Settlement
Settlement is the process of confirming transferred funds between parties to complete a payment transaction. It involves clearing the transaction and crediting the recipient's account. An authorisation reserves funds on a card or account; this reduces the amount that can be spent on the card, however, funds are not taken until settlement occurs. In most cases settlements are for the same value as the original authorisation but sometimes settlement may be for a lower or higher value or may not occur at all. In such cases the amount cardholder has left to spend is adjusted accordingly. Some or all of an authorisation amount can be reversed before it settles. An example would be when you purchase flight tickets and then immediately cancel the booking.
Applications
E-commerce:
Reduces fraud in online card payments by verifying the cardholder's identity
E-commerce:
Reduces fraud in online card payments by verifying the cardholder's identity
Advantages
- Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
- Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
Challenges
- User Experience: Additional authentication steps can cause friction and increase checkout abandonment
- User Experience: Additional authentication steps can cause friction and increase checkout abandonment
