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Payment Lifecycle

Authorization​

An authorization is a temporary hold on a customer's funds. It confirms that the customer has the necessary funds or credit for a purchase, without moving money from their account. By default Authorizations are captured immediately unless they have been configured to be manually captured or captured after a delay.

Manual capturing of Authorizations is often used in scenarios where the merchant needs to verify payment availability before finalizing the sale, such as in hospitality, car rentals, or e-commerce pre-orders.

Transaction​

A transaction represents the final step in the payment process, where funds are moved from the customer’s account to the merchant’s account. This occurs when an authorization is captured by the merchant, confirming the sale and triggering the transfer of money.

Once an authorization is captured, it becomes a transaction, meaning that the funds are no longer just reserved; they’re actually transferred to the merchant, making the sale official.

Key Authorization Concepts​

Pre-Authorization vs. Final Authorization​

Pre Auth​

This is an initial hold placed on a customer’s funds when they initiate a payment. The funds are reserved but not yet transferred.

It’s used to confirm payment capacity and customer intent.

Example: A hotel might pre-authorize funds upon check-in to cover estimated charges.

Final Auth​

This confirms the exact amount that will be charged, replacing the initial hold with the final amount to be captured.

A final-auth may be necessary if the total amount changes after the pre-auth (e.g., adding room charges in a hotel).

Authorization Duration​

The hold duration varies by bank but typically lasts 28 days.

If the funds are not captured before the hold expires, the authorization will be released, and the funds will return to the customer’s account.

When does an Authorization become a Transaction?​

An authorization becomes a transaction when the merchant initiates a capture.

Immediate Capture:​

In most cases, the capture happens automatically right after authorization, converting the hold into a transaction.

Delayed or Manual Capture​

Merchants can choose to delay capture, especially when the final amount isn’t determined immediately (e.g., in services where additional charges may apply).