Digital Transaction is known to be quick, unified, transparent, and seamless compared to conventional cash transactions. The annoyance of accepting candy for change that is never available in the till. The hassle is now obsolete with the introduction of digital payment, but the new innovations in merging technology with payment systems usher in new challenges. Although the payments might seem real time as both customer and vendor get the ‘transaction success’ notification the same instant the payment is made, the reality of digital payments is slightly different.

Let us understand the ‘settlement time’ and the factors that cause the delay in processing digital payment. The major stakeholders handling digital transactions between a customer and merchant are Payment Gateway, Payment Processor, Card Network, Issuer Bank, and Acquiring Bank. The cashless economy is driven by the seamless and unified functioning of all the stakeholders to process a digital payment. Here is a quick read about the ‘settlement time’ for digital payments.

It is important to know the Payment Gateway Settlement Process to understand the Settlement Time. In the previous blog about Understanding Online Card Payment, we gathered a basic insight of the flow of transaction between multiple stakeholders. So, let us begin with the moment customer receives the ‘transaction successful’ notification and track the flow of money to reach the acquirer’s bank account.

The amount as authenticated and authorized by the customer and the issuer’s bank, is instantly debited or the funds are blocked in the customer’s bank account. For the acquirer’s bank account to claim and capture the amount, the vendor/merchant must go through a settlement process. There are two different types of Settlement mechanism- Terminal Capture and Host Capture.

In Terminal Capture, the merchant is responsible for the Settlement Process, the merchant is required to store the details usually containing sensitive information and build a specific batch of transactions that require settlement. The Settlement process in case of terminal capture will be merchant initiated, on-demand payment settlement.

Whereas, in Host Capture the Payment Gateway settles the transaction and stores settlement batch files on the processor. Merchant only needs to authorize the transaction without having the need to store any sensitive information. The Payment Settlement process in case of host capture will be time initiated, as fixed number of settlements are done multiple times in a day.

Depending upon the mode of capture, and the terms agreed with the Payment Service Provider when availing their service, the settlement time may vary between T+2 business days or T+3 business days (T = Date of Payment Capture.) In case of refunds or unclaimed, the amount is redirected to customer’s bank account.

Both Terminal Capture and Host Capture have their advantages, and features that facilitate payment and smooth transaction of funds for the business. Choosing a Payment Gateway with the features that satisfy your business needs is vital to ensure uninterrupted and hassle-free flow of payments. Select a Payment Service Provider with the flexibility to accommodate your business requirements.

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