Clearing & Settlement
From Your Customer’s Wallet to Your Bank Account: How Money Flows Through Pay.
Your customer pays for something in your store or webshop, and the payment appears in your bank account. Although that may sound very straightforward, the reality is often much more complex. Depending on the payment method your customer uses, the money follows an extensive route involving various security and verification mechanisms. In this article, we explain how money flows through Pay.: from your customer’s wallet to your bank account.
As a merchant, you likely offer multiple payment methods in your store and/or webshop. Especially if you sell products internationally, the number of available payment options can quickly increase. Besides iDEAL, credit card payments, and traditional bank transfers, many merchants nowadays also offer payment methods such as Apple Pay and Google Pay. For international customers, services such as PayPal and country-specific payment methods like Bancontact are equally important.
Whether you support only a handful or dozens of payment methods, at Pay. we believe it is important that you always have a clear and consistent experience when it comes to receiving payments from your customers. That is why we transfer customer payments to you as quickly as possible.
However, behind these payouts lies a complex process. It is therefore valuable for merchants to understand at least part of what happens behind the scenes.
Terminology
To better understand how money flows towards your bank account, it is important to explain several key terms. We will keep it as simple as possible:
| Term | Explanation |
|---|---|
| Payment network or scheme | A payment network or scheme is a system through which payments are processed. Well-known schemes include Visa, Mastercard, and Bancontact. |
| Acquirer | An acquirer is a bank or financial institution that receives payments from the customer’s bank. Pay. has its own acquiring license and can therefore receive payments directly from banks. |
| Reconciliation | Reconciliation is the process of matching incoming funds with payments made by customers. This allows us to verify whether a batch of payments is complete or whether transactions may be missing. |
| Clearing | During clearing, a bank or financial service provider submits a batch of payments to an acquirer. This is an overview of transactions and their corresponding amounts. At this stage, the sending party transfers the funds to the receiving party. |
| Settlement | Settlement means that the receiving financial service provider — the acquirer — pays out the funds to the merchant. In simple terms: you receive your money. |
What Happens When a Customer Pays in Your Webshop, Checkout, or Platform?
What exactly happens when a customer pays depends on the payment method they choose. In general, there are four possibilities:
- The customer pays via a payment scheme, such as Bancontact, Mastercard, or Visa. This applies to almost all in-store card payments as well as online credit and debit card transactions.
- The customer pays via a Buy Now, Pay Later (BNPL) provider, such as Klarna, IN3, or Riverty. The BNPL provider takes over the payment and subsequently has a claim against the customer.
- The customer pays via iDEAL, the most commonly used online payment method in the Netherlands.
- The customer pays through a non-full-service payment provider, such as PayPal.
For payments processed through schemes and BNPL providers, transactions are submitted to Pay. in large batches. The speed at which this happens differs per scheme and also depends on the transaction type and the customer’s location. For example, a credit card payment from Japan generally arrives more slowly than a customer paying with a debit card in your physical store. Pay. sends reconciliation requests to all schemes multiple times a day, after which the funds are received. In most cases, you will receive your money within one business day.
Because Pay. is an acquirer itself, payments arrive directly with us. There is no external acquiring party involved, which saves time and ensures you receive your money as quickly as possible. We mainly work with major Dutch and Belgian banks with strong credit ratings, minimizing the risk of unforeseen issues.
The payments we receive are called SCT payments (SEPA Credit Transfers). Banks are required to process these payment orders within one business day, and the transactions cannot be reversed.
Payments via iDEAL are not processed in batches, but individually. Each payment is sent separately to Pay. Payments completed on business days before 2:30 PM are usually received the same day. Payments completed later are generally received on the next business day from 8:00 AM onward. iDEAL payments are only processed on business days, meaning weekend payments are received on Monday.
Stichting Pay.
Funds intended for you and other merchants are managed on separate bank accounts. For this purpose, there is a separate foundation: Stichting Pay. This foundation manages a safeguarded third-party funds account where all funds intended for third parties are received. From this account, the funds are transferred to merchants.
Stichting Pay. always maintains a financial buffer. As a result, there is more money available than the amount of outstanding merchant payouts. This buffer allows us to transfer payments to you even before they have been fully reconciled.
The total assets managed within Stichting Pay. consist of:
- funds received from consumers or sending partners that have not yet been reconciled;
- funds ready for payout to merchants that have already been reconciled;
- transaction fees paid by merchants to Pay.;
- the guarantee buffer for potential pre-financing, funded by our shareholders.
Reconciliation
Before we transfer incoming funds to you, we perform checks on all transactions. Incoming amounts are matched with registered payments. This process is called reconciliation. If payments are missing that we expected to receive, we can identify which transactions are involved.
A payment may be missing because a bank performs additional checks or because of a technical issue within a banking system. Sometimes a bank intentionally delays a payment, for example when fraud is suspected.
In principle, once reconciliation has been completed, we can transfer the funds to you. Reconciliation is highly automated, but in certain cases manual work is required. For these situations, Pay. employs trained specialists who can perform reconciliations quickly and accurately.
In some cases, we choose to pay merchants before reconciliation has been fully completed. This is possible because of the structure and financial buffer of Stichting Pay.
“Pay. can transfer payments to merchants before they have been fully reconciled. In those cases, we use our guarantee buffer so merchants receive their funds as quickly as possible.”
Clearing & Settlement
As a merchant, you usually notice little of this underlying process, apart from receiving your payouts every day. Early each morning, Pay. starts reconciling payments received the previous day. Around 10:00 AM, this results in the first clearing files: transaction overviews that are ready for payout to merchants.
Around 10:30 AM, we begin transferring the payouts: the settlements. From that moment on, merchants start receiving payments in their bank accounts.
Payouts are processed on every day when banking transactions are possible, except Sundays and public holidays. Although the process is highly automated, at least two employees are always involved in the Clearing & Settlement process.
When Are You Entitled to Your Funds?
From the moment a customer pays, multiple processes and checks take place before the funds reach your bank account. Because many of these processes are fully automated, most payments are transferred to merchants on the same or next business day.
Sometimes payouts take longer or issues temporarily prevent a transfer. In those situations, merchants may wonder whether this is allowed. After all, whose money is it?
Legally, you are entitled to the funds once they have been received by Stichting Pay. and successfully reconciled.
However, there are situations in which a payment must be reversed, for example when a consumer initiates a chargeback. In principle, merchants are responsible for repaying these amounts. Pay. can offset these amounts against future payouts. If a merchant cannot repay the funds, Pay. must compensate for the loss using the guarantee buffer. Stichting Pay. itself is not allowed to make a profit or a loss.
How Quickly Do You Receive Your Money?
Merchants regularly ask how quickly they receive their funds after a customer has paid. As explained above, this depends on several factors, such as the payment method used, the day of the transaction, and the time the payment was completed.
Pay. processes payouts on every day when payment traffic is possible. However, Dutch banks do not process SCT transactions during public holidays. For example, if customers complete an iDEAL payment during a holiday period or weekend, Pay. will only receive the funds on the next business day. After reconciliation, the payout to the merchant follows.
In exceptional situations, this may take several days. Consider the following example:
A customer places an order in your webshop on the Thursday before Easter and completes the iDEAL payment at 3:00 PM. Because payments completed after 2:30 PM shift to the next business day, and Good Friday is not considered a regular banking day, the payment will only be processed after the Easter weekend. In that case, you will generally receive your payout on Tuesday around 10:30 AM, once reconciliation has been completed.
This is an exceptional example, but it illustrates why timing can matter. In most cases, however, merchants receive their funds within 24 hours on business days after a customer has completed a payment.
Because Pay. acts as its own acquirer, no unnecessary time is lost involving external intermediaries. With Pay., you benefit from the fastest possible processing and payout of your payments.