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NRO Credit Card Processing

Overview

When an order is placed in NRO, it is not possible to know if the order will be fully shipped. Best practices dictate that the card should not be charged until the merchandise is shipped. Rather than charge the card, NRO will issue a Preauth to hold the funds until the order is shipped.

Under normal circumstances a charge will flow through three states.

1. Preauthed (Authorization Hold)
2. Charged
3. Settled

Once the merchandise is shipped, NRO issues a Preauth Complete to actually charge the card. The funds are not transferred to the merchant account until the charge is settled in Secure Pay.

Sometimes an order is changed or is partially shipped. The rest of this document describes the details for how NRO handles those situations.

Glossary

·Authorization Hold – An Authorization Hold (aka Authorization, Preauth) is a request to hold funds on a credit card for a specified amount in anticipation of charging it for that amount at a later time. It does not take cash from the credit card account. (http://en.wikipedia.org/wiki/Authorization_hold)

·Payment Capture– A Payment Capture (aka PreAuthComplete, Sale) is a request to take funds from the credit card account.

·PreAuthComplete- A PreAuthComplete is a form of Payment Capture that is executed when an Authorization Hold was previously performed.

·Sale– A Sale is a form of Payment Capture that is executed when no previous Authorization Hold was performed.

·Settlement– The Settlement (aka Clearing) process moves funds from the customer’s account to the merchant’s account. This is performed as a batch process. Only Captured transactions can be settled.

Order Processing Scenarios

It is easiest to explain what happens in NRO by way of example. Below are several. Each example includes a table with 4 columns. The contents of the columns are as follows:

1.A number indicating the process step.
2.Action– What happened to cause the corresponding action in NRO.
3.NRO Reaction – What did NRO do as a result of the action. The last row in this column contains an action that is performed by Secure Pay. It is there for completeness.
4.Online Statement – What might the customer see if he/she were to look at their credit card statement online. This assumes the bank honors any voids that NRO sends in a timely fashion. This is not always the case with every bank.

No Order Changes / No Partial Release

In this scenario the order is processed without any changes or partial releases. A single Authorization Hold is made to the customer’s card. Later, when the items are shipped, the Hold is converted to a charge.

 

No Change / No Partial Release


Action

NRO Reaction

Online Statement

1

Customer places $100 order

Preauth $100

$100 Authorization Hold

2

Order completed in CP

Preauth complete $100

$100 Charge

3

SP batch settled

Funds transferred

$100 Charge

Partial Release

In this scenario the complete order cannot be processed right away. Items are likely on backorder. In this case the original Authorization Hold is charged for only the amount of the items that have been shipped and a new Authorization Hold is created for the remainder of the order. This converts the original Authorization to a charge but at a lesser amount than was originally Authorized. Later, when the remaining items are shipped, the second Authorization Hold is converted to a charge.

 

Note that step 3 occurs immediately after step 2 and does not require any external action.

 

Partial Release


Action

NRO Reaction

Online Statement

1

Customer places $100 order

Preauth $100

$100 Authorization Hold

2

$25 partially released in CP

Preauth complete $25

$25 Charge

3


Preauth $75

$25 charge, $75 Authorization Hold

4

Order completed in CP

Preauth complete $75

$25 Charge, $75 Charge

5

SP batch settled

Funds transferred

$25 Charge, $75 Charge

Changed Orders

The customer cannot change an order in NRO once it is entered. Therefore, the only way for an order to be changed is in Counterpoint as a result of the customer contacting the merchant or merchant contacting the customer. If the order modification results in an amount less than the original order, NRO will behave as if the order was not changed with the exception that the card will be charged for the reduced amount of the order when it completes.

 If the new order amount is greater than the original order amount, a new Authorization Hold is issued for the new higher amount and the original Authorization Hold is voided. When the items are shipped, the second Authorization Hold is converted to a charge.

Note that step 3 occurs immediately after step 2 and does not require any external action.

 

Changed Order Increased Amount


Action

NRO Reaction

Online Statement

1

Customer places $100 order

Preauth $100

$100 Authorization Hold

2

Order changed to $125

Preauth $125

$100 Auth Hold, $125 Auth Hold

3


Void $100 Preauth

$125 Authorization Hold

4

Order completed in CP

Preauth complete $125

$125 Charge

5

SP batch settled

Funds transferred

$125 Charge

Changed and Partially Released Orders

This scenario combines an order change with a partial release. If the change results in an order amount lower than the original order the process behaves like a partial release.

If the new order amount is greater than the original order amount, a new Authorization Hold is issued for the new higher amount and the original Authorization Hold is voided. When the items are partially shipped, the second Authorization Hold is converted to a charge but for a smaller amount due to the partial shipment. Finally, a third authorization is completed for the remaining amount on the order.

Note that step 3 occurs immediately after step 2 and step 5 occurs immediately after step 4. Neither requires any external action.

 

Changed Order Increased Amount / Partial Release


Action

NRO Reaction

Online Statement

1

Customer places $100 order

Preauth $100

$100 Authorization Hold

2

Order changed to $125

Preauth $125

$100 Auth Hold, $125 Auth Hold

3


Void $100 Preauth

$125 Authorization Hold

4

$25 partially released in CP

Preauth complete $25

$25 Charge

5


Preauth $100

$25 charge, $100 Authorization Hold

6

Order completed in CP

Preauth complete $100

$25 Charge, $100 Charge

7

SP batch settled

Funds transferred

$25 Charge, $100 Charge

Potential Issues

Voids May Not Be Honored

As mentioned above, some banks may not honor voids of Authorization Holds. This can tie up funds on a customer’s card temporarily. How long is unclear. Most banks will release the Authorization Hold in 1-5 days.

A partial release should not have this problem since this process charges the card for a lesser amount rather than voiding the Authorization Hold. The problem occurs with changed orders. The only way to avoid this issue is to not change orders in Counterpoint such that the new order amount is higher than the original order. If the customer wants to add items to an order or replace an item with a higher priced one, the best way to handle this is to create a new order in Counterpoint for the additional items and remove any items from the online order that are no longer wanted. An alternative is to create the new full order in Counterpoint and cancel the online order.

NRO Payment Process Flow

The process flow diagram below shows how NRO processes payments based on order update information coming from Counterpoint. Credit card information is never sent to NRO, which keeps it out of PCI scope. Instead, the shopper’s browser sends payment information to Secure Pay, which routes a transaction ID (TTID) to NRO.The transaction ID is stored with the order in NRO and is used similar to a credit card number.

The red boxes in the diagram indicate places where NRO must reissue authorizations to ensure there is sufficient funds on the card. Without this reauthorization, it is possible that the final charge will be declined.


 

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