To help improve the accuracy of cardholders' available funds on debit and credit cards, as well as addressing regulatory concerns regarding the use
of pre-authorisations, MasterCard has mandated a number of changes to how authorisations are processed. These changes are being introduced with the
aim of speeding up the release of any excess authorisation amounts, to ensure cardholders' funds are not held for any longer than is necessary. They
will also give you different options on how you can treat a card transaction.
From 1st October 2014, all MasterCard authorisations must be defined as either a "Final" or a "Pre" Authorisation and also flow the Scheme Reference
Data. The changes listed overleaf apply to all transactions made on the following MasterCard brands: MasterCard Credit, MasterCard Debit, Maestro
Debit and Maestro International.
If you use your own equipment or a PSP to accept card payments, you will need to upgrade your systems to comply with the mandate. The below Q&As
will provide further information and we have also put together the attached Technical Specification Document which details the changes you need to
An authorisation is the first step to accepting a card payment. The merchant (you) sends a request to their Card Processor (Global Payments) via their terminal or online solution to verify the cardholders details and set aside the funds in the cardholder's account for a limited time. Global Payments does this by routing the authorisation request to the Card Issuer (Banks and Credit Card companies) via the Card Schemes (Visa and MasterCard) and Card Issuers (Banks and Credit Card companies). Once this is done an authorisation code is generated that relates to this specific transaction.
Clearing is the second step to accepting card payments. This is where the merchant (you) sends all their sales transactions to their processor (Global Payments) for that day. If you have a physical card terminal this usually happens when you complete your end of day banking. Global Payments then sends these transactions to the Card Schemes who validate and check the transactions and apply any associated fees to Global Payments. Any authorisations gained will still be valid until the funds settle.
Note: If you have selected to only carry out a Pre Authorisation then no clearing record will be presented to physically debit the cardholder's accounts and credit your merchant account unless you complete the transaction and send the clearing record for the actual transaction amount.
Settlement is the third stage to accepting card payments and occurs after transactions have been cleared. This is where the Card Schemes notify the Card Issuers of the amounts to be debited from cardholders accounts and the Card Processor advises of the funds to be credited to the merchants account. The authorisation that was presented with the final transaction is then released.
Final Authorisations will be used in most face to face environments where the cardholder pays in full and receives their goods immediately. This option should also be selected where goods or services can be dispatched and cleared within 4 working days of the original authorisation request.
A Final Authorisation is categorised as:
Where you have completed a Pre Authorisation and are ready to send the transaction for clearing, a Final Authorisation must be used as this will free up the authorisation holding on the merchants account.
Pre-Authorisations will be widely used by the travel and entertainment sectors or anywhere the final amount of the transaction is not known at the point of original authorisation e.g. an online business where it is not possible to fulfill an order in a single transaction. A Pre-Authorisation should be selected any time that you are holding funds in a cardholders account for longer than 4 days or where you are estimating the final amount of the transaction.
A Pre Authorisation is categorised by any of the following characteristics:
Incremental Authorisations (sometimes referred to as 'Top Up' authorisations) are used by the travel and entertainment sectors or anywhere the final amount of the transaction is not known at the point of original authorisation e.g. an online business where it is not possible to fulfil an order in a single transaction. An Incremental Authorisation should be selected anywhere that you require to hold further funds on a cardholders account and a Pre Authorisation has already been completed. (For example, if a guest decides to extend their stay in a hotel).
Incremental Authorisations should always be processed in the same way as a Pre Authorisation, but unlike a Pre Authorisation an Incremental Authorisation will carry the Scheme Reference Data from the original Pre Authorisation.
Scheme Reference Data is a unique identification number that is generated by the Card Schemes for each successful authorisation request. This data is used to accurately match authorisations to settled transactions. This makes the linking of chargebacks to their original transaction easier and allows re-presentments to be traced back to the corresponding chargeback easier. It will also aid in the prevention, research and detection of card fraud, making transactions more secure.
If you rent a terminal from us or use Global Iris, your transactions will already contain this data. If you use your own equipment or use a Payment Service Provider (PSP) then you will need to contact your provider who will advise you where to obtain the Scheme Reference Data number from.
A Payment Guarantee Period is the length of time that an authorisation request holds funds in a cardholders account, it does not confirm the cardholders identity or guarantee payment. Authorisations are gained to ensure funds are available while transactions are sent for clearing and settlement. For more information on authorisations, please read the Authorisation section in your Merchant Operating Instructions.
Any authorisation marked as Final Authorisation attracts a 7 day payment guarantee period and any authorisation request marked as Pre Authorisation attracts a 30 day payment guarantee period. After this period, funds will free up in the cardholders account and they will be able to draw on the balance.
Any transactions sent for clearing and settlement after the payment guarantee has expired may be subject to chargeback by the issuing bank if the card holder disputed the transaction. Please note: Maestro transaction only attract a payment guarantee of 7 days regardless of the authorisation method selected.
A reversal is the cancellation of an authorisation amount prior to the transaction being submitted for clearing. Completing a reversal will release the ring fence around the funds on the cardholders' account, ensuring an accurate available balance is maintained.
If you rent a terminal from us or use Global Iris, we will update these automatically so that they default to carry out Final Authorisations. However if the transactions you are completing do not meet the Final Authorisation criteria then it remains your responsibility to select the correct Pre Authorisation option to avoid incurring the Processing Integrity Fee (PIF).
If you use your own equipment or a PSP you will need to contact your provider to update your equipment in time for the 1st October 2014, they will be able to advise you on how to carry out a Final Authorisation. It is your responsibility to ensure your equipment meets the required standards for processing and authorising transactions as outlined by the Card Schemes. Failure to update your equipment or select the correct authorisation method will result in the PIF being applied.
If you rent a terminal from us or use Global Iris then the option to carry out a Pre Authorisation is already available for you. You can find more details on how to do this in your terminals' user guide and in the Global Iris resource centre.
If you use your own equipment or a PSP you will need to contact your provider to update your equipment in time for the 1st October 2014. They will be able to advise you on how to carry out a Pre Authorisation. It is your responsibility to ensure your equipment meets the required standards for processing and authorising transactions as outlined by the Card Schemes. Failure to update your equipment or select the correct authorisation method will result in the PIF being applied
Examples of when to carry out a Pre Authorisation include:
It is not recommended to extend a Payment Guarantee beyond 30 days. If you require a longer period then you must complete another Pre Authorisation request after the original 30 day period has ended. When you complete another Pre Authorisation for the same transaction, you must also key in the original Scheme Reference Data from the first authorisation.
The Scheme Reference Data can be found on the transaction receipt if you rent a terminal from us and on the online records you receive if you use Global Iris.
If you use your own equipment or a PSP then you will need to contact your provider to confirm how to complete a further Pre Authorisation including the Scheme Reference Data.
An alternative to completing a Pre Authorisation is to carry out a Zero Value Authorisation. This allows you to verify an account in advance of finalising a payment amount for clearing. A Zero Value Authorisations checks whether a card is valid and not lost or stolen and will not attract the Pre Authorisation charge, as it does not 'ring fence' any funds in the cardholder's account.
If you rent a terminal from us or use Global Iris to take card payments, you can find more details on how to do this in your terminals' user guide and in the Global Iris resource centre. If you own your own equipment or use a PSP you will need to refer to your service provider for further details of how to complete a Zero Value Authorisation
If you rent a terminal from us or use Global Iris to take card payments, you can find more details on how to do this in your terminals' user guide and in the Global Iris resource centre. If you own your own equipment or use a PSP you will need to refer to your service provider for further details of how to complete a reversal. If you process an Authorisation Reversal you will need to include the Scheme Reference Data.
When a Pre Authorisation has been held against a cardholders account, there will come a time when the transaction is complete and you want to send it for clearing to debit the cardholder and then credit your merchant account.
If you rent a terminal from us or use Global Iris, you will find more details on how to do this in your terminal's user guide and in the Global Iris Resource Centre. If you use your own equipment or a PSP you will need to refer to your service provider for how to find this information to complete a pre Authorised transaction.
You will need to upgrade your systems to comply with the mandate. We have put together a Technical Specification document which details the changes they will need to make for you. You can also download a copy of the document and view a series of Questions and Answers related to Scheme Reference Data here.
It is very important that you contact your equipment provider/PSP immediately so that they can start making the changes required. If they are unable to make the changes by 1st October 2014 your MasterCard transactions will all attract the Processing Integrity Fee of 0.25% of the transaction value in addition to your standard merchant service charges. Your service provider should contact us through their usual communication channel and schedule a time when they will be able complete their testing and meet the mandated date. It is your responsibility to ensure your equipment is compliant with Card Scheme rules.
If you use your own equipment or use a PSP, then this is something you will need to ask your service provider, as your service contract is with them and not with Global Payments.
If you rent a terminal from us or use Global Iris then we will automatically upgrade these to include the Scheme Reference Data and this will be done free of charge.
Under the terms of your Card Processing Agreement with us, it is your responsibility to ensure that your card processing equipment meets industry standards. You can find further details on this in your Merchant Operating Instructions in the 'Using Your Own Equipment' section (on page 12). This states that "It is your responsibility to ensure that your card processing equipment meets industry security standards. You must carry out, and bear the cost of all upgrades to your equipment which we, or your terminal supplier, may reasonably request from time to time. This includes any developments required to meet changes to Card Scheme Rules. Failure to meet these changes will result in non-compliance with some of these regulations and may incur charges or penalties and increase your chargeback exposure. "
Also, your Terms of Service under clause 6.22 states "If you do not rent your terminals from GP, you must ensure that your card acceptance systems (including any part provided by a third party) operate in accordance with the following documents which have been issued to you or any amended or reissued versions of these which shall also be issued to you:
Additionally, GP may require, for reasons of fraud prevention or otherwise, that you install specific terminal functionality which will be notified to you in writing by GP."
Yes, this is a change mandated by MasterCard. All card processors in the UK and their customers accepting card payments are mandated to make these changes or face the Processing Integrity Fee from MasterCard.
You can find the latest version of our technical specification document here