Settlement is the movement of funds from the customer''s issuing bank to your acquiring bank after a payment is captured. It is the reason an approved payment does not become spendable money the same day. Approval, capture and settlement are three distinct events.
Where it sits in the sequence
| Step | What happens | Typical timing |
|---|---|---|
| Authorization | Funds reserved on the card | Seconds |
| Capture | Instruction to take the money | Same day, or later |
| Settlement | Funds move issuer → acquirer | 1–2 business days |
| Payout | Funds move to your bank account | Per your schedule, often T+2 |
Only the last step is one you see in your own bank. Everything before it happens between banks, on their schedule rather than yours.
What happens during settlement
Transactions are batched — usually daily — and submitted through the card network. The issuing bank transfers the funds, deducting interchange on the way, and the network takes its assessment. What arrives at your acquirer is already net of both.
This is why interchange is not something a processor can waive. By the time money reaches your side of the transaction, the issuer has already kept its share.
Gross versus net settlement
- Net settlement. Fees are deducted before the money reaches you. Simpler cash flow, but reconciling gross revenue takes more work.
- Gross settlement. You receive the full amount and are invoiced for fees separately. Cleaner accounting, but you must hold cash for the bill.
Most modern providers settle net. If you are reconciling revenue against your own records, that is the difference to account for — the deposit will never match the sale total.
GOOD QUESTIONS
Frequently asked
What is the difference between settlement and payout?+
Settlement moves money from the customer's bank to your acquirer. Payout moves it from your merchant account to your business bank account. Settlement is between banks; payout is the part you actually see.
How long does settlement take?+
Usually one to two business days after capture. Weekends and bank holidays do not count, which is why a Friday sale often does not settle until Tuesday.
Why is my money not available immediately?+
Because approval is not transfer. An authorization only reserves funds; capture instructs the movement; settlement performs it between banks. Each step takes real time, and interbank transfers run in batches rather than continuously.
Do fees come out at settlement?+
It depends on the provider. Some deduct fees from each settlement so you receive a net amount; others settle gross and invoice fees separately at month end. The second makes reconciliation easier but requires holding cash for the bill.