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Pre-authorization process

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What is the pre-authorization process?

Pre-authorization consists of temporarily reserving a specific amount of money on a card for a future payment. This process checks the availability of funds on the card, and once confirmed, the specified amount is blocked in the cardholder’s account to ensure the payment can be completed successfully.

Payment pre-authorizations: common use cases

Payment pre-authorizations are widely used in services such as hotel reservations or car rentals. These are two of the most common scenarios where the business must ensure the customer has enough funds to cover any potential damages or additional charges.

How does the payment pre-authorization process work?

  • Pre-authorization request: The merchant requests a payment pre-authorization from the customer’s card-issuing bank before completing the final transaction.

  • Funds reservation: The issuing bank temporarily reserves the requested amount on the customer’s card. These funds become unavailable for other transactions until the pre-authorization is completed or released.

  • Verification of available funds: The pre-authorization allows the merchant to confirm the customer has sufficient funds before providing the service, helping prevent declined transactions or insufficient funds.

  • Final transaction: Once the service is completed, the merchant finalizes the transaction and requests authorization for the actual amount. The pre-authorized amount is then converted into the final payment.

  • Release of unused funds: If the final transaction amount is lower than the pre-authorized amount, the remaining balance is released and becomes available on the customer’s card again.

  • Pre-authorization expiration: If the final transaction is not completed within a certain timeframe (usually a few days), the pre-authorization expires and the reserved funds are automatically released.

Payment gateway with pre-authorizations

If you run a hotel, travel agency, or car rental company and need a PCI proxy payment solution that allows you to accept pre-authorizations, get in touch with us.

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