The settlement is a financial operation thanks to which the merchant receives money for a transaction with a client. This term defines the final step in receiving payment for some goods or services. So as the issuing bank sends the transaction to the financial institution or a payment processor. And then the acquirer places the funds to the seller’s acquiring bank account.

Merchants can send the approved authorizations daily to the acquiring bank they use. This “settle” is made with the payment processors’ help. On the next step, the acquiring bank passes the batch settlements to the card issuer. The Issuer performs the settlement payments (usually the next day). After this, the acquiring bank can deposit funds to the merchant’s bank account.

As you can see from the procedure’s description it really is a step the finalizes the process of merchant receiving the money.

Another way of settlement’s use is to describe a payment the cause of which is selling or purchasing. Anyway, during this procedure the bank will check the payment information to authorize it and approve (or decline).