What Does Provision Mean?

In the context of payment systems and POS terminals, "provision" (or "authorization") is a critical concept that every business owner should understand.

What is Provision?

Provision is the process of verifying and reserving funds on a customer's credit or debit card before completing a transaction. When you swipe a card, the POS system sends a request to the bank to confirm the card is valid and has sufficient funds.

How Provision Works

1. Customer presents their card for payment
2. POS terminal sends transaction details to the acquiring bank
3. The request is forwarded to the card issuer
4. The issuer verifies the card and checks available balance
5. An authorization code is returned (approved or declined)
6. The amount is temporarily held on the customer's account

Types of Provision

• Pre-authorization: Holds funds without immediate capture (common in hotels and car rentals)
• Sale authorization: Immediate capture of funds at the time of transaction

Why It Matters

Understanding provision helps prevent payment issues, reduce chargebacks, and ensure smooth transactions. NarPOS systems handle provisions automatically, providing real-time authorization for secure payments.