eCommerce Basics: How Online Card Payments Are Authorised

an online card payment being verified

When your customers purchase goods or services from your online store, authorisation is an important early step. The authorisation process ensures that online card payments can provide the required funds for an order before approving the transaction.

In our last article we covered CVV and AVS and explained how these card verification methods can help in protecting your business. But what does the authorisation process look like? In this article we will breakdown the step-by-step process for authorising online card payments.

Step 1: Your customer pays with their credit or debit card

When your customer places an order, they will be required to enter their card and address information, this includes:

  • Card details
  • Expiry Date
  • Security Code
  • Billing Address
  • Shipping Address

After your customer submits their information, a request is sent to your payment processor, which should only take a few seconds.

Step 2: Your payment processor checks your customer’s card

Your checkout system captures your customer’s account information and securely sends it your payment processor, who will then verify the payment by checking that the required funds are available and that the card details are correct.

Step 3: Your payment processor requests authorisation

Your payment processor will ask the card scheme network (for example, VISA or Mastercard) to get authorisation from your customer’s card issuer. The card issuer can be a bank, building society or other financial organisation that provides payment cards, such as debit, credit and prepaid.

Step 4: The transaction is submitted to the customer’s card issuer For authorisation

The card scheme submits the transaction to the card issuer for authorisation. The card issuer has responsibility for transactions made on the cards they have issued and will be responsible for debiting funds from your customer’s account.

Step 5: Authorisation response

The card issuing bank authorises the transaction and sends you an authorisation code to confirm that the transaction has been authorised. Your customer will also receive confirmation that their purchase was successful. You should not ship a product to a customer or complete their transaction until you have received an authorisation code.

What causes card payments to fail authorisation?

While failed authorisations can occur for financial reasons, in some instances the cause can be the result of a technical problem.

The most common reasons for failed authorisations include:

  • Insufficient funds
  • Invalid card number
  • Expired card
  • Security violation (CVV)
  • Invalid address (AVS)
  • Card has been cancelled
  • Card has been reported as lost or stolen
  • Payment Gateway configuration errors

Does successful authorisation mean the transaction was legitimate?

It’s important to understand that authorisation does not guarantee that the transactions was not fraudulent, or that that it cannot be disputed by your customer at a later date. These disputes are better known as chargebacks and are likely to be an ongoing challenge for your business. However, there are many ways in which you can effectively reduce and prevent them.

Want to know more?

If you’re eager to know more about chargebacks, we will have more to share on this soon. To stay up to date with the latest from our eCommerce basics series, search for #PixxlesPowerUps. Alternatively, we have plenty of ecommerce video guides which you can watch here or you can visit our resources page for more helpful blogs.