What is a Transaction Settlement?

The process by which a merchant will receive funds from a customer for a transaction.

Once a customer buys a service or goods, the issuing bank will send the funds to the payment processor used by the seller. These funds are then dispersed to the merchant. The term settlement is used to refer to the number of funds that are transferred to the merchant from the acquirer for the specific amount of the sale for the acceptance of the card transaction. The transfer of funds to the merchant is known as funding, and is the final step in the settlement process.