Funding and disbursement
Settlement moves money between banks. Funding is your processor moving money to you, and it runs on your contract rather than on network rules. Most "where is our money" investigations end here.
Funding is commercial, not technical
The network settles to the acquirer on its own schedule. What happens next — when you get paid, whether fees come out first, how much is held back — is between you and your provider. Two merchants on the same network with the same card mix can be funded days apart and both arrangements are correct.
This has a practical consequence that saves a lot of time: funding delays are almost never a network problem, so escalating one to the card network achieves nothing. Speeding up funding is a commercial negotiation with your provider, and it is usually priced.
Gross and net funding
| Net funding | Gross funding | |
|---|---|---|
| What arrives | Sales, less refunds, chargebacks and fees | Sales, less refunds and chargebacks |
| Fees | Taken per batch | Invoiced separately, usually monthly |
| Deposit ties to | Nothing obvious without a report | Batch totals, fairly directly |
| Common with | PSPs and facilitators | Traditional acquiring |
Net funding is more common and more confusing, because no deposit ever equals a number anyone in the business has seen before. Find out which arrangement you are on before you start debugging a reconciliation gap. It changes what the deposit is supposed to match.
Holds and reserves
Providers hold money back against future risk. Three different things get called the same thing, and they behave differently.
A rolling reserve holds a percentage of each day's volume for a fixed period and then releases it. In steady state there is always money in the reserve, but old money leaves as new money arrives.
A fixed reserve accumulates a set amount once and holds it.
A funding hold stops one specific payout, usually because of a risk review, a volume spike, or a change in what your business is selling.
Reserve terms track perceived delivery risk and your chargeback ratio, which is the reason dispute performance is a treasury problem as much as a support problem. New merchants, long delivery windows and subscriptions all attract heavier terms.
Disbursement
When you pay someone else out of money you collected — sellers on a marketplace, sub-merchants on a platform, drivers, contractors — that is disbursement. It is a separate flow with its own rules.
Four questions decide your architecture and your regulatory position, and they are much cheaper to answer now than during your first incident.
Who is the merchant of record? Whoever it is carries the chargeback liability.
Are funds split at settlement, or paid out afterwards? Splitting keeps the money off your balance sheet. Paying out afterwards means you are holding other people's money, which needs a licence in a lot of places.
What happens when a chargeback lands after the seller has been paid? This is the hard one.
Which rails carry the payout? ACH is cheap and slow. Card push and instant rails cost more and land faster.
Reading a funding report
Whatever the provider, the report has to answer four questions. Locate each one explicitly the first time you use a new provider's reporting, because the labels differ and the concepts do not.
Find these four answers before you rely on the report.
- Which batch or period does this deposit cover?
- What was the gross volume, and what was deducted from it?
- How much is in reserve, and when is it released?
- Which adjustments landed in this period, and which original transactions do they relate to?
Terms introduced
- Funding — the provider paying the merchant. Not the same as settlement.
- Net funding — fees deducted before the deposit arrives.
- Rolling reserve — a percentage of volume held for a fixed window, then released.
- Funding hold — a temporary stop on one payout.
- Disbursement — paying third parties out of funds you collected.
- Merchant of record — the party responsible for the sale and its disputes.