If you’re a new business owner, or new to payment processing, and are confused about batch settlements and merchant funding- this is for you! Learn what batches and settlements are so that you can not only understand the payment process better, but so you’ll know what to look for when searching and speaking with an unfamiliar merchant service provider.
Batches and Settlements
From prerequisites, fees, and funding times, the most crucial consideration of every business is who they choose to be their payment processor- not all providers are the same! Working with a professional processor, like Align eCommerce, can mean the difference between easy batch settlements with quick funding or a more complicated, slower procedure.
The basics of credit card processing are simple- a customer swipes a card to make a purchase, the transaction is approved (or denied), then the money moves from the customer’s bank to the merchant’s bank… but the specifics of the process are a little more complicated.
After accepting card payments all day, the sales become a batch, or a group of processed transactions that have not been settled yet. This grouping is also known as an open batch, which means transactions within the group can still be reversed or voided (if needed). Once the batch is closed each day, either automatically or manually, a settlement is initiated. It’s important to note that if a batch is left open too long by the merchant, then the payments provider can choose to close and settle the open-ended transactions or even let the batch expire.
So, after a batch is closed and a settlement begins, the processor will receive the processed funds from the issuing banks of the cards used that day. And then, depending on type of business and risk assessment, the funds will be transferred directly from the provider to the merchant’s bank account within a certain amount of time.
In addition, there are two different settlement types that a merchant account can be subjected to: gross settlements or net settlements. Gross settlements will allow the total daily batch to be deposited into the business’s account with only a single monthly withdraw of the accumulated processing fees, while net settlements mean the processor will take out the fees each day before sending the funds to the merchant instead.
The ability to process debit and credit cards is something every business should have- to learn more about your payment processing options and what Align eCommerce can do for you, reach out to us! From the lowest fees to best service, we’re ready to help.
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