Refund settlement is the stage at which the money for a refund actually moves. When a merchant issues a card refund, it creates a credit transaction that is cleared through the card network like a sale in reverse: the acquirer debits the merchant, the network moves funds between acquirer and issuer in its daily settlement, and the issuer credits the cardholder's account. The cardholder may wait several days for the issuer to post it.
For most merchants, refunds are netted against sales in the same batch settlement, so the payout they receive is reduced rather than a separate payment being made. If refunds exceed sales on a given day, the acquirer may debit the merchant's bank account or a reserve. Reconciling refunds therefore forms part of settlement reconciliation. On bank transfer and wallet rails, refund settlement is usually a new credit payment from the merchant to the payer, linked to the original by a reference.