Skip to main content

Auth and Capture

Authorization and capture, commonly known as Auth/Capture, is a payment processing method that allows merchants to authorize a payment transaction and then capture (settle) the funds at a later time. This process offers flexibility to merchants, enabling them to confirm the availability of funds before fulfilling an order and completing the transaction only when they are ready to ship the products or provide the services. Auth/Capture is crucial for businesses dealing with goods or services that may not be immediately available for delivery.

Use Case​

Imagine an online electronics store where customers can pre-order items that will be released in the future. The store wants to secure customer payments at the time of order placement but only charge customers when the products are ready to be shipped.

Workflow of Authorization and Capture​

  1. Customer Places Order:

    • The customer selects products on the merchant's website and proceeds to the checkout page.

  2. Authorization Request:

    • The merchant's website sends an authorization request to the payment gateway, including the transaction amount and customer's payment information (credit card details).

  3. Authorization Approval:

    • The payment gateway forwards the authorization request to the issuing bank for the customer's credit card. The issuing bank checks the account balance and places a hold on the authorized amount, ensuring the customer has sufficient funds or credit.

  4. Authorization Response:

    • The issuing bank sends an authorization response to the payment gateway, indicating whether the transaction is approved or declined. If approved, the payment gateway generates an authorization code.

  5. Order Confirmation:

    • The merchant's website displays an order confirmation to the customer, confirming that the payment has been authorized. However, the funds are not immediately captured.

  6. Product Availability and Shipment:

    • The merchant waits until the products are available for shipment or the services are ready to be provided.

  7. Capture Request:

    • When the products are ready to be shipped or the services are ready to be provided, the merchant's system sends a capture request to the payment gateway. This request includes the previously authorized transaction details.

  8. Funds Capture:

    • The payment gateway captures the authorized funds from the customer's account and initiates the settlement process.

  9. Transaction Completion:

    • The payment gateway informs the merchant about the successful capture, indicating that the funds have been transferred from the customer's account to the merchant's account.

Benefits and Considerations​

  • Flexibility: Auth/Capture provides flexibility for merchants to manage inventory, ensuring they only charge customers when products are available and ready to be shipped.

  • Customer Confidence: Customers appreciate the transparency and trust that come with being charged only when the products or services are about to be provided, increasing their confidence in the merchant.

  • Reduced Chargebacks: By confirming the availability of funds before capturing payment, merchants can reduce the risk of chargebacks due to insufficient funds.

  • Accounting Accuracy: Auth/Capture helps merchants maintain accurate records of transactions, as funds are captured only when the order is ready to be fulfilled.

  • Timely Fulfillment: Merchants can fulfill orders promptly as they have the assurance of payment, enhancing customer satisfaction.

Auth/Capture is a valuable tool for merchants, especially those dealing with pre-orders, back-ordered items, or services that require scheduling. It ensures a balance between securing payments and providing flexibility and convenience to customers.