In the context of bank card transactions, what is authorization?

In the context of bank card transactions, authorization refers specifically to the initial request for transaction approval from the merchant to the card issuer. When a customer swipes their card or enters their card details for a purchase, the merchant initiates this request to ensure that the cardholder has sufficient funds or credit available to complete the transaction. The card issuer then verifies the transaction details—such as card validity, available balance, and potential fraud indicators—before granting or denying the authorization.

Understanding this concept is critical in the payment processing cycle, as authorization is a preliminary step that ensures the financial transaction can proceed without issues related to cardholder creditworthiness or account status. This process is distinct from completing a payment or final approval of a transaction, as it occurs before the transaction is fully processed. Additionally, while verifying a cardholder's identity may be part of the overall security measures in card transactions, it is not solely defined as the authorization step.