Causes:
- Merchant Error: The transaction was completed without obtaining proper authorization from the card issuer. This can happen if the merchant bypasses the authorization process, uses an expired authorization, or if there’s a system error.
- Technical Issues: Network or system failures can lead to authorization not being obtained.
- Fraud: Unauthorized transactions due to fraudulent activity, such as using stolen card details.
Prevention and Mitigation:
- Proper Authorization:
- Always obtain proper authorization for every transaction.
- Ensure that your point-of-sale (POS) systems are functioning correctly and are up-to-date.
- Reauthorize if the initial authorization is expired or invalid.
- System and Network Checks:
- Regularly maintain and check your transaction systems to ensure they are working correctly.
- Have backup systems in place to handle authorization during network outages.
- Employee Training:
- Train your staff to follow proper procedures for obtaining authorizations.
- Educate them on the importance of authorization and the consequences of bypassing it.
- Monitor for Fraud:
- Implement robust fraud detection and prevention measures.
- Monitor transactions for suspicious activity and report any suspected fraud immediately.
- Documentation and Record Keeping:
- Keep detailed records of all transactions, including authorization codes and receipts.
- Ensure all documentation is easily accessible in case of disputes.
- Communication with Issuers:
- Establish good communication with card issuers to quickly resolve any authorization issues.
- Work with your payment processor to address any systemic issues that may cause authorization failures.
