Payment CaptureBatching? Authorization? At What Point Does the Money From a Transaction Actually Hit Your Account?

Payment Capture: A Pivotal Point in the Transaction Process

You’re probably familiar with the general concepts behind payments like authorization, approval, and declines. Are you familiar with the finer points of the approval process itself, though?

The specifics of the payment capture process may not seem all that important… until there’s a problem, of course.

For instance, if you receive a payment reversal request, then the little details can suddenly become very, very important, as we’ll see below.

What is Payment Capture?

Payment Capture

[noun]/pā • mənt • kapt • SHər/

A payment capture is the legally binding point at which transactional funds move from a cardholder's account into a merchant’s account. Payment capture comes after authorization; at this point, the payment is effectively "settled," and the transaction is over.

In short: capture is the point at which you get paid for a sale. It occurs when you initiate the process of moving authorized funds from the cardholder’s bank to your merchant account.

Any fees incurred will come due at this point, and any pre-authorized amount will be settled. Then, once any relevant fees or charges have been collected, the remaining funds will be moved into your merchant account. You can submit these individually, with capture occurring as an instant, automatic follow-up to authorization. Or, you can submit them manually as part of a batch (more on this later).

there are one or two minor differences, it would be fair to equate payment captures with transaction settlement. Both terms generally refer to the same step in the payment chain. The same applies for “batching,” assuming that you choose to capture transactions as part of a batch.

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Authorization vs. Payment Capture

A lot of merchants confuse the authorization stage with the payment capture stage. The two are totally separate processes, though.

Instant vs. Delayed Payment Capture

Manual payment capture is always based around delayed capture. With automated systems, though, you can choose to delay transactions just like a manual capture, or you can opt to submit them instantly.

With automated systems, payments are often captured immediately after authorization, unless you specify a delay between authorization and capture. Thus, a “delayed capture” is the time period you select between payment authorization and capture.

Benefits of Instant Payment Capture

Immediate capture comes with obvious and not-so-obvious benefits. Notably, you can:

Benefits of Delayed Payment Capture

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Real-World Example

Let’s say you are a hairdresser who requires deposits or partial payments online, before you render service. In that case, when a customer fills out a service request form on your website and pays the initial deposit, a capture delay will give you more time to verify the customer and their funds availability.

If the payment bounces, you would then have time to cancel that service appointment before you waste time and product on an unpaid service. If the payment clears authorization, you would complete the appointment and capture payment as normal.

What About Payment Reversals?

Payment reversals are another key point to consider regarding payment capture processes. Depending on the type of payment reversal initiated, it may stop a transaction before final capture is rendered. Or, the bank may use a reversal to claw back funds that were previously authorized, even weeks or months after payment capture.

Authorization Reversal

Sometimes referred to as a “voided” authorization. With these voided payment attempts, authorization was issued by the bank, but the transaction never cleared the payment capture stage. The bank withdraws their authorization before settlement, and the transaction is canceled.

Refund

This is when a previously captured transaction is credited back to the customer’s card. Refunds are generally processed by the merchant themselves. However, sometimes the customer’s bank may get involved.

Chargebacks

Chargebacks are forced payment reversals initiated by a cardholder’s issuing bank. In such cases, the funds from the original, captured transaction are forcibly removed from your account and returned to the cardholder as provisional credit.

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There are drastically different consequences for each of these scenarios. An authorization reversal may be annoying… but it’s a lot better than a chargeback.

Voiding accidentally duplicated transactions before they are captured, for instance, can save you from getting hit with a chargeback. Similarly, refunding imperfect or dissatisfactory transactions (before they become chargebacks) will save you time and money in the long run. Again, while there isn’t really a perfect solution for stopping this situation from happening, manual capture can help lower your odds of getting hit with a dispute.

Best Practices For Payment Capture

We’ve explored some nuances related to the payment capture process. But, regardless of how you approach payment capture, you need to be sure you’re adhering to best practices.

Consider and weigh the following:

How Delayed Payment Capture Helps Prevent Chargebacks

As mentioned above, payment capture is best performed manually. It’s a lot easier to cancel a transaction after a small window of consideration than it is to backtrack through your transaction history and try to find what went wrong later. Additionally, post-transactional disputes or chargebacks incur hefty fees and other penalties. 

A high chargeback ratio, for instance, can be extremely bad for your bottom line. You could expose yourself to higher interchange fees and chargeback fees. You may even run the risk of being added to the MATCH list, or terminated merchant file. 

It’s important to process transactions quickly to avoid losing sales due to expired authorizations. However, manual payment capture can filter out many mistaken orders, customer mind-changes, and bank refunds you might incur by processing every capture automatically. The extra time you buy to manually enter each order for capture can have a positive impact on your overall chargeback rate. 

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