Treasury in Acquiring: Competitive Advantage or Cost Function?

If you’re the CFO or treasury lead at a card-acquiring processor, this will resonate. Every hour in which you have settled the merchant but Visa hasn't settled you yet, is a drain on your cash position. Stretch that gap to a single business day and suddenly you’re financing an extra day of full processing volume. For high‑growth acquirers, that can mean millions locked up in float instead of product, people, or profit. Yet, this timing element may be the biggest invisible line-item on your P&L.

If you’re the CFO or treasury lead at a card-acquiring processor, this will resonate. Every hour in which you have settled the merchant but Visa hasn't settled you yet, is a drain on your cash position. Stretch that gap to a single business day and suddenly you’re financing an extra day of full processing volume. For high‑growth acquirers, that can mean millions locked up in float instead of product, people, or profit. Yet, this timing element may be the biggest invisible line-item on your P&L.

Card network settlements (the "Pay-in")

To get grip on your settlement timing, it is important to understand what happens in the clearing and settlement process.

Clearing: In the clearing process, acquirers submit transactions to the card networks throughout the day. The networks subsequently group them in processing days and net the amounts to create a single debit or credit position for the issuer and acquirer. They do this generally for each business day and settlement currency.
Settlement: In this process, the card networks instruct their settlement banks of the final net positions. The banks then retrieve funds from the issuer and send funds to the acquirer. Card networks settle most currencies on a T+0 to T+2 basis. Note that weekends and local bank holidays are skipped, and therefore not included in that calculation.

Many acquirers run more than one currency and settlement service, which makes understanding clearing cycles, timing of pay-in and overall liquidity management more complex. Silverflow helps acquirers to create an overview of the settlement services and their impact on settlement timing.

Merchant settlements (the "Pay-out")

Typically, merchants have limited visibility into scheme cut-offs and do not concern themselves with settlement timing. They want quick, reliable and predictable payouts, so they can focus on running their day-to-day.

Payout cycles can be shorter or longer than the pay-in, depending on the agreement with the merchant. Shorter payout cycles (e.g. same day / next day payouts) are a great benefit to the merchant and may be a competitive advantage for the acquirer if they can offer this. Other merchants may accept a longer payout timing against a discounted mark-up per transaction.

Configurable payout timing is a killer feature but it may incur extra costs because of financing. The Treasury Team therefore needs to understand when money comes in and when it’s promised out.

Note that not all acquirers may be legally allowed to pre-finance merchants as it requires following strict guidelines and having a proper license.

Measuring the funding gap

CFOs and Treasury Leads need a clear view of the gap between scheme pay‑ins and merchant pay‑outs. That gap determines whether the acquirer must front working capital, and at what price. The two core questions are:

How much working capital is tied up in acquiring operations?
What is the yearly cost of pre-financing merchant settlements?

An example:

Let’s look at a merchant that processes a daily processing volume of EUR 5m. Assume the acquirer does a gross payout of funds from the schemes to the merchant without deducting fees. Fees are invoiced separately, outside of this example.

The merchant sells high-end fashion on the Champs-Élysées in Paris. They serve mostly international shoppers from outside Europe. That means that the transactions are cross-border and the settlement delay for the acquirer is generally T+2.

In their negotiations, the merchant and the acquirer have agreed to a payout timing of T+1. This means the acquirer is effectively pre-financing the merchant a full day of processing volume. That implies a financing amount of EUR 5m. This is to be financed at the acquirer’s cost of capital, potentially making use of a new credit line.

Assume that the cost of financing this volume with a new credit line is 4%. That implies an annual financing cost of 4% times EUR 5m = EUR 200k.

Deciding to payout faster than your competitors may be the reason to win a merchant, but it requires the acquirer to be thoughtful in managing their liquidity.

Strategic considerations

Card network settlement timing generally varies from T+0 to T+2 depending on the currency and settlement service. A single acquirer can run multiple settlement services simultaneously, so timelines can vary across the portfolio.
Which settlement service is selected for a transaction may depend on various factors, sometimes out of your control.
Each extra business day between scheme pay-in and merchant pay-out translates into one full day of processing volume that must be financed.
Faster merchant payouts are a great feature to offer, but may have to be funded from your own balance sheet. Acquirers can use payout timing in negotiations with merchants.
Keeping track of your treasury metrics may help uncover hidden costs and potentially increase your revenues.

Conclusion

Timing is a silent P&L lever in card acquiring. Understand your settlement services, negotiate merchant payout timing, and control your overall portfolio cost. The result: happier merchants and a thankful CFO.

How do you approach treasury in acquiring today? Share your take or talk to our team!