CATEGORY - FEATURES & UPDATES

How Payment Gateways Settle Transactions

Features & updates - 29 Feb, 2024

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In the fast-paced world of e-commerce, smooth and efficient transactions are essential for merchants and customers. Payment gateways act as secure intermediaries, processing online payments and ensuring a seamless experience for all parties involved. However, the journey continues after a successful authorization.

Understanding how merchants receive their funds after a customer purchase is crucial for managing cash flow and financial planning. This blog post explores the world of payment gateway settlements, explaining the process, key factors, and how merchants can leverage this knowledge for their business success.

The Flow of Funds

Imagine a customer finalising a purchase at your online store. The payment gateway verifies their information, approves the transaction, and deducts the amount from their account. But the journey doesn’t end here. Behind the scenes, a complex process unfolds to transfer those funds securely into the merchant’s account. This transfer process is known as a payment gateway settlement.

Here’s a breakdown of the key players involved:

Merchant: You, the business owner who receives payment for goods or services.
Customer: The individual purchasing via an online store.
Payment Gateway: A secure service that facilitates online transactions by connecting merchants, issuing banks, and acquiring banks.
Issuing Bank: The customer’s bank holds their account and approves the transaction based on available funds.
Acquiring Bank: The merchant’s bank receives the funds from the issuing bank and deposits them into your merchant account.
Card Networks: Networks like Rupay, Visa, Mastercard, or Discover that govern the transaction process and set interchange fees (fees paid between banks for processing card transactions).

The Settlement Cycle in Payment Gateway

Now, let’s explore the typical flow of a payment gateway settlement:

Authorization: When a customer initiates a purchase, the payment gateway transmits a request to the issuing bank for approval. This step verifies if the customer has sufficient funds or credit limit to complete the transaction.
Fund Hold: Upon approval, the issuing bank places a hold on the authorised amount in the customer’s account.
Settlement Batching: Throughout the day, the payment gateway accumulates approved transactions into batches.
Settlement with Acquiring Bank: Based on the agreed-upon settlement cycle (explained below), the payment gateway sends the batch of transactions to the acquiring bank.
Clearing and Settlement: The acquiring bank communicates through card networks to finalise the transactions with the issuing banks. Funds are transferred from the issuing banks to the acquiring bank.
Merchant Deposit: Finally, the acquiring bank deposits the settled funds into your merchant account minus any applicable fees (processing fees, interchange fees, etc.).

Types of Settlement are offered by Payment Gateways

The timeframe for receiving funds depends on the type of settlement cycle offered by the payment gateway and your merchant agreement. Here’s a breakdown of the most common settlement cycles:

Instant Settlements: Your funds will be deposited into your account almost instantaneously after a successful transaction. This is ideal for businesses with high daily sales volume or those requiring immediate access to cash flow.
T+1 Settlement: This is the fastest settlement option, where “T” represents the transaction date. Funds are typically deposited into the merchant’s account one business day after the sale.
T+2 Settlement: This settlement cycle takes two business days for the funds to reach the merchant’s account.
T+3 Settlement and Beyond: Some payment gateways or merchant agreements may have longer settlement cycles, taking three business days or more for the funds to be deposited.
On-Demand Settlements: Enjoy the flexibility of requesting settlements at your convenience. This option provides greater control over your cash flow, allowing you to access funds when needed.
Scheduled Settlements: Maintain a predictable income stream with automated settlements occurring on predetermined days. This simplifies financial planning and budgeting for businesses with a consistent sales volume.

Settlement Types: Gross vs. Net

Beyond the settlement cycle, the method of receiving funds can also vary. Here’s a breakdown of the two main settlement types:

Gross Settlement: The total transaction amount is initially deposited into your account. Later, the payment gateway deducts its fees and any applicable network charges.
Net Settlement: The settlement amount already reflects the deduction of fees, with the net amount being deposited directly into your account.

Several factors can influence the time it takes to receive your funds:

Payment Gateway: Different payment gateways have settlement policies, so review your agreement.
Merchant Account Type: The type of merchant account you possess (high-risk vs. low-risk) may affect settlement times.
Transaction Volume: Merchants with high transaction volumes might negotiate faster settlements with their payment gateway.
Chargebacks: If a customer disputes a transaction (chargeback), the settlement may be delayed until the dispute is resolved.

Benefits of Payment Gateway Settlements

Being familiar with payment gateway settlements empowers you to:

Manage Cash Flow Effectively: By understanding settlement timelines, you can forecast your cash flow more accurately and make informed financial decisions.
Reduce Delays: Knowing the factors influencing settlements can help you identify potential delays and take proactive measures to minimise them.
Negotiate Settlement Terms: Some payment processors offer flexible settlement options. Understanding the process allows you to negotiate better terms that align with your business needs.
Improve Customer Service: Timely settlements ensure you can fulfil orders and provide prompt customer service without cash flow constraints.

How Easebuzz Payment Gateway Untangles Settlement Issues and Fuels Business Growth

In today’s digital world, a smooth and efficient payment process is the lifeblood of any online business. But delayed settlements can disrupt your cash flow, hindering your ability to invest in growth and fulfil customer orders. Easebuzz payment gateway understands this struggle. That’s why they go beyond secure transactions, offering exceptional settlement features designed to solve your business’s biggest payment headaches and fuel your growth.

Solving Your Settlement Woes

Traditional payment gateways often leave businesses frustrated with:

Slow Settlements: Waiting days or even weeks for your funds can disrupt your cash flow, making it difficult to invest in inventory, marketing, or growth initiatives.
Unpredictable Timelines: Unclear settlement schedules make budgeting and financial planning a guessing game.
Chargeback Delays: Fraudulent transactions can lead to chargebacks, further delaying your access to funds and creating additional administrative burdens.
Time-Consuming Reconciliation: Manually matching settlements with transactions is tedious and error-prone.

Easebuzz to the Rescue

Easebuzz tackles these challenges head-on with features that empower your business:

Faster Settlements: Get your money quicker with industry-leading settlement cycles. Improved cash flow lets you reinvest in your business and seize growth opportunities.
Transparency and Predictability: Know exactly when to expect your funds with clear communication on settlement timelines. This enables better financial planning and budgeting.
Reduced Chargeback Risk: Their robust fraud management system minimises fraudulent transactions, protecting you from chargebacks that can delay settlements.
Simplified Reconciliation: Say goodbye to manual reconciliation! Easebuzz offers automated tools that streamline the process, saving you valuable time and resources.

Beyond Settlements: A Growth Powerhouse

While settlement features are crucial, Easebuzz offers a comprehensive toolkit to fuel your business growth:

Wider Customer Reach: Expand your customer base by accepting various payment options, including credit cards, debit cards, UPI, wallets, EMI, and BNPL options.
Seamless Integration: Integrate Easebuzz effortlessly with your existing platform, ensuring a smooth user experience for your customers.
Dedicated Support: The Easebuzz support team is always available to answer your questions and address any technical issues.

Conclusion

By partnering with Easebuzz, you’re not just securing your transactions but gaining a powerful ally for growth. Their best-in-class settlement features, coupled with a comprehensive suite of benefits, empower you to receive funds faster, manage finances efficiently, and ultimately achieve tremendous success in the competitive online marketplace. Don’t let slow settlements hold you back. Choose Easebuzz and unlock your business potential.

FAQ's

What is Payment gateway settlement?

Payment gateway settlement is the final step when you receive money from a customer’s online payment. The payment gateway collects the money from the customer’s bank and deposits it into your merchant account minus any fees.

What is the payment settlement process?

The payment settlement process involves several steps after a customer purchases online. It includes checking if they have enough funds, getting their bank’s approval, and finally transferring the money to your account.

Which payment gateway provides instant settlement?

Easebuzz offers an instant settlement payment gateway; they are also known for their fast payouts. They group transactions and send them in batches based on your pick-up schedule (T+n). This means you’ll receive payments made on the day “T” within “n” business days (excluding weekends and holidays).

How long does payment gateway take to payout?

Payment gateways help you receive payments quickly and securely. While settlement times can vary, Easebuzz offers faster payouts to get your funds in your account sooner. Settlement typically takes a few business days, but Easebuzz can help expedite that process. Understanding settlement periods is critical for managing cash flow regardless of your chosen gateway.

What is the POS settlement process?

POS (point-of-sale) settlement is similar to the online payment settlement process. When a customer swipes or dips their card at your store, the funds are transferred from their bank to your merchant account, minus any fees.

What is the fastest payment method?

Digital payments are super fast. Money reaches the other person’s account in 10 seconds from when you pay. Mobile wallets are also speedy, with transfers typically reflected within 30 seconds. Both options are much faster than traditional checks or cash!