Is settlement the same as payment authorization?

No, settlement and payment authorization are two distinct steps in the payment process, especially in credit or debit card payments. Payment authorization occurs first, where the merchant requests payment from the customer's bank and receives approval to proceed with the transaction. Settlement, on the other hand, happens after payment authorization and involves the transfer of funds from the customer's account to the merchant's account. Settlement may occur immediately, within hours, or even days, depending on various factors.

Does settlement happen immediately after authorization?

Settlement does not always happen immediately after authorization. The timing of settlement depends on the type of transaction and the specific business practices. In some cases, settlement may occur immediately, such as in retail stores, where customers leave with their purchased goods. However, in other situations, merchants may place an authorization hold, authorizing the transaction but delaying settlement. Examples include hotels that settle at check-out and online stores that settle upon shipping the goods. Authorization holds ensure that the funds are available when needed for settlement.