Skip to main content Skip to main navigation
Skip to accessibility page Skip to search input

Mastercard and Visa pre-authorisation enhancements

Mastercard and Visa have recently updated their pre-authorisation processing standards. The new standards apply to authorisations that hold an initial or pre-authorised amount on a card for a period of time until the final amount is known.

Why are Mastercard and Visa making changes?

Pre-authorisations that hold funds on customers’ cards after the authorisation, that should have been completed or cancelled, are frequently the cause of customer complaints. The new standards help alleviate both cardholder and merchant frustrations.

Based on the new Mastercard and Visa pre-authorisation standards we require you to:

  • Cancel or complete all pre-authorisations. You can no longer leave them to ‘expire’.
  • Use the new ‘extend’ feature on your payment solution to extend the hold if it is required for longer than the validity period.  For Mastercard transactions, the validity period of a pre-authorisation is 30 days with the cardholder’s funds being placed on hold for this time unless the pre-authorisation is completed or cancelled.  For Visa transactions, the validity period of a pre-authorisation is determined by the type of business you have and how your pre-authorisation is processed. Refer to the table below for the validity period that applies to you.
  • Be aware of the new ‘Account Verify’ feature that allows you to check the validity* of the card number without holding funds on the card.
  • Be aware that the extra payment guarantee of 15-20% has been removed.  To complete transactions for an amount higher than the original pre-authorised amount you may be able to use the ‘top-up’ feature on your payment solution if it is available to you.

 

Visa validity periods

 

How your pre-authorisation is processed
Validity period
Hotels, vehicle rental, cruise lines performing pre-authorisation. 30 days
Rental businesses performing pre-authorisation, e.g. boat rental, trailer park, bike rental;
transportation, passenger railways, bus lines.
 
7 days

 

 

If you do not fall within either of the above industry types, your validity period will be based on one of the following scenarios:

If the transaction is a recurring transaction, instalment transaction or prepayment.
1 day
If the transaction is not recurring or instalment or prepayment  and you take a payment face-to-face 1 day
If the transaction is not recurring or instalment or prepayment and you take a payment online, mail or over the phone. 7 days

 

What the new standards mean for your customers, an example:

Ms Jones books a rental car online for her upcoming holiday. The rental car operator pre-authorises $1500 on her Mastercard.

One week before her holiday Ms Jones changes her travel plans and cancels the rental car. She’s still within the terms of the cancellation policy.

 

Current standards:

Despite the rental car operator no longer requiring the money to be held, the pre-authorisation remains on Ms Jones credit card until it expires (the amount of time until this happens can vary based on the institution issuing the Mastercard). This is frustrating for Ms Jones as her available credit is now severely limited.

 

Example:  

Ms Jones Credit Limit: $2000

Pre-Authorisation: - $1500

Remaining Credit Limit: $500

New standards:

The rental car operator uses the new cancel feature to cancel the pre-authorisation while Ms Jones is on the phone with them. The cancellation gets sent immediately and the funds will be available to Ms Jones as soon as it’s processed by her bank.

Example:

Ms Jones Credit Limit: $2000

Pre-Authorisation: - $1500

Cancel Pre-Authorisation: + $1500

Remaining Credit Limit: $2000

Next steps

If you currently process pre-authorisations, your payment solution(s) will need to be updated to allow you to observe these new standards. Refer to the information below for details on updating your payment solution(s).

 

EFTPOS 1

Mastercard and Visa

Your EFTPOS 1 payment solution will be updated with new pre-authorisation features to enable you to meet the Mastercard and Visa standards.

The features on your EFTPOS 1 payment solution will allow you to process Mastercard and Visa pre-authorisations but the behaviour of some features vary between Mastercard and Visa as outlined in the features and descriptions below.

You are also required to ‘complete’ pre-authorisations within the validity period or the cardholder has the right to dispute the transaction.

 

EFTPOS 1 features and descriptions

Top-Up
An open pre-authorisation can be 'topped up', allowing you to increase the amount held against a cardholder’s account. This feature can be used in lieu of the extra payment guarantee.  
Note the differences in the behaviour of this feature for Mastercard and Visa as outlined in the table below:

  Amount Held                   Validity Period If the top-up is declined
Mastercard Increased Extended by 30 days from date of increase The pre-authorisation can still be completed for the original amount provided the original validity period has not passed.
Visa Increased Does not change The pre-authorisation can still be completed for the original amount provided the validity period has not passed.

 

The ‘Top-Up’ feature is not eligible for Visa transactions if you are the following business type:

  • Laundries - family and commercial
  • DVD/video tape rental stores
  • Car washes
  • Quick copy, reproduction and blueprinting services
  • Unattended transactions for the sale of food or beverages.

 

Extend
The expiry date of an open pre-authorisation can be extended by the validity period of the pre-authorisation, without the need to increase the amount authorised.  
Note the differences in the behaviour of this feature for Mastercard and Visa as outlined in the table below:

  Amount held                        
Validity period
If the 'extend' is declined
Mastercard Does not change
Extended by 30 days from date of extension The pre-authorisation can still be completed for the original amount provided the original validity period has not passed.
Contact the cardholder to arrange for a new preauthorisation if a longer pre-authorisation is required for completion at a later day.
 
Visa Does not change Extended by 7 days from date of extension The pre-authorisation can still be completed for the original amount provided the original validity period has not passed.
Contact the cardholder to arrange for a new preauthorisation if a longer pre-authorisation is required for completion at a later day.

 

Partial cancel
The amount held by an open pre-authorisation can be partially reduced. This can be used when you no longer require the full amount to be held. The cancellation will be sent immediately and the funds will be available to the cardholder as soon as it is processed by their bank.

 

Cancel
In the circumstance where you are not intending to complete the authorisation and you therefore no longer require the amount to be held, you must use the cancel feature to return the full amount to the customer’s card. This should be performed as soon as possible after you’re aware that you no longer require the amount to be held. The cancellation will be sent immediately and the funds will be available to the cardholder as soon as it is processed by their bank.

 

Account verify with $0*
This feature (‘Account verify’) can be used when a card number needs to be validated prior to setting up a recurring payment. It works as a $0.00 pre-authorisation, with no requirement to perform a completion. The receipt will show an amount of $0.00.

Previously, you may have processed a $1.00 charge to the customer’s card that would have been later reversed. This removes the manual step and is aimed at improving the cardholder experience.

 

 

Summary

1.    If you have active Mastercard or Visa pre-authorisation transactions in your terminal when you receive your software update, continue to treat those transactions as you do today
2.    Once you have access to the new features, you are required to cancel or complete any new Mastercard or Visa pre-authorisations within the validity period
3.    Don’t allow a Mastercard or Visa pre-authorisation to ‘expire’, this keeps the amount held on the customer’s card for this period unnecessarily and may result in cardholder complaints
4.    If you complete a pre-authorisation after the validity period the cardholder is entitled to dispute the transaction.

 

Quest

Your terminal software will not be updated. Continue processing pre-authorisations as you do today.

Ingenico

Your terminal software will not be updated. Continue processing pre-authorisations as you do today.

 

All other terminal

Please contact your terminal provider to find out when your terminal software will be updated. You’ll be required to uphold the new standards from the time that your terminal software is updated.

 

PayWay API or Quick Stream

Mastercard and Visa

PayWay and QuickStream are already compatible with the new standards. You will need to make updates to your website in order to use the new features.
 

Visit QuickStream for detailed information on how to update your website.

Visit PayWay for detailed information on how to update your website. You must make these updates as quickly as possible to comply with the standards.


Once you have access to the new features, you are required to cancel or complete any new Mastercard pre-authorisations within 30 days. You can also use the new top-up or extend features. Do not allow a Mastercard pre-authorisation to ‘expire’, as this will hold the amount on the customer’s card for this period and may cause the customer to complain.

 

Third party payment gateway

We’re currently working with our third party payment gateways to ensure that they are compliant with the new Mastercard and Visa standards and we’ll provide you with more information once it’s available. We also strongly encourage you to get in contact with your payment gateway to find out when the new Mastercard and Visa features will be available to you.

Things you should know

*Please note this service only verifies the validity of the card number. You are responsible for verifying the identity of the cardholder and that the transaction is not otherwise invalid.

Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

VISA is a registered trademark of Visa International Service Association and used under licence.