Authorization

The first step of card processing, the issuer is asked to confirm the card is valid and that funds are available, and to reserve the transaction amount on the cardholder's account. Authorization is separate from settlement: the merchant must subsequently capture the authorization to receive funds.

In practice.

An authorization is a promise, not money: it confirms the card is live and funds are reserved, but nothing moves until capture. Merchants watch their authorization approval rate closely because every decline at this step is lost revenue at the point of highest intent. Routing, descriptors and issuer relationships all influence it.

Related terms: Capture · Pre-authorization · Settlement