The Authorization Dispute Chronicle
Fraud, Consumer Dispute, Processing Error…
But wait — something seems to be missing, isn’t it?
You’ve probably figured it out by now!
It’s none other than Authorization!
We’ve already examined the categories of Fraud, Consumer Dispute, and Processing Error on a network level!
Now, it’s time to explore the one category that remains untouched!
Authorization
Authorization is the process by which a financial institution verifies that a customer has sufficient funds available for a transaction. This step occurs before the actual payment is processed, ensuring that the transaction can be completed successfully.
Here is a simplified overview of how authorization works:
1. The customer provides payment information (e.g., credit/debit card) at checkout.
2. The merchant’s payment system collects the information and on behalf of the merchant, the acquirer sends the authorization request to the issuer via card network.
3. After receiving the authorization request through the card network, the issuer checks:
- Card validity (active/not lost/stolen)
- Available balance (for debit) or credit limit (for credit)
4. The issuer sends a response back to the acquirer via the card network:
- Approval: Funds are available, and the transaction is authorized.
- Denial: Insufficient funds or flagged as suspicious.
5. The acquirer forwards the response received from the card network to the merchant:
- If Approved: Proceed to finalize the sale.
- If Denied: the transaction is canceled, and the customer is notified.
Well, got a quick go-to about Authorization!
Let’s turn our attention to the main picture!
Authorization Dispute
This can happen due to various reasons like insufficient funds in the customer’s account, system errors in the payment processing system, card expiration and card restrictions, etc.
Here is our authorization category Map!
The Authorization Category Map:
I) Common Category
1. Declined Authorization
This dispute arises when a transaction is processed despite receiving a declined authorization response.
Common Causes:
- The merchant might have accidentally completed the transaction without checking if it was authorized.
- There could be a technical issue in the authorization process that led to a false decline.
- The merchant might have received a decline response from the issuer but still proceeded with the transaction.
2. No Authorization
This dispute occurs when a transaction is completed without proper authorization.
Common Causes:
· The merchant did not obtain authorization before processing the transaction.
· The merchant requested authorization after the transaction was completed.
· The authorization was requested for a different amount than the actual transaction.
· The authorization was obtained using incorrect or invalid card information.
· The transaction was processed on the expired card.
II) Network Specific
1. Category Specific Only to Mastercard
a. Expired Chargeback Protection Period
This dispute when the transaction was completed after the deadline, and the cardholder’s account was either closed or had problems that made it unusable.
b. Cardholder Activated Terminal (CAT) 3 device
This dispute arises when an unauthorized transaction is processed at cardholder-activated terminals like ticket machines, automatic fuel dispensers (AFD), food vending machines, etc.
c. Transit First Ride Risk (FRR) Claims
This dispute arises when there is a complaint from passengers about problems they encounter during their first ride on a transit or ride-sharing service. This can include issues like being charged the wrong amount, experiencing cancellations, etc.
Note: Reason code -4808 (for all categories)
2. Category Specific Only to RuPay
a. Transaction Processed with Invalid Data — 1123
This dispute arises when transactions are processed without proper authorization, using account numbers that don’t match any records in the issuing institution’s database.
3. Category Specific Only to Amex
a. Charge Amount Exceeds Authorization Amount — A01
This dispute arises when a merchant charges a customer an amount that exceeds the limit approved during the authorization process. This can occur due to factors like additional fees, tips, or adjustments not communicated beforehand.
b. Authorization Approval Expired — A08
This dispute happens where the authorization granted for a specific transaction becomes invalid over time. This typically occurs due to a delay between the authorization approval and transaction submission.
Well, that’s a wrap on our one-stop dispute categorization series!
We hope you enjoyed exploring the various dispute categories!
Until then, Happy Reading!
