudulent transactions. For customers, it provides flexibility, as funds are only fully transferred when the transaction process completes, ensuring they are only billed upon confirmation of service or product delivery.