Payment authorization validates transaction eligibility in real-time, while clearing processes approved transactions in batches to finalize fund movements between financial institutions through settlement networks.
How It Works in Practice
- 1Validate cardholder credentials and available funds through issuer systems during authorization phase
- 2Queue cleared transactions in daily batch files for submission to card network clearing systems
- 3Reconcile authorization amounts against final cleared amounts to identify discrepancies
- 4Generate exception reports for authorization-clearing mismatches exceeding tolerance thresholds
Common Pitfalls
Partial authorization amounts differing from clearing amounts create reconciliation gaps requiring manual intervention
Cross-border transactions may face clearing delays due to correspondent banking relationships and regulatory holds
Pre-authorization holds exceeding clearing amounts can cause customer disputes and chargeback liability
Key Metrics
| Metric | Formula |
|---|---|
| Authorization Success Rate | Approved authorizations / Total authorization requests × 100 |
| Auth-Clear Match Rate | Matching auth-clear pairs / Total cleared transactions × 100 |
| Average Clearing Time | Sum of hours from authorization to clearing / Number of transactions |
Related Terms
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