An authorization code (or authorization response) is a numeric value that an issuer sends you after you’ve submitted an authorization request. The authorization code helps explain why a transaction was either approved or declined.

There are dozens of different authorization codes, but they generally fall into one of three categories.

• Approved – The transaction can be processed. The card hasn’t been reported lost or stolen, the card hasn’t expired, and the account has enough funds to cover the purchase amount.
• Declined – The transaction should not be processed. Either the card has been reported lost or stolen or the account is not in good standing.
• Technical Issues – The transaction can’t be authorized. If you proceed anyway, you could run into trouble in the future. These response codes are usually given if the PIN was entered incorrectly, the account number is invalid, or the technology isn’t working as expected.

Your payment technology can be programmed to automatically accept or decline a transaction based on the authorization code received. Usually, you’ll only want to complete transactions that have been approved and terminate anything that isn’t approved. If you process card-present transactions, it might be possible to manually override an issuer’s decline. However, doing so will likely cause a chargeback.

There are a couple things to note about authorization codes.

1. Authorization is only the first step in the transaction lifecycle. Authorization doesn’t actually move funds from the cardholder’s bank account to your merchant account — that happens when the transaction is captured and settled.
2. If an authorization request yields an approved response, it simply means the issuer is allowing you to move forward with the transaction. It doesn’t mean the cardholder has approved the purchase. It is possible for an issuer to authorize a transaction but later find out a fraudster was acting without the cardholder’s consent.

AltoPay can help you optimise the authorization process to increase approval rates. We customize merchant accounts by variables such as acquirer preferences, industry, and region so you have fewer declines and more approvals.