Settlement (Payments)
The process by which funds from card or bank transactions are actually transferred between financial institutions and credited to the merchant or recipient.
Also known as: payment settlement, card settlement, settlement cycle
Last reviewed: 10 June 2026
Settlement is the back-end process that moves real money between banks after a payment authorisation. Card payments are typically authorised instantly but settled in a daily batch: the card network calculates net positions between acquirers and issuers, and central bank reserves or correspondent accounts are adjusted accordingly.
For merchants, settlement typically happens one to three business days after a transaction, meaning there is a period when a payment has been authorised but the funds are not yet in the merchant's account. Chargebacks can reverse settled funds, which is why merchants may hold 'settlement reserves' for high-risk transaction types.
Consumers see settlement indirectly — a card transaction may show as 'pending' on their account before it settles and posts. Understanding the difference between authorisation and settlement is important in fraud disputes: an authorisation hold can sometimes be released before settlement if fraud is caught quickly.