Settlement Processing in Paytm



Paytm offers T+N Settlement as well as Same Day (or Early Settlement). Paytm offers multiple early settlement services which merchants can opt for with minimum fees as per the business type and applicability. Paytm recommends you to choose your settlement cycle during commercial closure, which can be modified later based on your business needs. 


Settlement Workflow


It is a crucial part of the payment processing cycle in the context of electronic payments. Here's how merchant settlement typically works: 


  1. Customer Transactions: When a customer makes a purchase at a business or online store using a credit card or debit card, the transaction is processed through a payment gateway or payment processor. The customer's card information is verified, and the payment is authorized.  
  2. Authorization: During the authorization process, the payment processor checks whether the customer's card has sufficient funds or credit limit to cover the purchase. If the transaction is approved, the funds are placed on hold. 
  3. Money Received from Customers: This refers to the payments made by your customers using Paytm as a payment method for goods or services. 
  4. Batch Processing: Throughout the day, the merchant accumulates a batch of authorized transactions. Typically, At the end of the business day or at specific intervals, these transactions are batched together for Settlement. 
  5. Settlement: The settlement process involves the transfer of funds from the Nodal to the merchant's bank account. This typically occurs within a few business hours or at the T+N cycle after the transactions are batched. 
  6. Deduction of Fees: Paytm deducts certain fees or charges before transferring the settled amount to your bank account. These fees may include transaction processing fees or service fees for using the Paytm platform.
  7. Bank Account Deposit: The final step in the settlement process is transferring the settled amount to your designated bank account. Overall, the settlement process ensures that the money collected from your customers through Paytm is batched and transferred to your bank account. The settled funds are deposited into the merchant's bank account. This is when the merchant officially receives the payment for the goods or services sold to the customer.  
  8. Reconciliation: The merchant reconciles the settled funds received in their bank account with the corresponding transactions in their records. This helps ensure that all payments have been received correctly. Merchant Settlement is crucial for businesses to manage their cash flow and finances efficiently. Additionally, it helps merchants track their revenue, monitor transaction fees, and reconcile their financial records accurately.
  9. Post Settlement Communication: Paytm notifies merchants of any pending or failed settlements at least once a day.  

a. P4B Push Notifications and SMS are sent on each Successful, Failed, and Pending settlement. 


b. WhatsApp communication is sent for Failed settlements. 


c. Failed Settlement communications are sent once a day for the next 90 days in case of long failing payouts. Failed settlement could be due to the following reasons:


  • Bank account closed 
  • Bank account or IFSC or Beneficiary Name is invalid 
  • Bank account frozen 
  • Bank account dormant 
  • Bank account limit breached 
  • Failed by beneficiary reason due to any other reasons 


d. Pending and Long Pending Settlement Communications are being sent after 90-120 minutes to incorporate the delayed response from the beneficiary banks. 


e. Each communication clearly mentions the required actions to be taken, such as change of bank account, KYC required, transfer balance from wallet, etc. 


Net Settlement Calculation


All payment transactions of a customer using Paytm as well as refunds for given orders post-settlement are reflected in the Settlement Report. Net Settlement amount is transferred to the merchant's bank account after netting off commissions, refunds, and any other applicable deductions.

Net settlement amount calculation happens as mentioned below:- 


Net settlement amount= Payments accepted(-)Commission(-)GST(18% of commission fee) (-) Any other deductions (such as Rental/ Refund/ Chargeback/ Reversal/ Recovery) 


 Note: If as a merchant you have opted for any services, the VAS deductions are made against any value-added service which can be as mentioned in the below section.  


Types of Deductions


  1. Refunds


    Reason: Due to cancellation of any order


    Refunds are an essential part of online business. Customers can cancel orders and return products. Refunds can be initiated only against successful transactions. Merchants can either mark full or partial refunds. Merchant can initiate either partial or full refunds as per their use case.  Refunds are reversal transactions wherein complete or partial money is moved back to the customer's source account (account from which actual payment was made). A refund can only be created for a successful or settled transaction only. 

  2. Chargebacks


    Reason: Due to non-delivery of services / products


    Chargeback is a dispute raised by a customer (cardholder) with his Bank( issuing) in case he/she doesn’t get the service or product for which the payment was made and also doesn’t get the refund of the same.  In such cases, Customer reaches out to his bank (issuing)  and his Bank enquires the same with the acquirer and the acquirer reaches out to us, Paytm reaches out to the Merchant to get the Proof of delivery against the sold product/ services for the respective PG transaction ID.  Merchants have to provide it within a given timeline else debit from forward settlements will be made by Paytm. If a merchant doesn’t reply within TAT then such a chargeback is considered a valid chargeback. Under no response, it will be considered as accepted.  So basically, these payments are returned to payers and debited from the Merchant’s Settlement in case the merchant is not able to provide the delivery proofs of service/product in a given timeline. 

  3. Repayment/ Rental


    Applicable for: Soundbox/EDC device for an active subscription


    If a merchant has opted for a specific device or service such as Sound Box or EDC device, there would be a charge deduction for the same during the subscription period. The payment frequency and amount will depend on the terms of the subscription. It could be a monthly fee at the beginning of a month or a lump-sum payment for the entire subscription duration.

  4. Recovery


    Reason: Due to double payouts or any other recoverable


    There is one of the rare events of recovery from the settlement in case an overpayment to a merchant is made or to recover any other type of fund loss. 



  1. Refunds & Chargebacks gets adjusted from the day-to-day settlements and these orders are reflected in the Merchant Settlement report, for example for any given day if there are refunds or chargeback of INR 100 and accepted payments of INR 1000.
  2. In addition to the above scenarios, there could be cases where your fund transfers are in a HOLD state due to business or other reasons. 

Money Movement


  1. Virtual Money Movement



    1. As soon as the payment is successfully completed, money is transferred to the merchant’s virtual Pool Account.  
    2. The collected money till 12 AM gets settled on the next day for T+N settlement merchants (Typical T+1 Settlements).
    3. For all Success transfers, the status gets updated in real-time over UMP/P4B (Instant success+ Deemed success+ Pending to success).
    4. For settlement failures, retry attempts happen via the system only for a defined set of days.
    5. Finally, Day-level Settlement Report-based reconciliation occurs.


  2. Physical Money Movement


    Default physical money movement flow for any transaction includes the following steps:

    1. Funds debited from customer bank accounts are collected in the Nodal account of the Payment aggregator via Acquirers on T+1.
    2. Payment Aggregator settles merchants by sending money into their bank account from its nodal account.