Pay by Bank Versus Cards: Settlement Time
Open Banking Expert
Ever notice that it takes several days for charges to appear on your card when making a purchase? Purchases like gas, groceries, or a night out at a restaurant could take days to show up on your online account.
What makes this a big deal? Consumers are becoming more mindful of their spending and want their purchases to happen in real-time. Why? Because it can help them with better budgeting and better insights into their spending abilities.
In the final installment of our Pay by Bank vs Card series, we’re looking at settlement time between the two payment methods and exploring the ins and outs of how each works.
Understanding Pay by Bank and Card Settlement Times
When you make purchases online, you seldom think about the complex process that occurs behind the scenes, from payment initiation to settlement.
Both Pay by Bank and cards have several steps in the payment settlement process. However, Pay by Bank carries a distinct advantage in settlement time when powered and optimized with Open Banking connectivity. Let's break it down below.
Average Card Settlement Times
On average, transactions can take up to 3-5 days to appear and clear on card statements.
While there’s no easy way to tell which transactions take longer than others, overall, most consumers expect to see charges reflected on their online accounts around 72 hours after purchase.
The basic steps to card settlement are as follows:
- Authorization: This happens in seconds. Your card issuer says, "Yep, you've got the funds for this!"
- Clearing: The merchant's bank and your bank exchange information. Think of it as a financial phone call between two banks.
- Settlement: Finally, the money moves from your account to the merchant's account. This can take roughly 3 business days but can be quicker or slower.
But why does the process take so long? It's all about security, fraud checks, and the volume of transactions being processed. The delay in charges showing up on your debit or credit card statement is typically due to the time taken for authorization, settlement, and various checks and balances in the transaction processing system.
While most transactions appear within a few days, the exact timing can vary depending on the factors mentioned above.
Open Banking Speeds Up Pay by Bank Settlement Times
Pay by Bank is a type of account-to-account (A2A) payment, which is a form of ACH payment. Broadly speaking, ACH-based transfers and payments aren’t known to be instantaneous or quick on their own. It takes roughly 2-3 business days for standard ACH payments.
It’s important to understand that ACH isn’t inherently faster than cards. However, when powered by Open Banking, Pay by Bank can access instant payment rails, like RTP and FedNow, and can enable instant payment acceptance for merchants through Trustly’s guaranteed payments.
How does this work? Trustly’s Open Banking solutions allow our risk engine to see and assess consumer bank accounts. In essence, when consumers make a payment, Trustly guarantees them and allows funds to be transferred to merchants in real-time, effectively allowing merchants to accept Pay by Bank payments instantly.
Now, you might be thinking, "Great, but why should merchants care?" Well, faster settlement times with Pay by Bank can mean:
- Faster access to your funds and with minimal processing delays or errors.
- Reduced risk of payment issues and a significant increase in approval rates with Trustly’s smart routing capabilities, dynamic risk engine, and payment guarantee.
- Quicker refunds when customers return items. With instant payouts, your customers get their money back faster, directly improving customer satisfaction and experience.
The Speed Showdown and Why It Matters
So, which is faster? In most cases, Pay by Bank takes the crown. But why? Check out the table below to see the key differences.
Improve Settlement Time Today with Pay by Bank
While cards aren't going anywhere soon, Pay by Bank is definitely stirring things up in the payment world, especially when it comes to settlement time. As payment solutions continue to innovate, Pay by Bank is steadily becoming a viable alternative to traditional card payments that merchants can use to improve their payment settlement time with faster access to funds.
If you’re ready to take your business to the instant payments world, contact us today for a free demo.
To learn more about Pay by Bank vs Cards, check out the other blogs in our series:
