Settlement services are used in interbank operations for the balance settlement of an operation between two entities. The sending and receiving parties mostly use different banks and a final bank with settlement services is required for clearing.
When an electronic payment transaction is processed, three main parties are involved; the cardholder’s bank, a settlement bank, and a payment processor. The cardholder’s bank starts the transaction via a payment processor and a settlement bank facilitates the communication between different banks by providing settlement services.