In cashless payments, the term “authorization” stands for the approval of a financial transaction. In a typical transaction, they must be checked and finally approved by the respective credit institution or payment provider. The check serves to ensure that the customer’s account can be debited for the respective amount, and there are no other obstacles such as a blocked card or anything. The verification and approval of the transaction used here is referred to as authorization.
Authorization – how it works?
In the process of authorization, the payment provider checks to see whether the user is authorized to pay. During the part of this check, the user’s bank is verified to see if the respective amount can be debited from his account. The card-issuing bank has the authority either to reject a transaction or issue an authorization. Further, the bank will issue a processing number and debit the money from the account. The authorization becomes necessary as the booking process is not immediate, but the payment is reserved and booked only during the next business day.
Authorization for credit card payments
While the credit card is swiped through the terminal, the card data is directly sent to the issuing bank. Following which, the merchant bank sends an authorization request to the card issuing bank. The card limit is checked now, and the requested information is sent back. The transaction is either authorized and carried out, or it can be declined by the issuing bank, depending on whether the credit card limit is reached, or the card has been blocked. Before the actual payment is made, the seller is intimated about the authorization. Once the account is debited, the customer can take his goods, or it will be sent to him. The authorization process takes only a few seconds, even though the card information is routed around the world and the account will be debited with the respective amount.
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