What is a Settlement?
Settlement is the process by which already authorized transactions are sent to the Front-End Processor to be forwarded to the Merchant Bank and/or Back-End Processor. They, in turn, are forwarded to the FED to move the funds from the Issuing Bank to the Merchant Bank. Regulations relative to settlement are different for each Merchant type and card type. These regulations predominantly cover what information must be sent at the time of settlement.
NOTE: The product or service must be delivered or performed before settlement can take place. In the case of MO/TO, this specifically means the goods must be shipped before the settlement process can be performed.
Electronic Merchant Systems Payment Processing Glossary :
Defining key payment processing and merchant services industry terms to help business owners make better decisions.