Reconciliation

Reconciliation is unglamorous but commercially critical. For every dollar of processing volume, reconciliation is the control that verifies the correct dollar actually arrived in the merchant’s bank account, net of the correct fees.

Why Reconciliation Breaks Down

Payment data flows through multiple systems with different identifiers, timezones, and reporting conventions:

• The merchant’s order management system records the transaction at checkout time.
• The PSP records the authorization at processing time (often seconds later).
• The card network records the clearing at end-of-day batch time.
• Settlement occurs on T+1 or T+2 in a batch that may net dozens or hundreds of transactions.
• Chargebacks arrive separately, sometimes weeks later.

Matching these records is conceptually simple but technically complex: transaction IDs may differ across systems, timezones create day-boundary discrepancies, and partial refunds or adjustments create non-obvious matches.

Reconciliation Failure Modes

Underpayment: The PSP settles less than expected — due to incorrect fee application, unreported chargebacks, or reserve withholding not clearly disclosed in settlement reports.

Missing transactions: A transaction that appears in the OMS is absent from the PSP’s settlement report — indicating a processing failure or data gap.

Duplicate settlements: The same transaction settles twice — a PSP error that requires identification and dispute.

Fee discrepancies: Actual MDR charged differs from contracted rate — due to card type misclassification, MCC errors, or unauthorized fee changes.

FX discrepancies: For multi-currency merchants, the FX rate applied to settlement differs from the disclosed or expected rate.

Reconciliation Architecture

For merchants processing above ~$5M/year, manual reconciliation in spreadsheets is inadequate. A robust reconciliation architecture includes:

1. Data ingestion: Automated download of PSP settlement reports (typically CSV or API) and bank statements.
2. Transaction matching: Automated matching of order IDs to PSP transaction IDs using fuzzy matching where ID formats differ.
3. Exception management: A queue of unmatched items for manual review, with aging tracking.
4. Fee validation: Automated comparison of applied fees against contracted rates by card type and transaction category.
5. Reporting: Daily reconciliation dashboard with match rates, outstanding exceptions, and settlement confirmation.

Third-party reconciliation tools (Reco, TrueLayer Reconciliation, Cashflows) can provide this infrastructure without custom build. For merchants with complex multi-PSP setups, the build cost for internal reconciliation tooling is typically $150K–$500K in engineering time.