Auth & Capture

Two-step payment flow: authorize funds first, capture when ready to fulfill.

What is Auth & Capture?

Auth & Capture is a two-step payment flow where the payment is first authorized (funds are held/reserved) and later captured (money is actually charged).

This payment flow is useful for businesses where the final confirmation, product shipment, or service fulfillment happens after the customer places the order.

Step 1: Authorization

Verify & Hold

• Verify the payment method
• Check sufficient funds
• Temporarily block the amount
• Do NOT deduct money yet

Step 2: Capture

Confirm & Charge

• Merchant confirms transaction
• Actual deduction happens
• Money gets settled to merchant
• After shipment/fulfillment

---

How It Works

Instead of charging the customer immediately:

1. First: Merchant authorizes the payment
2. Then: Bank temporarily blocks the amount on the customer’s card/account
3. Next: Once product/service is confirmed, merchant captures the payment
4. Finally: Funds are transferred successfully

At the authorization stage, the customer sees the amount as “held” or “pending”. The merchant has assurance that funds are available, but no actual settlement happens yet.

---

Why Businesses Use Auth & Capture

This flow is ideal when:

• Delivery confirmation is required
• Inventory may change
• Final amount may vary
• Services are fulfilled later
• Merchant wants fraud protection
• Merchant wants payment assurance before fulfillment

---

Real-World Examples

Airlines

When a customer books a flight:

1. Payment is authorized first
2. Airline confirms seat allocation
3. Payment is captured after ticket confirmation

Useful because:

• Fare availability may change
• Seat confirmation may fail
• Final booking validation needed

---

Key Benefits

Payment Assurance

Merchant knows customer has sufficient funds before fulfillment.

Better Customer Experience

Customer is charged only when order/service is confirmed.

Reduced Refunds

Since money is not immediately captured, failed orders may simply release authorization instead of processing refunds.

Flexible Fulfillment

Merchant can:

• Capture full amount
• Capture partial amount
• Reverse authorization
• Perform multiple captures (if supported)

---

Auth & Capture Lifecycle

Step 1 — Payment Authorization

Customer initiates payment.

Merchant sends:

• Amount
• Card/payment details
• Authorization request

Bank:

• Validates payment method
• Checks available balance
• Places hold on funds

Result: Payment status becomes AUTHORIZED

---

Step 2 — Hold Period

Funds remain reserved for a limited duration.

Typical authorization validity:

• 5 to 7 days
• Sometimes up to 30 days depending on card network

During this period, merchant can:

• Capture payment (full or partial)
• Reverse authorization
• Wait for fulfillment confirmation

If authorization expires before capture, the hold is automatically released and the transaction becomes invalid.

---

Step 3 — Capture

Merchant captures the payment after confirmation.

Examples of when to capture:

• Product shipped
• Hotel checkout completed
• Flight ticket confirmed
• Service delivered

Result: Payment status becomes CAPTURED

Actual settlement starts here — funds are transferred to merchant’s account.

---

Step 4 — Reversal (Optional)

If order/service is cancelled, merchant can reverse authorization.

What happens:

• Held amount gets released back to customer
• No actual charge occurs
• Payment status becomes REVERSED or CANCELLED

When to use reversal:

• Order cancelled by customer
• Stock unavailable
• Booking failed
• Fraud detected

Auth reversal avoids unnecessary refunds since the money was never actually charged.

---

Partial Capture

Merchant may capture only part of the authorized amount.

Example:

• Authorized amount: ₹10,000
• Captured amount: ₹7,000
• Remaining ₹3,000 gets released automatically or reversed manually

Useful for:

• Partial shipment (some items out of stock)
• Variable billing (final amount differs)
• Inventory shortage
• Split fulfillment

Full Capture

Capture the complete authorized amount when order is fully fulfilled.

Partial Capture

Capture only what you need — remainder is released automatically.

---

Auth Reversal Explained

Auth reversal releases held funds without charging the customer.

When to Use Reversal

Scenario	Action
Order cancelled before fulfillment	Reverse authorization
Stock unavailable	Reverse authorization
Booking failed	Reverse authorization
Fraud detected	Reverse authorization
Payment already captured	Use refund (not reversal)

Auth reversal only works on AUTHORIZED transactions. Once captured, you must use the standard refund flow.

---

Summary: Authorization vs Capture vs Reversal

Action	What It Does	When To Use	Status After
Authorization	Holds funds on customer’s card	At order placement	AUTHORIZED
Full Capture	Charges the full authorized amount	After complete fulfillment	CAPTURED
Partial Capture	Charges only part of authorized amount	Partial shipment/fulfillment	CAPTURED
Reversal	Releases hold without charging	Order cancelled before capture	REVERSED

---

Next Steps

Now that you understand how Auth & Capture works, learn how to implement it:

Auth Payment Initiation

Start an authorization to hold funds on the customer’s card.

Authorization Management

Capture funds or release the hold after authorization.