What is net settlement?
The provider deducts fees, refunds and chargebacks from the day’s sales and pays the merchant one net amount per currency. It is the norm for card acquiring. In gross settlement, the merchant receives the full sales amount and fees are invoiced separately, which is easier to reconcile but less common.
In detail
The provider deducts fees, refunds and chargebacks from the day’s sales and pays the merchant one net amount per currency. It is the norm for card acquiring. In gross settlement, the merchant receives the full sales amount and fees are invoiced separately, which is easier to reconcile but less common.
Net vs gross settlement
Net settlement is the norm: fees, refunds and chargebacks are deducted before the payout, and the merchant receives one amount per day per currency. In the merchant payout, the acquirer or PayFac pays gross sales minus fees, refunds, chargebacks and any reserve. Gross settlement pays the full sales amount and invoices fees separately, which is simpler to reconcile but rarer.
Netting at scheme level
Netting also happens upstream. In clearing, the acquirer submits the batch to the scheme, which groups transactions by processing day and nets them into one debit or credit position per business day and settlement currency, then instructs its settlement banks. Issuers pay and acquirers receive, net. To reconcile net payouts, finance matches each payout to the transactions it contains, fee by fee.
More detail in our #PayDecoding episode on Settlement.