First, we have the ‘authorisation’:
- This is the point at which you authorise the payment at the merchant (it could be a shop, bar, gym etc), this could be by using Chip & PIN, Contactless, Swipe & Sign, Apple Pay, Google Pay, Samsung Pay, FitBit Pay or Garmin Pay (yes, we offer all of those!).
- At this point, the funds have not technically left your account, rather, they are pending with the amount set aside, away from your available balance (this is called an allocation). We like to think that this is a great way to make true to the old saying; out of sight, out of mind.
- The transaction will then be recorded in your on-screen balance as well as in the feed and this is when we send a notification of the transaction to you. Your on-screen balance at this point is known as your ‘effective balance’, which is your ‘cleared balance’ minus any pending transactions and money you’ve already set aside in your Goals.
- This does not affect your ‘cleared balance’ (the balance used to calculate your interest) until the presentment comes through.
Next up, the ‘presentment’:
- This is the point at which the pending authorisation settles and when the ‘acquirer’, the merchant’s bank, claims the outstanding funds.
- At this point, the funds have physically left your account.
- Your on-screen balance is not affected at this point (unless the presentment value is different to the authorisation value).
- Your downloadable PDF bank statement only shows settled transactions; these are shown at the time of the presentment, so the transactions may not appear chronologically according to the authorisation or what is displayed in your feed.
Let’s shake things up and add in ‘offline transactions’
‘Offline transactions’ are a bit different. These are transactions that don’t get processed immediately and don’t display in your app at the time of the actual transaction. Merchants may process transactions ‘offline’ for a number of reasons, but the most common would be because there is no immediate connection to the transaction network. The best example of an offline transaction would be using your card on the train to Newcastle to buy that overpriced bottle of water or buying a stale sandwich whilst mid-flight to Prague.
And on the topic of Prague, let’s turn our attention outside the UK. Imagine you’re on holiday, skiing down the slopes of Whistler or tanning on the beaches of Honolulu. This is where your Starling card brings out the big guns - allowing you to use your card abroad without those hidden fees and getting a great exchange rate, what more could you want?
We’re going to use an example for this one, so buckle up!
You buy a jacket that costs $100. Following the steps outlined above, the merchant authorises $100 to be taken from your account and we issue you the notification. Bear in mind, your account is in pounds so an estimated amount is set aside as a pending transaction based on the Mastercard exchange rate that is currently in play. This estimated amount is $100 converted to pounds at the time of the authorisation but it does not represent the final amount because the exchange rate is forever fluctuating.
A few days later, the merchant claims their funds by issuing a presentment. They present for an amount of $100 and $100 is once again converted to pounds, which is then finally taken from your account. Depending on the fluctuation of the exchange rate between the authorisation and the presentment, you will either be charged slightly more or slightly less for that $100 jacket. The merchant is still owed $100 and that is why they claim $100 - they do not take the exchange rate into account when issuing the presentment as they work in the local currency and not pounds. You’ll notice this in the app as the amount that was displayed when the authorisation was placed will most likely be a little different when compared to the final presented amount. This will affect your balance; the transaction in your feed will be updated to represent the presented amount.
In some cases, the exchange rate works in your favour so you end up paying less for that jacket you’ve just bought! This doesn’t mean that we expect you to study the markets before making a purchase overseas, but if you can predict the exchange rate going in your favour, then that jacket will be calling your name even louder than before!
Now that we’ve covered the successful transactions, what happens when a transaction fails but you can still see it in your app? In this case, Starling would have received an explicit instruction from the merchant to authorise the amount on your card, however it’s possible that something went wrong either on the merchant’s side or with their acquirer, the merchant’s bank. This could lead to them not being able to confirm that the transaction was successful, causing the payment to fail on their side.