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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.

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.

In a net settlement system, banks keep track of their electronic (and physical) credit and debit transactions throughout the day. At the end of the day, the information is shared with a mediating institution (the clearinghouse), and the net differential is transferred between participating banks.

As between the two financial institutions and their respective customers, they will typically settle by debiting and crediting their respective customers' accounts they maintain.

As nouns the difference between settlement and payment is that settlement is the state of being settled while payment is (uncountable) the act of paying.

Clearing and Settlement Mechanisms (CSMs) are the processes underlying all payment transactions exchanged between two payment service providers (PSPs). They are invisible to the end-users of the. payment schemes, yet they are indispensable in transferring money from one account to another when two different.

What is Settlement in the Payment Processing World? Simply put, payment gateway settlement is when the bank transfers funds immediately with no waiting. It is the process where the money is transferred or routed from the customer's bank to the merchant's bank.