Payment Authentication | Payments Explained | EBANX (2024)

FAQs

Payment Authentication | Payments Explained | EBANX? ›

Payment authentication is the process of confirming a customer's identity through at least one of the following authentication factors: knowledge, inherence, ownership, and user location.

It works by prompting buyers to confirm their identity through their card issuer. It's a risk-based authentication method, so transactions are handled differently depending on their level of risk.

Payment Authorization is a process through which the amount to be paid on a payment method is verified. In case of credit cards, authorization specifically involves contacting the payment system and blocking the required amount of funds against the credit card.

Authorization. Authentication is verifying someone's identity, while authorization verifies what applications, files, and data a user can access. An analogy would be an airline confirming who is allowed on board and what services they can access.

Verification serves as a check to confirm that payment information provided is accurate and that the person making the payment is authorized to do so. For example, when a credit card is used for an online purchase, the payment system checks if the card number, expiry date, and CVV code match the issuing bank's records.

Knowledge is the most common category used for transaction authentication. The knowledge factor is the information that only the cardholder possesses: personal password, PIN, a secret word like your mother's maiden name, your favorite vacation spot, etc.

Personal Identification Number (PIN)

Similar to SMS OTP, PIN-based biometric authentication banking is widely accepted because of its user-friendliness. All users have to do is enter their self-selected PIN codes to complete the transaction.

The authorisation process starts when a customer makes a purchase. The merchant's payment terminal generates an authorisation request that is sent to the merchant's acquirer, who in turn forwards it to the card scheme (Visa or Mastercard), from where it is sent to the issuer or the issuer's processor.

That said, the typical credit card transaction process—from beginning to end—essentially breaks down into five key stages: authorizing, authenticating, batching, clearing, and funding.

First of all, a business can't charge your card without your permission. It would need to get your authorization first. This holds true whether you're paying with your smartphone or for any other online card-not-present transaction.

Which is better authentication or authorization? ›

Authentication and authorization are two vital information security processes that administrators use to protect systems and information. Authentication verifies the identity of a user or service, and authorization determines their access rights.

Since authentication validates identity, this process comes first. Once identity is verified, the authorization process determines the user's privileges and grants access accordingly. A user cannot be authorized before being authenticated first.

Authentication methods prevent unauthorized purchases by verifying the user's identity. These vary by payment method. For instance, in-person sales require a signature or four-digit PIN. Credit card networks use 3D Secure for online transactions, which may ask for a PIN, password, or 2FA verification.

Payment authentication is the process of ensuring that the person attempting to make a payment is the legitimate cardholder.

Authentication Checks: Authentication checks vary based on the payment method, such as CVV or 3D Secure for credit card payments. Funds Availability Verification: Financial institutions verify account funds to prevent overdrafts and ensure successful payments.

Perhaps the most common method to verify bank account information is to use micro-deposits. This technique involves sending a couple of small deposits (less than a dollar each) to a bank account. The customer provides the account number and routing number, and the business sends the micro-deposits to the account.

Authentication is used by a client when the client needs to know that the server is system it claims to be. In authentication, the user or computer has to prove its identity to the server or client. Usually, authentication by a server entails the use of a user name and password.

Payment Verification Process

Payment Details Check: Payment details (amount, date, reference number) are verified against payment processor/financial institution records. Account Verification: Verify account ownership and good standing by checking the account holder's details.

In simple terms, authentication is the process of verifying who a user is, while authorization is the process of verifying what they have access to. Comparing these processes to a real-world example, when you go through security in an airport, you show your ID to authenticate your identity.