Partial Authorization Logic for Prepaid Card Transaction Success
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Solution Overview
Problem
The payment industry faces challenges in increasing the success rate of transactions, particularly for subscription and recurring transactions, due to high chargeback rates and unfriendly practices to cardholders, which can lead to additional chargebacks and compliance burdens.
Innovation Solution
A payment processing system that allows partial captures and full deposits based on partial authorization results, using historical data and risk assessments to determine the best course of action, while minimizing chargebacks and optimizing customer relationships.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If merchants allow forced deposits when authorization is denied due to credit limit, then transaction success rate increases, but chargeback rate increases
Solution Approach 1:
The system performs a partial authorization for a reduced amount when the full transaction amount is denied due to credit limit. This allows the merchant to capture what is available now and attempt to collect the remainder later, increasing transaction success rate without immediately triggering a chargeback by forcing a full deposit that would be denied.
Solution Approach 2:
The system performs a preliminary partial authorization to secure available funds before attempting full collection. This preliminary action establishes a foundation for subsequent collection attempts, allowing the merchant to gradually collect the full amount without triggering immediate chargebacks from forced full deposits.
2Adaptability or versatility
If merchants use partial authorizations for prepaid cards, then customer flexibility increases, but system complexity increases
Solution Approach 1:
The system automatically determines whether to perform partial or full authorization based on card type detection and predefined rules, without requiring manual merchant intervention. This self-service approach handles the complexity internally while presenting a simple interface to merchants, maintaining customer flexibility without increasing operational complexity.
Solution Approach 2:
The system dynamically adjusts the authorization amount parameter based on detected card type (prepaid vs. traditional). For prepaid cards, it enables partial authorization functionality; for traditional cards, it uses standard full authorization. This parameter change approach adapts system behavior to different card types without requiring complex configuration.
3Loss of energy
If merchants perform full deposit when partial authorization is received, then revenue recovery increases, but chargeback risk increases
Solution Approach 1:
The system performs a preliminary partial authorization to secure available funds before attempting full collection. This preliminary capture reduces the gap between authorized and collected amounts, improving revenue recovery while minimizing the need for forced full deposits that would trigger chargebacks.
Solution Approach 2:
The system captures the partial authorized amount immediately and schedules subsequent attempts for the remaining balance. This partial action approach ensures revenue recovery from available funds without immediately forcing collection of the full amount, thereby reducing chargeback risk while still recovering revenue over time.
Data Source
AI summary
A payment processing system allows partial captures and full deposits after receiving a partial authorization result on a requested card transaction. When the partial amount authorized is less than the full transaction amount, but above a certain value (which can be merchant specified), the system can accept the partial amount (a partial deposit or partial capture) as payment for the transaction. When the partial amount authorized is less than the full transaction amount, and below a certain value (which can be merchant specified), the system can make a full deposit of the transaction amount. The system can use one or more factors, including historical information, in determining whether to attempt a full deposit.