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Payment settlement involves collecting the funds for the amount recorded for an order. For example, when using credit cards, the settlement process specifically involves contacting the payment system and collecting the required amount of funds against the credit card.

Settlement is when the funds from customer transactions are actually transferred from the cardholder's issuing bank to the business's acquiring bank. Think of it like this: Payment authorization is when the issuer says, ?Yes, those funds are available and approved to be used for this purchase.?

It involves a series of steps that occur after a customer makes a purchase, ensuring the funds are aptly transferred from the customer's account to the merchant's account. This process involves various intermediaries, including the payment gateway, acquiring bank, issuing bank, and card networks.

Settlement can be defined as the process of transferring of funds through a central agency, from payer to payee, through participation of their respective banks or custodians of funds.

The first part is the clearing process in which payment information is conveyed from the payor to the payee, probably through intermediary banks. The second part is settlement in which the actual transfer of value associated with the payment order is made, generally not with cash but with a claim on a bank.

When a credit card payment is made, the banks communicate instantly via the merchant's payment gateway. However, the actual funds are not transferred at the same time. This is where the settlement process comes in. It's an interbank process where obligations are met and funds are ultimately discharged.

What Is a Settlement Date? The settlement date is the date when a trade is final, and the buyer must make payment to the seller while the seller delivers the assets to the buyer. The settlement date for stocks and bonds is usually two business days after the execution date (T+2).