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Payment Startup launches Pre-Authorization on Debit, Credit Cards for Online Merchants

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Bengaluru-based payments startup, Cashfree has launched Pre-authorization on Debit and Credit cards for its 15,000 online merchants. This is the first time any payment gateway in India is offering such a service.

Pre-authorization or card authorization is a facility that payment gateways offer to online merchants to block funds when a customer places an order. If the order is modified or cancelled within a specific time, the merchant can mark the transaction void and the amount goes back to the consumer’s original payment source. In this case, the merchant is not charged anything for the transaction. Without Pre-authorization, refunding a cancelled transaction would require 2-15 days of processing time from banks and card companies. Additionally, without Pre-auth, the merchant will need to pay the transaction charge (TDR) even for the cancelled transaction.

Pre-authorization of card is a popular feature in developed nations. Hotel bookings and online merchants use Pre-authorization as a way to confirm a booking. Pre-auth through Cashfree is live on travel app ixigo.com for train ticket booking. It is launching on a host of other apps as well.

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Talking about the launch, Akash Sinha, CEO & Co-founder of Cashfree, said, “Pre-auth is an innovative feature for online merchants in India. This is like an escrow for transactions that have a chance of failing or where the final amount might change – say a cab ride. With Zero charges and zero refund time, it is a win-win feature for both merchant and consumer. We will see a versatile set of e-commerce companies adopting it in the near future and some interesting use cases built on top of it.”

Cashfree is India’s leading payment gateway. Cashfree is used by more than 15,000 businesses for vendor payouts, wage payouts, bulk refunds, expense reimbursements, loyalty, and rewards. It counts Xiaomi, Tencent, Zomato, Cred, Club Factory, ExxonMobil, Google-backed Dunzo, donation platforms like Ketto and Milaap amongst its customers. Cashfree works closely with all leading banks like ICICI, HDFC, Kotak and Yes Bank to build the core payments and banking infrastructure that powers Cashfree products. Cashfree recently raised its Series A of $5.5 million from Korean investor Smilegate with participation from existing investor Y Combinator.

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Suman Chaudhary
An engineer by education and writer by profession, Suman keeps tab on startup ecosystem of India and leads the research team of IndiaWeb2 for covering funding deals, merger & acquisition and market reports.

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