How Settlement Works: From Transaction to Bank Account (UK Guide)

Settlement is the process of moving money from your customer’s bank account to yours after a card payment is made.

It doesn’t happen instantly. After a transaction is authorised, it needs to be cleared, reconciled, and settled — usually over a 1 to 3-day period.

Here’s a simplified timeline of what happens after a customer taps or inserts their card:

1. Authorisation

• The cardholder’s bank checks if the funds are available

• If approved, the transaction is authorised and a hold is placed on the funds

• You see a "transaction approved" message on your terminal

2. Clearing

• Your merchant acquirer sends the transaction details to the card scheme (e.g. Visa, Mastercard)

• The card scheme passes this to the issuing bank (the customer’s bank)

3. Settlement

• The issuing bank releases the funds to the card scheme

• The card scheme passes the money to your acquirer

• Your acquirer then deposits the funds into your business bank account

Settlement times depend on your provider, contract type, and processing system. Typical timelines are:

Settlement Speed - When You Receive the Funds:

Same-Day Settlement - Later that business day (cut-off applies)

Next-Day Settlement - The following business day

2–3 Day Settlement - 48–72 hours after the transaction

Weekly or Delayed Batching - Once a week (common with some aggregators)

📌 Tip: Most traditional merchant accounts offer next-day settlement, while app-based readers like Square or Zettle may take 1–2 working days.

There are two main types of pricing model:

✅ Blended Pricing

• One flat % per transaction (e.g. 1.75%)

• Easy to understand

• Interchange is hidden within the fee

✅ Interchange Plus (IC+) Pricing

• You see actual interchange + scheme fee + provider margin

• More transparent

• Better for high-volume or larger businesses

📌 Tip: If you process over £10,000/month in card payments, IC+ pricing may save you money — but only if your provider passes on the true interchange rates without mark-ups.

Several factors can slow or speed up your payments:

• 🕒 Your cut-off time: Transactions after a certain hour are settled next day

• 🏦 Your provider/acquirer: Some settle faster than others

• 🌍 Card type: International and commercial cards may take longer

• 📅 Weekends and bank holidays: These can delay settlement by 1–2 days

• 🔐 Security flags or issues: Fraud reviews may pause certain payments

• 🧾 Rolling reserves (for high-risk accounts): A portion of funds may be held back

• Mismatch in bank account details

• Holds due to high-risk transactions or chargebacks

• Technical issues between card scheme and provider

• New account limits (common during onboarding)

• Batching delays with some mobile or app-based readers

📌 Reminder: Always check your provider’s settlement terms and cut-off times — these are sometimes hidden in the fine print.