What a settlement actually represents
When a player deposits by card, bank transfer or e-wallet, the money does not go straight to the operator. It goes to a payment processor, which collects funds from the card schemes, banks or wallet providers and, after an agreed delay, pays a net amount to the operator. That net payment is the settlement.
A settlement is rarely a simple total of deposits. It is gross deposits, less withdrawals processed through the same channel where the processor handles payouts, less refunds, less chargebacks, less processing fees, less any amount held back as a reserve, plus any reserve released from earlier periods. Some processors also convert currencies before paying, which adds an exchange rate to the calculation.
Because so many items are netted together, the bank credit an operator sees on any given day can look very different from the deposit figures in its own back office. Reconciliation is the process of explaining that difference, line by line, so that the finance team knows exactly what it has received and why.
The three-way match
A sound reconciliation compares three sources of data for each processor and each settlement period.
- The operator's own records. The platform's record of player deposits, withdrawals and transaction statuses for that processor and period.
- The processor's statement. The processor's report of transactions, fees, chargebacks, reserves and the resulting net settlement.
- The bank or account credit. The amount that actually arrived, on the date it arrived, in the account that received it.
Each source should agree with the others once known timing differences are accounted for. Differences between the platform and the processor usually come from transactions that one system recorded as successful and the other as failed or pending, or from timing around the cut-off. Differences between the processor statement and the bank credit usually come from fees deducted at a different stage, currency conversion, or intermediary bank charges.
Unexplained differences should be investigated and resolved, never simply written off. Small amounts left unexplained month after month add up, and they can hide processor errors or, occasionally, fraud.
Fees and how they appear
Processing fees in iGaming can be complex. A single processor might charge a percentage of each deposit, a fixed fee per transaction, separate fees for payouts, chargeback fees, refund fees, monthly minimums and currency conversion margins. Card processing for gambling merchants is generally priced higher than for ordinary retail, reflecting the risk the processor and acquirer take on.
Fees may be deducted from each settlement, invoiced separately, or a mixture of the two. Finance teams should build a fee model for each processor based on the contract and check each statement against it. A fee line that does not match the contract, or a new charge that appears without notice, should be raised with the processor.
Keeping a clear record of fees by processor also helps commercial decisions. When an operator compares processors for a market, the effective cost of each, including chargeback and conversion costs, is a more useful number than the headline rate.
Reserves and rolling reserves in general terms
Processors often hold back part of an operator's money as security against future chargebacks, refunds and other liabilities. There are two common forms.
- A fixed reserve. A set amount held for the duration of the relationship, or until the processor is comfortable releasing it. It might be funded upfront or built up from early settlements.
- A rolling reserve. A percentage of each settlement is held back and released after a set period. Each day's or week's reserve is released on its own schedule, so the total amount held rises and then levels out once releases begin to match new holds.
The percentage and holding period are set by contract and depend on the processor's view of the risk. They may change over time as the operator builds a track record, or if chargeback levels rise.
Reserves need to be tracked as an asset. The operator should maintain a reserve ledger for each processor showing every amount held, the date it is due for release and the date it is actually released. Processors sometimes release late or net releases against other items, and without a ledger the operator may not notice.
When a processor relationship ends, the reserve does not come back at once. The processor usually keeps it for a further period to cover chargebacks that arrive after the final transactions. Operators should agree the release terms in writing when the relationship ends, diarise the expected release dates and chase them. Reserves left with former processors are a surprisingly common source of unrecovered funds.
A worked example
The figures below are entirely illustrative and do not reflect any real processor's terms. Assume a processor settles card deposits in EUR weekly, deducts fees from the settlement and holds a rolling reserve of a set percentage for a set number of days.
| Line | Amount (EUR) |
|---|---|
| Gross deposits for the week | 500,000 |
| Less refunds | -4,000 |
| Less chargebacks | -3,000 |
| Less chargeback fees | -600 |
| Less processing fees | -17,500 |
| Less rolling reserve held this week | -50,000 |
| Plus reserve released from an earlier week | 45,000 |
| Net settlement | 469,900 |
The finance team would check gross deposits against the platform, compare the fee and reserve lines with the contract, add the reserve held to the reserve ledger and tick off the release against the ledger entry from the earlier week. It would then confirm that 469,900 arrived in the correct account on the expected date. Any difference, such as an intermediary charge, would be recorded and explained.
Chargebacks in iGaming
A chargeback happens when a cardholder disputes a transaction with their card issuer and the issuer reverses it. In iGaming, chargebacks arise from genuine fraud, such as stolen cards, from players who regret losses and claim they did not authorise the deposit, and from family members using a card without permission.
Chargebacks cost operators the reversed amount plus a fee, and they affect the processor relationship. Card schemes monitor merchants' chargeback ratios and run programmes for merchants that exceed set thresholds. A processor whose gambling merchant drifts into those programmes faces costs and scrutiny, and may increase reserves or end the relationship.
Operators manage chargebacks through strong KYC, verification of the cardholder's identity, limits for new players, fraud screening tools and clear descriptors on card statements so that players recognise the charge. They also contest chargebacks where they have evidence that the transaction was authorised. In reconciliation, each chargeback should be matched to the original deposit and the player account, so the operator can see patterns and take action against abuse.
Currency in settlements
Processors settle in different ways. Some settle in the currency the player paid. Others convert everything to a single settlement currency, such as EUR or USD, at their own rate. Some offer a choice of settlement currencies for an additional charge.
When a processor converts, the operator should know the rate used and compare it with market rates at the time. Conversion margins built into settlements are easy to overlook because they do not appear as a separate fee. When a processor settles in local currencies, the operator receives several currencies and must decide how to manage them.
Many operators prefer to receive settlements in the original currency where possible and to manage conversion themselves. This gives them control over timing and visibility of rates, and lets them hold currency they will need for local costs, such as Canadian affiliates paid in CAD or British gambling duty paid in GBP.
Converting and moving funds after reconciliation
Once a settlement is reconciled, the money becomes available for the business. The next step is deciding where it should go. A typical sequence looks like this.
- Cover local obligations. Retain enough in each currency for upcoming costs in that currency, such as local tax, local affiliates or local suppliers.
- Convert the surplus. Convert remaining balances into the group's base currency, often EUR, using spot conversion at regular intervals.
- Fund outgoing payments. Pay suppliers, affiliates, licence fees and taxes from the base currency or the relevant currency balance.
- Move profits within the group. Transfer surplus funds to holding or treasury companies under the group's intercompany arrangements and in line with any regulatory capital or player fund requirements.
Operators should only convert and move money that has been reconciled and that belongs to the operator. Player balances and any amounts the regulator requires to be held for player protection should stay where they are required to be. A treasury account receiving reconciled processor settlements is the right starting point for business flows. Our article on supplier payments covers the outgoing side.
Controls that keep reconciliation reliable
Reconciliation is only as good as the discipline behind it. A few controls make a large difference.
- Reconcile each processor at least weekly, and daily for high-volume processors.
- Separate the person who prepares the reconciliation from the person who approves it.
- Keep the reserve ledger and the chargeback log as part of the reconciliation pack.
- Escalate unresolved differences above a set threshold within a set number of days.
- Retain processor statements, reconciliation workpapers and bank confirmations for the period required by your licence and AML rules.
Payment providers, auditors and regulators may ask to see reconciliation files. A tidy monthly pack for each processor, showing the three-way match and the movements in reserves, answers most questions before they are asked.
General information, not legal advice
This article is general information about processor settlement reconciliation in iGaming. It is not legal, accounting or tax advice, and processor terms vary widely.
CCYFX converts reconciled processor settlements for licensed operators using spot FX with EUR as the base currency, and makes onward business payments. Our foreign exchange service explains how conversions are booked and settled.
