How Payment Clearing and Settlement Systems Really Work: A Deep Dive

1. Clearing Subsystem

After a user completes payment, the platform must fulfill obligations by performing settlement, which runs parallel to the payment system and forms a large ecosystem.

1.1 Clearing System Overview

Payment clearing involves the exchange and calculation of payment instructions. It includes clearing (matching and netting) and fund transfer, determining each participant's receivable and payable amounts.

1.2 Clearing Business Architecture

The clearing system consists of an access layer, clearing processing subsystem, accounting service, billing subsystem, and a front‑office module (see Fig.1).

1.3 Object Relationship Model

Different order types involve various stakeholders (platform commission, merchant fees, rider fees, insurance, etc.). Models vary by merchant type, such as single merchant, merchant‑partner, agency‑merchant, and multi‑level agency structures (see Fig.2).

Single merchant: simple acquiring merchant.

Merchant‑partner: e‑commerce platforms sharing revenue.

Agency‑merchant: merchants onboard via agents.

Agency‑agency‑merchant‑partner: multi‑level agency structures.

1.4 Billing Rule Subsystem

The billing subsystem maintains rules for various billing scenarios (percentage, fixed amount, tiered, etc.) and matches them using condition groups such as category + city.

1.5 Accounting Service

Different clearing tasks use distinct calculation templates to compute fees and generate settlement amounts, distinguishing between profit sharing (fees) and revenue sharing (transaction amounts).

1.6 Clearing Service

Clearing groups transaction details by institution, business type, and debit/credit direction to produce clearing results used for settlement.

2. Settlement System

2.1 Settlement Overview

Settlement transfers funds based on clearing results. It applies to various enterprises such as transaction platforms, four‑party and three‑party payment institutions.

2.1.1 Different Enterprise Settlement

Platforms settle with merchants on diverse cycles (e.g., 3‑day, 7‑day, monthly, 60‑day). Payment institutions settle to merchants, partners, and channels using T+1, D+1, D0, H0, S0, or TD modes.

2.1.2 Role of Accounts

Accounts like "merchant pending settlement" and "merchant settlement" manage funds in transit (see Fig.6).

2.2 Three‑Party Settlement Modes

Typical products include T1, D1, D0, H0, S0, and TD settlements (see Fig.8).

2.2.1 Common Settlement Modes

Three main models: intermediate‑account mode, frozen‑balance mode, and bill‑only mode (see Fig.9‑Fig.11).

2.3 Settlement Architecture

Timed tasks drive settlement flow; merchant backend, operations backend, accounting core, advance‑payment system, and billing system interact (see Fig.13).

2.4 Settlement Process

From request input through data preparation, core processing, payout handling, and result update (see Fig.14‑Fig.20).

3. Full Clearing‑Settlement Process

Using a three‑party payment institution as an example, the article explains data generation, account setup, and accounting handling across the entire chain.

3.1 Global Data

Four data segments: accounting, payment, clearing, and settlement data (see Table 3).

3.2 Account and Subject Settings

Defines accounts such as transit accounts, receivable bank accounts, and bank deposit accounts (see Fig.26).

3.3 In‑Transit Funds

Three types: payment in‑transit, fund in‑transit, and customer in‑transit, each reflected by balances in specific accounts (see Fig.27‑Fig.29).

3.4 Accounting Rules and Examples

Illustrates the full accounting flow from payment receipt, channel clearing, error handling, merchant settlement, to channel settlement, including short‑fall and surplus handling (see Fig.30‑Fig.37).