Understanding Incremental Authorisation in payments

Struggling to find that balance between security and user experience? One effective feature for achieving this in payments is… 

Incremental Authorisation

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‍What is Incremental Authorisation? 

Incremental Auth (short for Incremental Authorisation), is a payment processing feature. 

It allows the amount of a transaction to be increased in small increments, before any money is moved from the customer’s account. This is really useful where the final transaction amount may change, such as hotel stays, car rentals or subscription-based services. 

For example:

Scenario #1 
‍A customer approves a payment for a hotel stay at check-in, but later decides to use the mini bar and order room service. Rather than asking the customer to make a payment every time they order something - the additional charges are added as increments and the total is taken from their account at the end of their stay, in a single transaction. 

Scenario #2
‍A private hire company estimates a fare for a customer’s journey and asks them to approve a payment for the amount. Mid-ride the customer realises they need to pick up a friend. Rather than taking a separate payment, the charge for the extra pickup is added as an increment and the correct amount for the journey is taken from the customer’s account at the end of the trip. 

Instead of asking customers to make multiple payments (for what are normally small extra charges) Incremental Auth allows the amount to be increased, and a single transaction to be made. 

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How does Incremental Auth work?

Let’s see a car hire scenario as an example: 

Step #1 Initial authorisation
Customer approves a payment for the amount of £150 (this is the initial pre-authorisation and is sent to the Acquirer). This ringfences the £150 in the customer’s bank account, but no funds are yet moved. 

Step #2 Additional charges
The customer incurs an extra charge - they drive their hire car through London and have to pay ULEZ. The business requests an increment of £12.50 to cover the ULEZ charge. A second pre-auth of £12.50 is sent to the Acquirer referencing the initial pre-auth (the one in Step #1). 

Step #3 Final capture
The final amount is then the initial authorisation + any additional charges that have been added:

Original pre-auth amount + incremental auths = total amount. 

£150 + £12.50 = £162.50.

The funds are then captured and taken from the customer’s account in a single transaction.

This process ensures that the customer’s payment method remains secure while giving businesses the flexibility to increase the amount as needed. The business doesn’t have to worry about chasing for payment and the customer gets a better experience - win win. 

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Benefits of Incremental Auth

• Improved customer experience.
  Customers appreciate not having to make payments for every additional charge. Enabling Incremental Auth creates a more enjoyable and smoother experience for customers, especially in industries like travel and hospitality. 
• Increased revenue for businesses.
  The ease at which customers can buy additional services or products without having to tap their cards or get out their phones, could also encourage them to spend more. 
• Removes the hassle of collecting payments for extra charges.
  Incremental Auth removes the need for businesses to chase customers for additional payments, as long as they’ve pre-authorised a payment.

Use cases for Incremental Auth

Incremental Auth is particularly valuable in industries where the final transaction amount could increase. Here are some common use cases:

Where a customer is given an estimated taxi fare…

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This gives private hire companies the ability to increase fares based on distance, time of additional stops etc. - cases where the final amount may end up being higher. 

Example journey:

1. Taxi fare estimate is £10. 
2. Customer approves the payment (pre-authorises £10).
3. An extra stop is added in mid-journey to pick up a friend. 
4. This adds an extra £3 to the fare (a 2nd pre-auth for £3 is sent to the Acquirer). 
5. The final cost of the journey is now £13. 
6. The taxi company requests the final total of £13 and the money is taken from the customer’s bank account in a single payment. 

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Where a customer wants to add extra items to a grocery shop…

The gives shops the ability to increase an order total based on items being added to the basket after the order has been accepted.

Example journey:

1. Grocery shop comes to £60.
2. Customer approves the payment (pre-authorises £60).
3. Later, the customer realises they forgot to buy milk, so adds this to the order.
4. The milk adds an extra £1.20 to the grocery shop (a 2nd pre-auth for £1.20 is sent to the Acquirer). 
5. The final cost of the grocery shop is now £61.20. 
6. The grocery store requests the final total of £61.20 and the money is taken from the customer’s bank account in a single payment.

Other use cases can include: 

• Hotels and resorts: Ability to cover necessary charges like room service or damages that are added on during a guest’s stay. 
• Car rentals: Securing funds for the rental period and adding charges for fuel, tolls or late returns. 
• Subscriptions:  Allowing for add-ons to bills, such as one-off purchases. 

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Key takeaway

Incremental Auth is a game-changer for businesses that want flexibility in payment processing but need to maintain security and customer trust. By enabling businesses to increase transaction amounts without requiring additional customer input, it streamlines operations and provides a much better customer experience. 

Adopting features like Incremental Auth will be crucial for staying competitive and meeting customer expectations. Whether you’re in hospitality, travel, or e-commerce, Incremental Auth can help you deliver a seamless and secure payment experience. 

Ready to enable Incremental Authorisation? Get in touch.