Every business enjoys getting paid, and payment methods like debit and credit cards make the process quicker. While instant payments may be ideal for most companies, some require special payment arrangements and a flexible system that enables them to collect funds in a way that makes sense for their particular business model.
For some business types, instant payments don’t fit the type of transaction taking place – either for the business or the customer. Fortunately, with Chargent, these businesses can authorize payment, then collect their customer’s funds using a delayed capture.
While it sounds like a fancy term, it’s really quite simple to understand – and in this post, we’ll explain what delayed capture is, describe the impact it can have on your business, and show you how easy it is to set up with Chargent.
What is Delayed Capture?
In short, “delayed capture” is a form of card authorization delay. It enables vendors to make sure customers have enough money or credit available to cover a transaction – so the vendor can receive full payment in the near future.
In payments, the term capture is similar to the transfer of money. For delayed capture, the merchant authorizes the payment, then returns later to complete the transaction and transfer the funds. Essentially, during this process, a vendor tells the card company – electronically – that they and their customer have agreed on doing business for a certain amount of money. Then, that value is reserved on the customer’s card for the merchant to collect or capture later.
Issuing an immediate capture will allow you to access the funds quickly. Maybe this seems like an ideal scenario, but it can backfire. Things like fraud and chargebacks can be challenging to deal with and can ultimately affect your cashflow. Plus for many industries, the card networks like Visa, Mastercard, and American Express expect you to capture funds only at the conclusion of a transaction. Authorizing first tells you that you will get paid, at the conclusion – whether that is a few minutes or a week later.
Why Delay Capture?
There are several benefits to delaying the capture of a customer’s payment, depending on how your business operates. Some of these benefits include:
- Fraud Prevention: If a vendor believes that a transaction is suspicious, delayed capture provides enough time to verify a customer’s credentials before delivering a product or service.
- Inventory Supply: If products are not available immediately, delayed capture can give you time to restock ordered items before fully processing the customer’s payment.
- Flexibility: If you end up needing to void a transaction, you can do so before processing the payment – allowing you to avoid additional transaction fees assumed when processing a refund.