Settlement

Settlement refers to the final step of the payment process, where the acquiring bank retrieves funds from the cardholder’s issuing bank, and funds get deposited into the merchant’s business account, deducting applicable processing fees. The settlement step ensures that the financial aspects of the transaction are finalized.

When a customer initiates a card transaction at a merchant, the communication between the issuing and acquiring banks starts through the payment gateway. Upon approval, the customer receives confirmation, but funds are not directly transferred to the merchant. The settlement step follows, involving clearing where transaction details are verified. This period includes secure data exchange via a payment network.

Once the agreed-upon amount is deducted from the customer’s account and deposited into the merchant’s, the payment is officially settled. This ensures merchants receive their proceeds, minus processing fees. The settlement step of the payment flow, governed by regulations and security protocols, is a vital element, assuring merchants of secure revenue transfer and maintaining trust in financial transactions.