An Authorisation code is a unique alphanumeric code generated by a financial institution or payment processor to validate and authorize a transaction initiated by a customer using a credit or debit card. It serves as a digital “seal of approval” that confirms the legitimacy of the transaction and ensures the availability of funds or credit for the purchase.
When a customer makes a purchase or initiates a transaction, the payment information is securely transmitted to the merchant’s acquiring bank or payment processor. The acquiring bank then sends a request to the customer’s issuing bank, seeking authorisation for the transaction. The issuing bank, after evaluating the customer’s account status and available funds, generates an authorisation code and sends it back to the acquiring bank.
The authorisation code plays a crucial role in the payment process. It acts as a reference number that allows the acquiring bank or payment processor to track and verify the transaction’s details. Additionally, it provides proof that the customer’s issuing bank has approved the transaction and that the necessary funds or credit are available.
Merchants and service providers rely on authorisation codes to ensure the smooth and secure processing of transactions. They use these codes to validate purchases, prevent fraud, and reconcile their financial records. By cross-referencing the authorisation code with the transaction details, merchants can confirm that the transaction was properly authorized and completed. This verification process helps protect both the merchant and the customer from unauthorized or fraudulent transactions.
For customers, the authorisation code serves as a reassurance that their payment has been successfully processed. It provides them with a reference number that can be used for inquiries or disputes related to the transaction. In case of any issues or discrepancies, customers can refer to the authorisation code to help resolve the matter efficiently.
It is important to note that an authorisation code is not the same as a transaction or approval code. While an authorisation code confirms the initial approval for a transaction, a transaction code is generated when the transaction is completed, and funds are transferred. The approval code, on the other hand, is a code assigned to a specific transaction to indicate that it has been approved.
In summary, an authorisation code is a unique identifier generated by the issuing bank to authorize and validate a transaction. It plays a vital role in ensuring the security and legitimacy of financial transactions, providing merchants and customers with confidence in the payment process.