Simpler Smarter Savings

Authorization Request

Each step of credit card processing is given its own term. When a customer swipes his credit or debit card at a store, the electronic point-of-sale (POS) machine sends an “authorization request” to the acquirer. Here is how this authorization request process is completed.

1. Customer Wants to Purchase Products or Services

The usage of a credit or debit card will signal that a customer wants to remove funds from his account to pay for merchandise. The transaction could be at a brick-and-mortar store or website. It really doesn’t matter.

The consumer financial data is sent to the acquirer for authentication during this first phase of the authorization request. This authentication process is meant to prevent fraud.

2. Acquirer Verifies Identification

A third-party credit card processor, called the acquirer, receives the customer and merchant account information checking it against its key codes. Since acquirers might issue their own cards, there are at least two paths that the request could follow. If the information is valid, then the acquirer sends the authorization request to the credit card issuing financial institution.

If the acquirer also issues the credit or debit card, then it can complete the next step of the authorization process also. At times, this could create a conflict of interest when there are inadequate financial records or discrepancies.

3. Credit Card Bank Checks Funds Availability

When the credit card issuing bank receives the authorization request, it will recognize that the data has already been verified for accuracy. Thus, the credit card financial institution must simply check to see if the customer account has the necessary funds.

The credit card bank can actually look into the merchant account and customer account to authorize the transaction. If there are enough funds, then the transaction can be completed. An approval will mean that the funds are credited to the merchant account. A denial means that no funds are transferred.

Of course, some cards allow for overdraft protection. In those cases, even though the funds are not available, the credit card bank might still authorize the transaction and charge a special overdraft fee to the consumer.

4. Merchant Receives Approval or Denial

Finally, the credit card company will notify the merchant if the authorization request has been approved or denied. The merchant will print a paper receipt for the consumer.