7. Settlement — Little More Details

In last two chapters, we covered settlement timelines and settlement amount. Let’s talk about where to settle?

Settlement Account:

An aggregator can do settlement to any account (current, nodal or escrow) that merchant holds in any bank as long as it has IFSC code. The account is mapped to merchant’s Live ID (MID) issued by aggregator.

• Current Account: Opened by businesses that allows large amount of transactions with low (or zero) interest rates
• Nodal Account: Non-interest earning account that is regulated by RBI. Mandatory for businesses that pool money for subsequent disbursement (E.g. e-Commerce market places, payment Aggregators). In case of nodal accounts, the funds pooled should be out of the account not later than T+3 working days (definition of T can vary) and anomalies to nodal guidelines that are found in bank audit are reported to RBI
• Escrow Account: Non-interest bearing accounts that are opened as per terms agreed by parties. Agreement can ‘bipartite’ (merchant, bank) and ‘tripartite’ (merchant — bank — Aggregator). Tripartite agreement is required if aggregator needs access to the account to move the money

Multi-Account Settlement:

There is possibility that merchant wants to settle funds to different accounts based on business model.

Example 1: A Mutual Fund aggregator, should settle funds directly to AMC’s account. If customer buys HDFC’s MF then funds should go HDFC’s account and if customer buys Aditya Birla’s MF then funds should be credited to Aditya Birla’s account

Example 2: A automotive company launched a App where customer can select the dealer’s name and make payment towards service. The funds should be directly settled to selected dealer’s account and dealer should be able to mark refunds.

This can be achieved in two ways

• Have separate Live Id for each dealer and pass the appropriate Live Id that is meant for selected dealer funds will be settled to the account that is linked to that Live Id.
• Create special fields or schemes for each dealer and link to dealer’s bank account. During transaction pass the appropriate scheme so settlement is done to that account

Multi-account settlement

Important point to consider:

If you are enabling multi-account settlement with scheme/special field integration then make sure refunds are supported for that flow else refunds of one scheme (business unit/dealer/AMC)will be adjusted from settlement of different scheme (business unit/dealer/AMC)

Simple Depiction of mixed up and clean settlement

UTR:

Whenever aggregator does settlement (credit merchant’s account), UTR (Unique Transaction Reference number) is generated and can be shared as part of settlement report or over mail.

This number can be used by merchant to check the credit and reconcile.

<<We covered settlement… let’s move on refunds and its complexities>>