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Education

Caring critically: The Visa designates merchant types typically within the T&E
segment like car rentals, lodging, restaurants, nightclubs
barkeeps dilemma and other businesses where items may be added after the
initial engagement between merchant and cardholder.
Grocery stores, too, are an acceptable merchant type,
By Ken Musante conceivably to allow for instances when customers tip for
delivery of in-store purchases.
Napa Payments and Consulting
Incremental authorizations are meant for card-present
arkeeps have a difficult job: loud work envi- transactions and allow for card-present interchange even
ronment, inebriated clients, highly contagious though the card needn't be in the merchant’s possession
patrons and weekend hours. Customers pay for subsequent incremental adjustments. Incremental
B with cards, cash and tabs. Barkeeps are both authorizations are used when the final amount is not
frontline and critical care workers. As their customers known when the original authorization occurs. They don't
and vendors, we payments folks need more solutions that replace the original authorization; they're additional to
leverage incremental authorizations for times when final previously authorized amounts. The sum of all linked
authorization will be greater than the 20 percent variance estimated and incremental authorizations represents the
allowed for tip-accepting merchants. total amount authorized for a given transaction.

New kids on the block
To allow for incremental authorizations, the POS must
"Put it on my tab" is the original buy now, pay later include the original transaction identifier obtained from
solution. (It's also a 2008 song by New Kids on the the first authorization with each subsequent incremental
Block.) Adding drink orders to a copy of a physical tab is authorization. Further, the POS or gateway must manage
difficult anywhere but a sole proprietor shop. Sticking the the following additional fields:
customer's card into a pint glass is more big-city but still • Additional authorization indicator: Utilized to
ineloquent. Other solutions require the barkeep to run indicate an estimated/initial authorization.
a small or zero-dollar authorization and either keep the
card or return it to the cardholder. • System trace audit number: Uniquely identifies a
cardholder transaction and the message types it
None of these solutions protects merchants from the comprises. The same trace number is used in an
difference between original and final authorizations; estimated authorization request and incremental
all incur additional costs for the merchant through a authorization request.
verification fee, authorization fee, and void or a misuse • Retrieval reference number: Contains the value from
of authorization fee. Further, if cards aren't maintained, the original authorization request and is used with
merchants could face higher card-not-present interchange other key data elements to identify and track all
and/or downgrades for authorization mismatches messages related to a given cardholder transaction.
(inclusive of authorization tolerances). • Message reason code: Used to identify the reason for
an authorization.
When barkeeps run a zero-dollar verification fee, they
aren't securing funds for final authorization. They're The list of merchants currently allowed to accept
verifying the cards are valid and have sufficient funds incremental authorizations for Visa is provided within
for specific purchases. Barkeeps running an estimated Visa's Product and Service Rules at https://vi.sa/3no4TEy.
authorization amount must: A basic merchant-facing guide also exists at https://bit.
• Void the authorization and process the final ly/31Vi3RY.
authorization;
• Process the final authorization (if funds allow) and Few POS systems offer full incremental authorization
void the first authorization; or capabilities. Stripe does a good job documenting its
incremental authorization functionality. Unfortunately,
• Process an adjustment far outside the allowable tip many others, even restaurant-facing POSs, do not yet offer
variance and incur higher fees. incremental authorizations. As an industry, we need to
change that. We need to lighten the load of these critical
These options are relatively more expensive or tedious. care and frontline workers.

The rise of incrementalism
As founder of Humboldt Merchant Services, co-founder of Eureka
Visa and Mastercard have solutions for this. Incremental Payments, former executive at WePay, and founder of Napa Payments
authorization allows for an initial amount to be estimated and Consulting, Ken Musante has experience in all aspects of success-
and authorized when the card is presented for the first ful ISO building. Contact him at kenm@napapaymentsandconsulting.
drink and returned to the customer. Mastercard allows com, 707-7656 or www.linkedin.com/in/ken-musante-us/.
any merchant type to process incremental authorizations;
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