What is the purpose of an authorization system?

An authorization system primarily functions to effect transactions based on pre-set criteria. It evaluates specific parameters, such as card validity, available funds, and transaction limits, to determine whether a transaction should be approved or declined. This process is vital in ensuring that only legitimate and secure transactions are processed, thus protecting both merchants and consumers from potential fraud.

While recording merchant sales data, initiating electronic fund transfers, and managing customer loyalty programs are important functions within the broader scope of payment processing and customer relationship management, they do not define the core purpose of an authorization system. An authorization system's central focus is the real-time confirmation of transaction eligibility based on established risk assessments and criteria. This focus is crucial for maintaining the integrity of the payment process and reducing instances of fraud.