What are incremental authorizations?

Incremental authorizations have emerged as a valuable tool for businesses and customers alike. If the original or estimated authorization amount falls short, these authorizations provide a means to increase the approved amount for a transaction.

Offering flexibility and adaptability, incremental authorizations cater to evolving customer needs and ensure seamless transactions across various industries. On this page, we’ll explain incremental authorizations in detail, examining their application in different industries, while explaining how your business can leverage this method to optimize your payment processes and improve customer satisfaction.

What are incremental authorizations?

Incremental authorizations allow for an increase in the authorized amount of a transaction, if original or estimated authorization falls short. This type of authorization can be requested when there’s a need for additional funds based on a revised estimate of the cardholder's potential expenditure.

Here are some key points to consider regarding incremental authorizations:

• Incremental Authorization is supported for Visa, Mastercard, Diners, UPI, and JCB, but it isn’t available for American Express transactions.
• Incremental authorizations aren’t meant to replace the original authorizations, but instead are issued in addition to the previously authorized amount.
• The cumulative total of all linked estimated and incremental authorizations represents the overall authorized amount for a particular transaction.
• It's important to note that incremental authorizations don’t extend the validity of the initial pre-authorization amount. The validity period of the initial pre-authorization remains the same.

What’s the difference between original or estimated authorization and incremental authorization?

The main difference is their purpose and functionality. Original or estimated authorization is the initial authorization or pre-authorization that’s used to secure a certain amount of funds for a transaction, and is based on an estimated or expected amount that the cardholder is likely to spend.

The purpose of the original/estimated authorization is to reserve the specified amount from the cardholder's available credit or funds to ensure it’s available when the transaction is settled, representing the starting point for the transaction and setting the initial authorized amount.

In contrast, incremental authorization comes into play when the original or estimated authorization amount is insufficient to cover the total cost of the transaction. If the cardholder's actual spending exceeds the initial authorization, then an incremental authorization request can be made to increase the authorized amount. 

This method allows for additional funds to be reserved in order to cover the remaining cost of the transaction. Incremental authorizations are typically based on revised estimates – or higher expenditure expectations – and are used to increase the original authorized amount.

Incremental authorization examples

Incremental authorizations allow you to increase the authorized amount when the initial estimate or pre-authorization isn’t enough. You can also request these authorizations based on revised estimates of the cardholder's potential expenditure. 

However, as we’ve mentioned, it's important to note that incremental authorizations don’t replace the original authorization but rather add to the previously authorized amounts. 

To give you an idea of incremental authorizations in action, we’ve explained how they’re typically used in different industries. In each of these industries, incremental authorizations serve to adjust the authorized amount based on changes or additions made by the customer, ensuring that the necessary funds are available to cover the final transaction amount.

Traveling

When booking a hotel room or reserving accommodations, you can use incremental authorization if a traveler initially reserves a room for a certain number of nights but decides to extend their stay. In this case, an incremental authorization can be requested to cover the additional nights' charges.

Car Rentals

Incremental authorizations are commonly used in the car rental industry. Let's say a customer initially rents a car for a specific period, but later decides to extend the rental duration. An incremental authorization can be obtained to account for the extra days of rental, ensuring the required funds are available, protecting your business from losing funds when it comes to payment.

Cruising Ships

When passengers board a cruise ship, they often provide an initial authorization for onboard charges like dining, spa services, or entertainment. If the passengers exceed their initial estimated expenditure, you can obtain incremental authorizations to cover those additional expenses.

Grocery Shops

Incremental authorizations can be used in grocery stores, particularly for pre-orders or online shopping. For example, if a customer places an order for a certain amount of potatoes, but requests additional items or changes to the order before the grocery store prepares the order, an incremental authorization may be used to accommodate the revised total.

Support Incremental Authorization with Checkout.com

With Checkout.com’s Integrated Platform product, you can protect your business from losing funds by requesting an incremental authorization to increase the authorization amount or extend the authorization's validity period.

Our Integrated Platform essentially enables your business to increase conversion rates, reduce manual tasks and foster loyal communities of customers. Talk to our sales team for more information on how to integrate our product into your payments flow.