CHALLENGE status happens if there is a successful authorized transaction, but it is being reviewed by Midtrans' Fraud Detection System. The credit card is not charged yet, but the funds are reserved.
For every CHALLENGE transaction, YOU will have options to ACCEPT or DENY the transaction before SETTLEMENT. You can do this from your Midtrans MAP or API. We will auto cancel the challenge transaction if you don't take action until settlement time (D+1 transaction, at 3 PM).
We are not eligible to decide this since you know your business better than we do, hence we want you to take action regarding this. However, the CHALLENGE transaction will be automatically denied if you do nothing until it passes SETTLEMENT time.
Here is JSON example for challenge status: