Payments 101 · lesson 03 · 5 min

Life of a transaction: authorize, clear, settle

Why the money leaves in milliseconds but moves in days — the three phases of every payment.

A card payment looks instant, but it happens in three phases.

Authorization is the instant part. The terminal sends an authorization request up through the acquirer and scheme to the issuer. The CMS checks the card's status, its restrictions (is e-commerce allowed? international?), the available limit, and fraud signals — then answers approve or decline. On approval it places a hold (a *provision*) on the cardholder's limit. No money has moved; it's a reservation with an authorization code as the receipt.

Clearing happens later, usually that night. The merchant's acquirer sends the final transaction records in batch through the scheme to the issuer. The CMS matches each record to its authorization, converts the hold into a booked transaction, and applies fees and currency conversion.

Settlement is the actual movement of money between banks, netted across millions of transactions, on scheme-run settlement accounts.

In Everest, every financial operation returns a utid — the Unique Transaction ID that identifies that transaction through all later life: reversal on the same day, conversion into installments, statement lines, or a dispute months later. When you see utid in this portal, think "the handle on one transaction, forever."