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A Guide to Same Day Settlement Payment Gateways

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20233 min read

If you sell goods or services, you’ll need a payment gateway to facilitate transactions. However, one thing to keep in mind is that settlement periods can vary widely between processors. There are numerous benefits to instant payment processing, including better management of cash flow and funding daily operations. We’ll cover a few of these benefits in our guide below, along with what to look for in any same day payment processor.

What is a settlement period?

The time lag between receiving a customer payment and receiving the funds in your merchant bank account is called the settlement period. Normally, this takes anywhere between 24 hours and several weeks, but three to five working days is typical for most payment processing services. Banks use this processing time to monitor transactions for fraud and avoid chargebacks as part of the clearing process.

What is a same day settlement payment gateway?

While face-to-face transactions typically involve only two parties, when you use a payment gateway, you’re adding a third party into the equation. This can lead to a lengthier settlement process as a result, as gateways communicate with processors and processors with banks. A same day settlement payment gateway works to eliminate this time lag by transferring funds directly into the merchant account, enabling real-time payments even on bank holidays and weekends.

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How does an instant payment settlement gateway work?

To understand how same day services work, it’s first helpful to take a closer look at what happens during payment processing via a gateway.

The customer makes a payment to your business using a gateway at the point of sale.
The gateway pulls these transactions into a daily batch and transfers the batch details to a payment processor, who passes them on to the credit card company or bank.
The merchant’s bank deposits the total amount of authorised transactions into the business bank account, deducting applicable fees.
The credit card companies debit the customers’ banks for the funds, crediting the merchant’s bank in return.

As you can see, there are several parties involved with this type of system, including separate banks for the customer and merchant as well as a third-party processor.

Like any payment gateway, same day settlement involves transferring funds in a series of batches. The difference is with a same day service, these transfers are more frequent which allows for greater efficiency.

One example of a payment gateway offering instant funding credit card processing is PayPal. The company’s Payflow Gateway helps merchants accept credit card payments and integrates with most ecommerce platforms. When a transaction is approved, the funds appear nearly instantly in the merchant’s PayPal account for same day settlement.

GoCardless also offers an instant payment gateway service enabling business to collect money rapidly. Learn more about our feature, Instant Bank Pay.

When is same day settlement useful?

Is it really a big deal if your funds take a few days to clear? While larger companies may not need same day settlement, for smaller businesses there are several distinct advantages. Here are a few situations where instant payment processing can help:

Your business works with downstream partners and needs instant liquidity
Your work with contractors who need payments settled in advance
You work in a business that provides cash awards and needs immediate funds, such as online gaming
You have high inventory turnover and need a consistent cash flow to restock

How to choose a same day payment processor

There are numerous payment service providers out there, some of whom offer same day settlement or instant funding credit card processing. Here are a few factors to consider when choosing the best gateway, apart from settlement times.

How much does the gateway cost? Compare set-up costs, monthly rates, and per-transaction costs.
What types of payments does the gateway accept? While most accept Visa and Mastercard, your customers might prefer additional card types.
Does the gateway accept international payments? Are there extra fees for currency exchange?
Does the platform offer customer support to help you if payments become delayed?
What security measures are in place? Is the provider PCI DSS compliant?

By comparing your options carefully, you can find the best fit for your business and start accepting payments straight away.

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