📑 Table of Contents
Overview of Settlement Discrepancies
Settlement discrepancies occur when there's a mismatch between expected and actual payment settlements. These issues can result in revenue leakage, accounting errors, and cash flow problems if not addressed promptly.
Discrepancy Categories by Frequency
| Discrepancy Type | Frequency | Avg. Financial Impact | Typical Resolution Time |
|---|---|---|---|
| Missing Settlements | 40% of all issues | ₹50K-5L per incident | 24-72 hours |
| Amount Mismatches | 30% of all issues | ₹500-50K per incident | 12-48 hours |
| Delayed Settlements | 20% of all issues | Opportunity cost only | 48-96 hours |
| Fee Errors | 10% of all issues | ₹1K-20K per incident | 7-14 days |
Issue #1: Missing Settlements
Missing Settlement in Bank Account
HIGH SEVERITY📋 Symptom:
Gateway report shows transaction as "settled" but no corresponding credit appears in bank account within expected settlement cycle (T+2, T+3, etc.).
🔍 Root Causes:
- Bank Account Mismatch: Gateway has incorrect/old bank account details
- Extended Settlement Window: Weekend/holiday delays extending settlement beyond expected date
- Batch Consolidation: Small settlements combined into single larger batch
- Hold/Freeze: Gateway has placed temporary hold due to risk review
- Technical Error: Gateway's banking integration failed
- Beneficiary Name Mismatch: Bank rejected credit due to name difference
✅ Resolution Workflow:
- Verify Settlement Status: Log into gateway dashboard and confirm transaction shows as "Settled" with settlement date
- Extend Search Window: Check bank statements from T+2 to T+7 (accounting for delays)
- Check for Batch Settlements: Look for consolidated credit entries that combine multiple days
- Verify Bank Account: Confirm gateway has correct bank account number and IFSC code
- Request Settlement Proof: Ask gateway support for UTR (Unique Transaction Reference) number
- Contact Bank: If UTR provided, check with bank why credit wasn't received
- File Formal Complaint: If unresolved after 48 hours, file complaint with gateway escalation team
- Document Everything: Keep email trail, screenshots, and reference numbers
⏱️ Expected Resolution Time:
24-72 hours. Most cases are resolved within 24 hours once proper investigation starts. Complex cases involving bank disputes may take up to 7 days.
💰 Financial Recovery:
100% recoverable. If gateway shows settled, you're entitled to full amount. Gateway liability insurance covers missing settlements.
Issue #2: Amount Mismatches
Settlement Amount Differs from Expected
MEDIUM SEVERITY📋 Symptom:
Bank credit received but amount is different from expected net settlement (transaction amount minus fees).
🔍 Root Causes:
- Incorrect MDR Calculation: Wrong fee percentage applied
- Hidden Fees: Undisclosed charges (chargeback fee, annual fee, setup fee)
- GST Calculation Error: Wrong GST rate on MDR
- Partial Chargeback: Chargeback deducted from settlement
- Currency Conversion: Exchange rate fluctuation for international transactions
- Rounding Errors: Minor discrepancies due to rounding (₹0.01 - ₹1.00)
- Missing Transactions: Batch missing some transactions
✅ Resolution Workflow:
- Calculate Expected Net: (Transaction Amount) × (1 - MDR%) - GST on MDR
- Compare with Actual: Note exact difference in rupees
- Download Settlement Report: Get detailed breakdown from gateway
- Identify Fee Components: Check all deductions (MDR, GST, platform fee, gateway fee)
- Verify Transaction Count: Ensure all expected transactions are in batch
- Check for Chargebacks: Look for chargeback deductions in report
- Calculate Discrepancy Percentage: (Difference / Expected Amount) × 100
- Raise Dispute: If discrepancy > 0.1%, contact gateway with calculations
- Request Fee Breakdown: Ask for itemized fee statement
- Demand Refund: For incorrect charges, request credit adjustment
💡 Common Amount Mismatch Examples:
Example 1 - Incorrect MDR:
- Transaction: ₹10,000
- Agreed MDR: 2.0%
- Applied MDR: 2.5% (error)
- Overcharge: ₹50
- Recoverable: Yes, with proof of agreement
Example 2 - Hidden Chargeback:
- Expected Settlement: ₹50,000
- Actual Credit: ₹47,500
- Difference: ₹2,500
- Reason: Customer initiated chargeback
- Action: Review chargeback notification (may be legitimate)
Issue #3: Delayed Settlements
Settlement Beyond Expected Cycle
MEDIUM SEVERITY📋 Symptom:
Settlement arrives later than agreed cycle (T+2 becomes T+4 or T+5).
🔍 Root Causes:
- Bank Holidays: Non-working days extend settlement timeline
- High Chargeback Rate: Gateway adds buffer for risk management
- Account Under Review: Suspicious activity triggers manual review
- Technical Issues: Gateway or banking system downtime
- Incomplete KYC: Pending documentation delays processing
- New Merchant Status: Extended cycles for first 3-6 months
- Settlement Threshold: Minimum balance not met (e.g., ₹1000 minimum)
✅ Resolution Workflow:
- Check Holiday Calendar: Verify no bank holidays between transaction and expected settlement
- Review Agreement: Confirm your settlement cycle in merchant agreement
- Check Gateway Status: Look for notifications in dashboard (hold, review, pending docs)
- Verify Transaction Status: Ensure transaction moved from "Pending" to "Settled"
- Contact Support: Ask for reason for delay and expected credit date
- Request Expedited Settlement: For urgent needs, ask for instant settlement (may incur fee)
- Document Pattern: If delays are recurring, document dates and file complaint
- Consider Alternative Gateway: Persistent delays may warrant switching providers
📅 Delay Impact Analysis:
| Delay Period | Impact Level | Opportunity Cost (for ₹1L settlement) | Action Required |
|---|---|---|---|
| +1 day | Low | ₹27 (@ 10% annual rate) | Monitor only |
| +2-3 days | Medium | ₹54-82 | Contact support |
| +4-7 days | High | ₹110-192 | Escalate + file complaint |
| 7+ days | Critical | ₹192+ | Formal dispute + consider legal |
Issue #4: Fee & MDR Errors
Incorrect Fee Deductions
MEDIUM SEVERITY📋 Symptom:
Gateway deducting more fees than agreed upon in merchant agreement.
🔍 Common Fee Errors:
- Wrong MDR Tier: Standard rate applied instead of negotiated discount (2.5% vs 2.0%)
- Incorrect GST: 18% GST applied on gross instead of on MDR only
- Payment Method Mix-up: Credit card rate applied to UPI/wallet transactions
- Volume Slab Error: Not receiving volume discount despite meeting threshold
- Duplicate Fees: Platform fee + gateway fee both charged
- Hidden Setup Fees: One-time charges applied repeatedly
- Chargeback Fee Error: Fee charged even when chargeback won
✅ Resolution Workflow:
- Pull Merchant Agreement: Find your exact MDR rates and fee structure
- Download Fee Report: Get detailed fee breakdown for disputed period
- Calculate Correct Fees: Compute what fees should have been
- Identify Overcharge: Calculate total overcharged amount
- Prepare Evidence: Create comparison sheet (Agreed vs Charged)
- Email Finance Team: Send detailed breakdown with agreement reference
- Request Credit Note: Ask for refund or credit adjustment
- Follow Up Weekly: Fee disputes take 7-14 days to resolve
- Escalate if Needed: Contact relationship manager or senior management
- Future Prevention: Set up automated fee validation in reconciliation
Issue #5: Duplicate Entries
Duplicate Transaction Entries
LOW SEVERITY📋 Symptom:
Same transaction appears multiple times in settlement reports or multiple settlements credited for single transaction.
🔍 Root Causes:
- Customer Double-Click: User clicked "Pay" button multiple times
- API Retry Logic: Payment confirmation API called multiple times
- Data Export Error: Gateway report generation bug
- Refund Confusion: Original payment + refund shown separately
- Batch Processing Error: Transaction included in two settlement batches
- Test Transactions: Test mode transactions mixed with live data
✅ Resolution Workflow:
- Identify Duplicates: Sort by transaction ID and timestamp
- Check Customer Orders: Verify if customer actually ordered multiple times
- Review Transaction Details: Compare all fields (amount, time, customer ID)
- Determine True Duplicates: Genuine duplicate vs legitimate repeat order
- Calculate Impact: For genuine duplicates, calculate excess settlement
- Process Refund: If duplicate settlement received, initiate refund to customer
- Report to Gateway: Inform gateway of duplicate processing
- Fix Integration: If API issue, add idempotency keys to prevent future duplicates
Issue #6: Chargeback Deduction Issues
Unexpected Chargeback Deductions
HIGH SEVERITY📋 Symptom:
Amount deducted from settlement with minimal or no advance notice, often labeled as "chargeback" or "dispute resolution".
🔍 Common Chargeback Problems:
- No Prior Notification: Chargeback deducted without email alert
- Excessive Chargeback Fee: Gateway charges ₹500-1000 per chargeback on top of amount
- Won Chargeback Still Deducted: Funds not returned after winning dispute
- Fraudulent Chargeback: Customer received product but still disputed
- Multiple Deductions: Same chargeback deducted from multiple settlements
- Timing Issues: Chargeback for 90-day old transaction
✅ Resolution Workflow:
- Request Chargeback Details: Get reason code, customer statement, dispute evidence
- Review Transaction Records: Pull order details, delivery proof, customer communication
- Assess Validity: Determine if chargeback is legitimate or fraudulent
- Gather Evidence: Collect delivery proof, signed receipts, tracking numbers, customer emails
- Submit Representment: File dispute with evidence if chargeback is invalid
- Track Dispute Status: Follow up every 3-5 days on resolution
- If Won: Verify funds are returned to your account (usually 30-45 days)
- If Lost: Document reason to improve future prevention
- Monitor Pattern: High chargeback rate (>1%) triggers gateway scrutiny
Issue #7: Refund Processing Problems
Refund Not Reflected in Settlement
LOW SEVERITY📋 Symptom:
Refund initiated but not deducted from settlement, or deducted twice, or deducted from wrong settlement batch.
🔍 Common Refund Issues:
- Timing Mismatch: Refund processed after original settlement
- Fee Not Refunded: MDR deducted but not returned on refund
- Partial Refund Error: Full amount deducted instead of partial
- Duplicate Refund: Same refund deducted multiple times
- Wrong Settlement Batch: Refund deducted from unrelated batch
- Refund Fee Charged: Gateway charges fee for processing refund
✅ Resolution Workflow:
- Track Refund Lifecycle: Note refund initiation date and expected deduction date
- Check Settlement Reports: Find refund line item in settlement breakdown
- Verify Refund Amount: Ensure correct amount (gross refund + fees if applicable)
- Match with Original Transaction: Link refund to source transaction
- Calculate Net Impact: Original settlement - refund amount - any fees
- Check Customer Confirmation: Verify customer received refund
- Reconcile Books: Update accounting to reflect refund
- Report Errors: Contact gateway if refund not processed correctly
Prevention Strategies
✅ Daily Prevention Checklist
- Perform daily reconciliation (don't wait for month-end)
- Review settlement reports within 24 hours of transaction date
- Monitor gateway dashboard for alerts and notifications
- Check bank statements daily for incoming credits
- Maintain updated bank account information with gateway
- Set up email/SMS alerts for all settlements and chargebacks
- Keep merchant agreement accessible for fee verification
✅ Weekly Prevention Actions
- Run exception reports to identify unmatched transactions
- Verify all pending disputes are being tracked
- Calculate actual vs expected settlement totals
- Review chargeback ratio and investigate any increases
- Audit fee calculations for accuracy
- Follow up on any unresolved discrepancies from previous week
✅ Monthly Prevention Review
- Perform comprehensive month-end reconciliation
- Analyze settlement patterns and identify recurring issues
- Review gateway performance (settlement speed, accuracy, fees)
- Calculate total discrepancy rate and recovery rate
- Update documentation and SOPs based on new issues
- Conduct team training on new discrepancy types
- Evaluate need for automation tools if issues are increasing
Automate Discrepancy Detection
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Start Free 30-Day Trial →Frequently Asked Questions
Escalation path: 1) Start with support ticket (48 hours). 2) Email relationship manager with ticket reference (24 hours). 3) CC senior management from gateway's website (24 hours). 4) File formal complaint with consumer forum or banking ombudsman (if gateway is regulated). 5) Consult lawyer for legal notice if amount is significant (>₹1L). Always maintain written communication trail. Most gateways respond within 72 hours when properly escalated.
Yes, but it's a last resort. Your merchant agreement is a legally binding contract. If gateway fails to settle funds as agreed, you have grounds for breach of contract. However, legal action is expensive and time-consuming. Better approach: 1) Document everything. 2) Send legal notice (₹5K-10K, lawyer required). 3) Most gateways settle immediately after legal notice to avoid court. 4) If proceeding to court, file in small claims court for amounts under ₹20L (faster, cheaper). Success rate is high when you have proper documentation.
Minimum 7 years (Indian tax law requirement). Keep: 1) Gateway settlement reports (CSV/PDF). 2) Bank statements showing credits. 3) Reconciliation worksheets. 4) Exception reports and resolutions. 5) Email correspondence with gateway. 6) Chargeback documentation. 7) Merchant agreements and amendments. Store digitally with automatic backups. Use cloud storage with version control. Critical for GST audits, income tax scrutiny, and resolving disputes years later.
Industry benchmarks: Excellent: <0.5% (fewer than 5 discrepancies per 1000 transactions). Good: 0.5-1.0%. Acceptable: 1.0-2.0%. Poor: 2.0-5.0% (needs immediate attention). Critical: >5% (systemic issues). Calculate monthly: (Total Discrepancies / Total Transactions) × 100. Track trend over time. Sudden increase indicates new problem (gateway change, new product type, fraud spike, process breakdown).
Always separately first, then consolidated. Each gateway has different: settlement cycles, fee structures, reporting formats, bank accounts (sometimes). Reconcile individually to identify which gateway has issues. Create separate sheets/reports for each gateway. Then create master summary showing all gateways combined. This approach helps: 1) Identify problematic gateways. 2) Negotiate better terms with reliable ones. 3) Make informed decisions about which to use more. 4) Isolate issues quickly during troubleshooting.
95-98% of discrepancies, yes. Automated tools excel at: missing settlements, amount mismatches, fee errors, duplicate entries, delayed settlements, batch matching issues. They struggle with: edge cases requiring business context, one-off special arrangements, new discrepancy types not in algorithm, issues requiring human judgment. Hybrid approach is best: automation handles 98% of routine matching, human reviews 2% of exceptions and complex cases. This gives you speed + accuracy.
Significant and cumulative. Example: Business processing ₹1 crore monthly with 3% unresolved discrepancy rate loses ₹3 lakhs monthly = ₹36 lakhs annually. Beyond direct revenue loss: 1) Tax implications: Reporting mismatches trigger scrutiny. 2) Cash flow problems: Can't pay suppliers on time. 3) Audit findings: Clean audit becomes qualified opinion. 4) Investor concerns: Reduces company valuation. 5) Stress and time: Hundreds of hours resolving old issues. Prevention and quick resolution are far cheaper than delayed action.