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Settlement Bank

Reviewed by Apoorva | Updated on Sep 30, 2020

Catalogue

Introduction

A settlement bank is the last bank that receives and reports the settlement of a transaction between two entities. This bank partner with the entity being paid, most often a merchant.

What is a Settlement Bank?

A settlement bank is a merchant’s primary bank for receiving payment; it helps make electronic transaction processing available for merchants. It is also referred to as the acquiring bank or an acquirer. Merchants are required to have a good relationship with settlement banks to ensure fast and efficient payments for their business and clients.

Transaction Processing

There are three main entities involved while processing an e-payment transaction—cardholder’s bank, settlement bank, and payment processor. To facilitate the process, the merchant must open a merchant account and sign an agreement with the acquiring bank specifying the terms & conditions and settlement of transactions for the merchant. Such banks charge transaction fees for their service.

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