Partial authorizations: How do they work, and what do merchants need to know?

Nobody likes to see a credit or debit card declined.

Not only can it be confusing, frustrating, and embarrassing for your customer, it also represents lost revenue for you, as a merchant. So what can your business do about it?

Partial authorization is one solution. Available through major card schemes such as Visa and Mastercard, partial authorization helps you avoid declines by enabling the capture of however much the customer has in their account, then giving them the opportunity to complete their purchase with your business through a different payment card or method.

Below, we’ll explain what partial authorization is, how it works, and why it’s something your business should consider. We’ll also walk you through the rapidly shifting regulatory landscape surrounding partial authorization and its implementation, and explore whether it’s mandatory for your business or region in 2024.

What does partial authorization mean?

Partial authorization is an option for when your customer lacks sufficient funds or credit in their account to complete a purchase with your business.

Instead of declining the sale out of hand (and losing that revenue), you can authorize the payment for the amount the customer has in their account – then collect the outstanding balance with a different payment method.

Let’s say, for example, that your customer walks into your store, and attempts to buy an item, with their debit or credit card, for $150. However, the customer hasn’t recently checked their bank balance, and only has $141 available in that account. Typically, this would result in a decline – and no shortage of embarrassment at the point of sale for your customer.

For better understanding, with partial authorization, however, you can charge the customer $141, then allow them to settle the remaining $9 a different way: like cash, check, or with an alternate debit or credit card. This allows you to keep your authorization rates high and maximize your takings at the register: all while offering a smoother, more seamless experience for your customers.

How does partial authorization work?

So, what does the partial authorization process look like? Let’s break it down, step by step.

1. After your customer uses a credit or debit card to make a purchase with your business, you – via your payment processor, such as Checkout.com – send an authorization request to the card issuer. This is where the customer’s bank performs some key checks to ensure there’s no fraud involved, and that the cardholder has enough money in their account to pay for their desired item.
2. If the customer does lack the funds to complete the purchase (and if you, as the merchant, have enabled partial authorization), the issuer returns a response with a partial authorization. This allows you to capture the maximum funds available to the customer on their chosen payment card. However, you should consult your customer to make sure this is what they want to do; if you don’t, and automatically capture the partially authorized amount, it could increase your risk of having to void the transaction.
3. You can then choose to capture this amount ($141, in our example above), and request payment via a different method from your customer. (Alternatively, you can elect to void the transaction, if your customer would prefer to pay the full purchase amount through a different card or payment method.)
4. That’s it! By partially authorizing your customer’s total debit or credit card balance, you’ve avoided the impact of a decline on your authorization rates – and spared their blushes at the checkout.

Enabling partial authorization with Checkout.com

When you process payments with Checkout.com, partial authorization is good to go – you just need to opt in to benefit from it.

To do this, flag any POST authorization requests for a Visa or Mastercard transaction with partial_authorisation.enabled: true. (The default value – partial_authorisation.enabled – is set to false.) You can see the full request and API response on our Documentation page.

If a transaction has been partially authorized due to the customer not having sufficient funds to follow through with the purchase, you’ll receive the response code 10010, along with information about the authorized amount. This allows you to calculate the outstanding balance, and process payment for it via alternate means.

Different partial authorization card schemes

The two main partial authorization services for merchants come from Visa and Mastercard.

Introduced in 2005, Visa’s partial authorization scheme – the Visa Partial Authorization Service – has seen more than 140 million transactions approved every year, and can boost your approval rates by +25 basis points. For more information about partially authorizing payments through Mastercard, its Transaction Processing Rules document will help.

Is partial authorization mandatory for merchants?

No, partial authorization isn’t mandatory – but it is recommended by the card schemes to help improve authorization success rates.

We should also note that partial authorization isn’t mandatory for issuers. Just because a bank can offer partial authorization, doesn’t mean it will – and some transactions in which the customer lacks sufficient funds to make the purchase may still be simply turned down.

Benefits of partial authorization

The ability to partially authorize payments offers a wealth of benefits for your business and your customers – not to mention your revenue and reputation, too. Let’s explore them.

Higher approval rates

By allowing you to capture payments that would have otherwise been declined, partial authorization can boost your business’s authorization rates. Higher authorization rates mean more completed payments, which equates to more revenue and healthier cash flow.

Fewer abandoned carts

Partial authorization combats cart abandonment, too.

By enabling customers to proceed with their purchase through an additional payment method, you can salvage sales that would otherwise have been lost, and avoid having to spend big on retargeting and email marketing campaigns to win those lapsed customers back.

A better customer experience

As customers, we’ve all felt it – that jarring, jolting lurch in the pit of the stomach when, at the checkout step we see our payment has been declined. It’s unpleasant – but, with partial authorization, it can be avoided.

Often, a customer lacking the funds or the credit to make a purchase is purely accidental: they may have forgotten to transfer money in from another account, or it may have just slipped their mind that they made a bigger purchase earlier that day. So, by offering partial authorization – the ability to finish the purchase with a separate card – you can avoid them the embarrassment, the fluster, and the hassle of dealing with a declined payment.

It’s a nice thing to do, but it’s also good business: especially in the long-term, when the positive experience your customer has had at your register will lead to increased loyalty, repeat purchases, and free word-of-mouth marketing.

How Checkout.com supports partial authorization

Considering the effect it can have on your customers’ shopping experience – and on your business’s bottom line – implementing partial authorization is a no-brainer. How, though?

Let Checkout.com help.

We make enabling partial authorization simple – allowing you to increase your authorization rates to boost revenue, and helping your customers avoid the embarrassment of a declined card. What’s more, we’ll continue to bring you, as a merchant accepting a wide range of payments, the latest news and updates from Visa and Mastercard – and work with you to ensure you’re compliant with the latest rules and mandates around partial authorization.

Want more from your payments strategy? Get in touch with our team of payment experts today to start the conversation – and start putting partial authorization into practice.