Pre-authorisation
Understand all the details of the pre-authorisation¹ feature and what it means for eligible merchants.
Pre-authorisation feature
Pre-authorisation reserves funds on a card for a sale to be processed (or cancelled) at a later time. This gives you comfort, as it makes sure that the customer will have funds available when it comes time to pay.
Mastercard® and Visa® have pre-authorisation processing standards to help alleviate both cardholder and merchant frustrations. This is because pre-authorisations are frequently the cause of customer complaints.
The standards apply to authorisations that hold an initial or pre-authorised amount on a card for a period of time until the final amount is known. Pre-authorisation functionality is available for eligible merchants (based on Merchant Category Codes). As a merchant, you’ll need approval from us to activate this functionality.
The pre-authorisation feature and pre-authorisation transaction type availability is dependent on the payment solution and card type presented.
Pre-authorisation transaction types
Pre-authorisation
The initial authorisation transaction that reserves funds on a card for a sale to be processed at a later time. The funds are not debited from the cardholder’s account until the final payment (completion) is processed.
Completion
A completion is used to charge the cardholder and remove the reserved/held funds from an earlier pre-authorisation transaction (this includes any adjustments that may have been processed).
Top-up
A top-up is used to increase the value of the original pre-authorisation transaction, where the expected value of the final transaction may be higher than the initial pre-authorised amount. The expiry date of the original pre-authorisation transaction processed on a Mastercard will also be extended.
Extend
An extend is used to increase the number of days that the pre-authorisation is in effect, up to a further 30 days. The value of the original pre-authorisation is not changed.
Partial cancellation
A partial cancellation is used to decrease the value of the original pre-authorisation transaction, where the expected value of the final transaction may be lower than the initial pre-authorised amount.
Full cancellation
A pre-authorisation cancellation is used to fully cancel a pre-authorisation that is no longer required.
Account verify
The account verify feature is only used to confirm the validity of a card. No transaction value is processed for this transaction. No funds are reserved on the card. The feature works well to validate a card number prior to setting up recurring payments. You’re still responsible for verifying the identity of the cardholder and that a transaction is otherwise valid.
Mastercard® and Visa® Standards
Mastercard and Visa apply pre-authorisation standards, to minimise cardholder and merchant frustrations surrounding outstanding pre-authorisation holds on cards.
The standards require you to:
- Use the ‘partial cancellation’ or ‘full cancellation features to cancel all pre-authorisation transactions that are no longer required. You can’t leave them to ‘expire’. These transactions should be performed as soon as possible after you’re aware that you no longer require an amount to be held.
- Be aware that the extra payment guarantee of 15-20% no longer exists. Use the ‘top-up’ transaction on your payment solution to increase the amount on hold, before completing the pre-authorisation transaction.
- Use the ‘extend’ feature on your payment solution to extend the pre-authorisation transaction hold if it is required for longer than the validity period.
- Use the ‘Account Verify’ feature that allows you to check the validity of the card number without holding funds on the card. This service only verifies the validity of the card number. You’re still responsible for verifying the identity of the cardholder and that a transaction is otherwise valid.
- Be aware that the behaviour and validity periods of some pre-authorisation features vary between Mastercard and Visa and may depend on the cardholders issuing bank, supporting the pre-authorisation standards.
Refer to your terminal user guide and/or payment solution provider for more information about the pre-authorisation features available to you, how to process them and validity periods for the Schemes.
The Detail
1. Pre-authorisation functionality is available for eligible merchants (based on Merchant Category Codes) and is subject to our approval. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Visa is a registered trademark of Visa International Service Association.