What is delayed capture for payments?

As human beings, we love instant gratification – which makes delays hard to sit with.

There are times, however – particularly in the context of accepting credit and debit card transactions at your business – where delays aren’t frustrating, but highly beneficial.

That’s because, as we’ll soon see, delayed capture for payments can help your business prevent fraud, save on fees, improve the customer experience, and optimize your operations – not to mention mitigate the impact chargebacks can have on your revenue and reputation.

So what is delayed capture, and how does it work? Which industries can it have the most game-changing effect in, and what are some examples of it in use?

We’re exploring all this, as well as delayed capture’s litany of benefits for businesses, below – read on!

What is delayed capture?

Delayed capture is a way of taking payment that allows you to authorize a customer’s debit or credit card for a preset amount, but not actually ‘capture’ it (that is, deduct those funds from the customer’s account) until later.

As a merchant, delayed capture allows you to verify that a customer’s card has sufficient funds to cover a purchase. But instead of taking the payment in real time, you delay it.

This could be for a variety of reasons: perhaps while waiting for the product to be fulfilled or shipped, to come back into stock, or to minimize the possibility of payment fraud (which we’ll discuss in greater detail below).

During this waiting period, the customer’s funds are frozen, but aren’t debited from their account until you’re ready to give the transaction the green light.

How does delayed capture work?

In a typical credit or debit card transaction, two key processes – authorization and capture – happen at the same time. How delayed capture works, however, is by splitting these processes up: authorizing the card, but waiting to capture the funds.

Here’s how the delayed capture process looks in practice:

• A customer provides their card details at your business’s checkout for an agreed-upon amount – let’s say $100.
• A payment request is sent, via your payment service provider (such as Checkout.com), to the customer’s bank. After confirming the customer’s account does, indeed, contain sufficient funds to make the purchase, their bank authorizes it and lets you know.
• From the customer’s account, $100 (the agreed-upon transaction value) is reserved, meaning they can’t access it. However, it isn’t credited to your account yet, either.
• During this state of payment ‘limbo’, you have time to prepare the goods, restock the requisite inventory, or ensure the legitimacy of the cardholder and payment. This gap can be anywhere from a week (for debit cards) to 28 days (for credit cards).
• If red flags pop up – any suspicious activity that might suggest fraud, for instance – you can void the transaction. (Because the payment hasn’t yet been settled, you can sidestep the costs and hassle of having to refund the customer.)
• If there are no issues, you can then capture the payment for any amount up to the pre-agreed value. (If you need to debit the customer for more than this, you’ll have to request a reauthorization, and obtain their consent.)
• The money lands in your account, the customer receives their order, and everyone’s satisfied.

Why use delayed capture?

Delayed capture offers a wide range of benefits for merchants, including:

• Flexibility in fulfillment: with delayed capture, you can wait until an order is ready to be shipped – or until you’re able to deliver a service – before receiving payment for it. This provides a level of flexibility that enables you to optimize your business’s logistical and order processing operations.
• Fewer chargebacks: when you delay the capture of a payment, it gives you time to verify the customer’s identity, and – if any disputes or issues arrive with them, or the deal – enables you to void the transaction. By voiding the transaction before it’s settled, you save yourself the time- and resource-intensive process of refunding the customer; while also ensuring that the customer can’t falsely raise a chargeback (which can lead to fees, reputational damage, and loss of revenue for your business).
• Improved customer experience: for the customer, it’s nice to know they won’t be charged until their order is ready to be dispatched, or their service ready to be delivered. This increased satisfaction reduces the likelihood of them canceling orders due to unexpected charges – or worse, disputing them with their bank.
• Fraud prevention: by delaying capture of a payment, you give yourself some breathing room; valuable time in which you can review orders (and the cardholders that made them) more thoroughly. This allows you to detect fraudulent transactions, and put a stop to them before your business has accepted the illegitimate purchase.
• Optimized payment processing fees: by only capturing funds when you’re sure the order will be fulfilled, you can reduce the number of partial captures or refunds – which, over time, adds up to big savings on your payment processing bill. Plus, by voiding a transaction – instead of capturing it, then having to refund it – you won’t be eligible for the transaction fees levied on the completed purchase.

Delayed capture for payments helps prevent chargebacks – but it’s not the only chargeback prevention strategy you can have in your locker.

For a comprehensive list, explore our guide to the top 10 ways to prevent chargebacks in 2023.

Learn more: What is authorize and capture?

Examples of delayed capture

Delayed capture has its benefits, but it won’t be necessary – or recommended – for all transactions. And there are several specific situations and sectors in which delayed capture of payments will be most relevant and appropriate.

Let’s take a look at a couple of them below.

Delayed capture in the travel industry

In the travel industry, guests need to be able to book a hotel room in advance. Yet, to reserve precious space in their lodgings for those guests, hotels also need the security of knowing that the guest, when they arrive, will have enough money to pay for their stay in full.

Here’s where delayed capture comes in. When a customer books into a hotel, for example – let’s say for a week, at $120 per night – the hotel can pre-authorize their card for the full amount of the stay. (So in this example, $840.) In doing this, the hotel confirms the customer’s account contains sufficient funds to pay for their accommodation, and – when the customer arrives, and completes their check-in – is able to capture the payment in full.

Collecting upon fulfillment

In sectors such as retail and manufacturing, some customers – often B2B ones – only pay after they’ve received their items. In these situations, the merchant only captures the payment once the order has been successfully fulfilled, allowing them to process the transaction in the way that works best for their cash flow and business model.

Delayed capture at gas stations

When you arrive at a gas station, you’ll often have to authorize your card before you can start filling up your car. These systems often let you select an upper authorization limit – say, $50 or $100 – corresponding to how much gas you think you’ll end up pumping.

However, the system delays capturing your payment until it’s calculated the final amount of gas you’re driving away with. If you end up putting $77 of gas into your car, you may still see a pending transaction of $100 until the payment has been captured – at which point $77 will be debited from your account, and the remaining $23 of the pre-authorized amount unfrozen.

Find the perfect payment option for your business with Checkout.com

Here at Checkout.com, we understand how important it is to find a payment processing solution that works not only for your business – but for your customers, too.

And, while we don’t support delayed capture for payments right now, we do provide a wealth of other ways for you to accept credit and debit card payments.

We let you process in 150 currencies, settle in 20, and accept payments in 50 countries. Through enabling your customers to pay in a variety of the local and alternative payment methods they’re most comfortable with, you can reach new markets, boost your conversion rate, and relieve your checkout of friction – all while building up your customer base at home and abroad.

Sound good? To explore which payment methods Checkout.com allows you to accept, explore our full payment directory – or get in touch with our team to find out how your business can benefit from faster, more reliable, and highly convenient payments today.