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Pre-authorisation charges have quietly become one of the most practical tools for businesses handling payments before delivery or completion. Whether you run a global marketplace, a travel platform, or a subscription-based service, the ability to temporarily hold funds before committing the transaction provides a useful buffer. Pre-authorisation isn't just about protecting your balance sheet. It also plays a role in building trust with your customers.
Let's walk through how pre-authorisations work, why they matter, and how you can apply them thoughtfully to protect revenue without hurting the customer experience.
How pre-authorisation can safeguard your revenue
Holding funds before confirming a transaction might sound cautious. But that caution has upside.
When you initiate a pre-authorisation, you temporarily reserve a specific amount on the customer's card – without taking the money out. This acts as a guarantee. It confirms the customer's payment method is valid and has sufficient funds.
Why this matters:
- Fewer failed payments at the point of fulfilment or service delivery
- Lower risk of fraud or no-shows
- Reduced operational effort tied to chasing unpaid balances
For businesses dealing with high-value items, fluctuating costs (like hotel incidentals), or subscription renewals, pre-authorisation prevents revenue leakage before it starts.
Navigating pre-authorisation: A step-by-step guide for merchants
If you're new to pre-authorisation, here's how to approach it without adding unnecessary friction:
- Know what it is
Pre-authorisation places a hold, not a charge. Funds are reserved, but not removed from the account.
- Choose a processor that handles it well
Not all payment providers make pre-authorisation simple. Look for one that automates releases and supports both cards and wallets.
- Set appropriate amounts
Don't over-hold. Align the hold with realistic expected costs, not worst-case scenarios.
- Be clear with customers
Tell them upfront. Let them know it's a temporary hold and not a charge, and when it will be released.
- Manage holds actively
Monitor open authorisations and release or capture them in a timely manner.
- Train your staff
Ensure everyone – from support to finance – understands how holds work and how to handle related inquiries.
Done well, pre-authorisation becomes part of your operational rhythm, not an occasional tactic.
What every CFO should ask before rolling out pre-authorisation
If you're a finance leader, here are the questions to ask before adopting or expanding pre-authorisation:
- Will this reduce the risk of lost revenue from cancellations or failed payments?
- How will it impact our average dispute and chargeback resolution time?
- Can we quantify the operational savings from reduced payment errors or fewer manual interventions?
- Are we able to track authorisation holds across all sales channels?
- Does our current provider support pre-authorisation for both cards and local wallets?
- What's the cost impact of holding funds for longer durations – on both our balance sheet and customer experience?
These questions frame pre-authorisation not as a technical feature but as a business lever.
Clarifying common misconceptions
Misunderstandings about pre-authorisation can cause hesitation—both internally and for your customers. Here's what to clear up:
|
Misconception |
The reality |
|
"It charges the customer twice" |
No. It's a hold. If the transaction proceeds, the hold is captured. If not, it's released. |
|
"Only works for credit cards" |
Debit cards and digital wallets can support pre-auth too. |
|
"It's confusing for customers" |
Not if you explain it clearly. Most people are familiar with it from hotels or rentals. |
|
"There's no added value" |
It reduces fraud, ensures available funds, and improves payment certainty. |
Reducing fraud and chargebacks
Every dispute costs time and potentially revenue. Pre-authorisation gives merchants an edge.
- Verifies funds: Stops bad actors from using accounts with insufficient balances.
- Reduces fake orders: Especially useful in travel or high-ticket eCommerce.
- Provides a trail: If a customer disputes the transaction, the pre-authorisation record helps demonstrate intent.
Pre-authorisation isn't a silver bullet, but it tightens the loop around common fraud scenarios.
Strategies that make pre-authorisation work
If you're going to use it, make it work for you – not just your risk team. Consider these best practices:
- Automate as much as possible: Use platforms that initiate, extend, and release holds without manual effort.
- Monitor expirations: Pre-auths don't last forever. Be proactive about re-authorising if needed.
- Align with your refund policy: Ensure pre-authorisation windows and refund timelines don't contradict each other.
- Use data: Track pre-auth success and drop-off rates to refine your approach.
Building trust with customers
Holding funds before a purchase can feel intrusive if not handled right. But it can also reassure customers that you're running a responsible operation.
- Let them know why the hold exists
- Provide estimated timelines for release
- Avoid hidden pre-authorisation amounts or surprise holds
Transparency isn't optional – it's what builds loyalty.
A business owner's guide to using pre-authorisation practically
Whether you're running a marketplace or managing bookings for a travel platform, pre-authorisation should be easy to manage.
Here's a simplified checklist:
- Align hold amounts with actual risks
- Document your pre-authorisation terms
- Automate where possible
- Review authorisation aging reports weekly
- Balance protection with customer flexibility
You don't need a full risk team to get this right. Just a process that reflects how your business actually operates.
Simplifying your payment stack
Payments work best when they're predictable. Pre-authorisation contributes to that by:
- Confirming the transaction is likely to succeed
- Giving you room to investigate suspicious activity before fulfilment
- Allowing you to manage fulfilment more efficiently (especially in split or partial delivery cases)
With the right payment provider, pre-authorisation becomes a quiet but consistent contributor to fewer declines, better customer experience, and stronger cash flow.
In conclusion
Pre-authorisation isn't flashy. It's not the newest feature in payments. But it solves real problems.
If you're looking to improve payment certainty, reduce operational hassle, and provide a better experience for your customers – pre-authorisation is worth serious consideration.
And while Antom supports pre-authorisation as part of its broader payments toolkit, this is a strategy any business can adopt, regardless of the provider they use.
