Settlement is the final step in the transaction processing; it aims at releasing the parties to the transaction (merchants, processors, acquirers and issuers) from their obligations by transferring the funds owed by one member to another.


Settlement can be classified in two:

  • Final: a settlement is final when it meets three conditions; it is unconditional, irrevocable and enforceable. This also applies for insolvency cases.
  • Provisional: conditional to satisfying certain requirements, obligations are discharged through the transfer of funds. The failure to fulfill the requirements can cause a rescission which can be initiated by any of the transaction parties.


  1. Batch processing: the transaction receipt data is deposited by the merchant with the acquirer who collects it and holds it until the receipt is processed as a batch.
  2. Transfer of captured authorizations: the Front-End Network provider which is responsible for authorizing and capturing transactions forwards the information to the Back-End Network which is responsible for finalizing transactions, routing payment to a merchant’s account and generating statements.
  3. Funding: The Back-End Network generates ACH files for merchant settlement and sends them to the Acquiring Bank who funds the Merchant Account.
  4. Reimbursement: The Acquiring Bank submits settlement files to the Issuing Banks for reimbursement via the Interchange Network.
  5. Issuing of monthly statement: Issuer posts the transaction to the Cardholder account and sends the Cardholder a monthly statement.
  6. Final payment: the card user receives its monthly statement and pays to the issuing bank.