#1 Merchant Question: “Where is my money?”

It has been my experience, in speaking with over 4,000 merchants about their Payment Processing, that most business owners do not understand what really happens after the completion of a transaction at their business. The first thing to realize is that the transaction is not yet complete. The completion happens when the terminal settlement is done, usually at the end of the business day.

The settlement of the payment terminal, whether a machine or Virtual Terminal, forwards the funds to the Processing Company’s bank to be accepted and deposited. Now this isn’t the local bank down the street, but rather the Merchant Acquirer’s bank in the centre of the credit card world, New York City! So every credit or debit transaction done by the merchant is actually completed in NYC.

At the same time all the card transactions worldwide are then sent for collection to the banks of the underwriters of the cards, meaning where they were issued. Then the funds are sent back and deposited to the Merchants bank account by the next morning. Please note that some processing companies will not deposit the funds to the merchant that day even though they have them. It can take up to three days for some companies to finally deposit funds as they like to benefit from the interest!

There are two main factors determining exactly when the merchant receives the money in their account, besides the policy of the Payment Processor. The first is the schedule of the processing bank. When a Payment Processor deposits perhaps hundreds of thousands of deposits at once, the processing bank typically assigns a time to do this. The reason behind this is that if the bank processes all their customers at one time, it would overwhelm their system. What they do instead is assign a specific time to their biggest customers to help even out the daily load of deposits they must accommodate. The second is related to how long it takes for the bank to post the funds to their customer accounts. It is beneficial for the merchant to understand the cut-off time needed for the merchant settlement to be done so the money shows up before they need it. The merchant should always ask how long it takes for their terminal sales to show up in their accounts before getting involved with a payment processing company!

You don’t want surprises wondering “Where’s my money?”.