Mastercard – Revised processing requirements for Pre and Final Authorizations

In 2014, Mastercard introduced new authorization processing requirements for Mastercard and Maestro card transactions in Europe.

Authorization attempts needed to be defined as either pre-authorization or final-authorization.

This process was implemented by Mastercard to prevent cardholders having funds reserved on their cards for long periods of time.

Mastercard has communicated a change to Final authorizations in Europe as well as the extension of these processing requirements to all other regions including Asia/Pacific, Canada, Latin America, Caribbean and United States. As of October 14th 2016, merchants must code an authorization for an amount greater than zero as a pre-authorization or final authorization in all regions.

Each authorization type has requirements associated to the cancelation and capture of the transaction. Merchants failing to meet these requirements may be subject to fees that will be passed on by Adyen.

Final Authorization
The majority of e-commerce transactions today can be flagged as final-authorization.

The new applicable requirements for flagging transactions as final authorization in Europe are: 

•    Transaction must be captured within seven (7) business days of the authorization date - used to be four (4) business days
•    The capture amount must be the same as the authorized amount and be submitted in the same currency
•    Transaction may no longer be cancelled after authorization

The requirements for flagging transactions as final authorization outside of Europe are: 

•    Transaction must be captured or cancelled within seven (7) business days of the authorization date
•    The capture amount must be the same as the authorized amount and be submitted in the same currency

Scheme Fee Impact
There is no scheme fee impact if your transactions meet the above-mentioned criteria. However a Processing Integrity Scheme Fee is applied to all final-authorization requests that fail to meet the criteria listed above. 

Adyen passes on to merchants Processing Integrity Scheme Fees in Europe since November 2014. Effective on June 2017 a Processing Integrity Scheme Fee will apply to all final authorization requests that fail to meet the criteria listed for all regions other than Europe. This Scheme Fee will be charged by Mastercard as 0.25% of the authorized amount, with a minimum of USD 0.04 per authorization.


Pre-Authorization
The requirements for flagging transactions as pre-authorization outside of Europe are:
•    Mastercard transactions with pre-authorization must be captured or cancelled up to (30) days after the authorization date
•    Maestro transactions with pre-authorization must be captured or cancelled up to (7) days after the authorization date

This flagging should be used by:

•    Hotels or booking sites where the amounts are reserved on a credit card until after the stay
•    E-commerce merchants who may not capture the full amount within seven (7) working days as part of the total order is not in stock
•    Subscription merchants who are registering card details using a low value authorization and then canceling this authorization. 

Scheme Fee Impact
For pre-authorizations Mastercard introduced a pre-authorization usage fee in 2014 applicable in Europe. 

Effective November 2016, Mastercard has introduced an additional scheme fee for pre-authorization transactions outside of Europe. Mastercard will charge this fee at the rate of USD 0.045 for all pre-authorization requests that fail to meet the criteria listed above.

Adyen will start passing on the new above-mentioned Scheme Fees as they become applicable in each case.

By default, Adyen flags all authorization requests as final authorizations. Flagging all transactions as pre-authorization is also possible via configuration on your account. Adyen has dynamic flagging capabilities which will enable you to flag transactions as pre-authorization or final authorization in specific cases; minimizing the extra scheme fees costs. 

For more information please contact your Account Manager or Adyen support (support@adyen.com)


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