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MAG Sponsor Spotlight: Making Authorization Reversals Work for Merchants (MAG Quarterly- Volume Three, Issue Four)

The importance of providing correct data elements
By Arturo Martinez, Global Merchant Products, Visa Inc.

December 8, 2015

Authorizations are a key part of any sale, giving merchants the ability to identify if funds are available to complete a transaction. With each successful authorization, the amount available for other purchases is reduced to cover the approved sale until it is settled with the cardholder’s bank. This is commonly known as an authorization hold. However, not all authorizations are settled, and that can cause a problem for cardholders when the authorization is tying up money that can be used for other purchases.

Merchant responsibility for a cancelled sale

Imagine, as a cardholder, not having access to your money, or not knowing why your card is being declined. To help ensure that cardholders have access to all of their available funds, merchants should process authorization reversals for any sales that are cancelled by their customers. Authorization reversals notify the issuer that all, or part, of a sale has been cancelled and that the authorization hold should be released.

With missing or non-matching data elements, the Issuer will not be able to match the authorization reversal to the original authorization. This means that the funds will remain outstanding for anywhere from 3 to 14 days, depending on the card type.

A deeper look into the authorization reversal process

To better understand if the authorization reversal process is working as intended, Visa reviewed thousands of authorization reversal transactions over a recent three month period. It was discovered that many merchants were sending incomplete or incorrect information in the reversal messages, meaning that the issuers could not properly identify and therefore remove the matching authorization holds. While some issuers may release an authorization hold with only a matching transaction identifier, others require the correct information in all three of the required data authorization fields mentioned here:

• Field 37 – Retrieval Reference Number
• Field 62.2 Transaction Identifier
• Field 38 Authorization Identification Response

Merchants can ensure that their cardholder customers are not negatively impacted by extended authorization holds against their accounts by providing all of the required information. This will ensure that the issuer has the necessary information to match the reversal to the original authorization and release the hold as quickly as possible.

Next steps

Visa is committed to using the information compiled from the recent review to reach out and educate all identified parties. Visa will also reiterate to issuers that they release authorization holds in a timely fashion for their customers when the reversals are properly identified.