How Paytm Payment Gateway’s T+1 settlement is solving cash flow woes for online startups

In an interesting analysis, Paytm is reported to be the fastest when it comes to transaction settlement time to merchants as compared to that of other competitors.
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Cash flow management is one of the important aspects of running a business. It indicates the financial health of your company and prepares you for any unforeseen situation that may arise in the future.

Businesses incur different types of expenses at different stages, and a positive cash flow is important to be able to run a business smoothly. There are two factors that determine the ability of a business to manage its cash flows effectively.

  1. Cash flow frequency: How often does a business receive money from its customers and how fast does this money hit the merchant bank account. Delayed and infrequent credits to your bank account will result in discrepancies between invoices and account statements that will need to be manually reconciled later.
  2. Cash flow predictability: Every business needs to know exactly when liquid cash will hit their bank accounts to plan expenses and business investments accurately. The ability to reliably forecast your income and expenses over the year is critical.

More often than not, delayed and unpredictable settlement of business transactions can lead to cash flow problems for businesses selling online and is one of the main reasons why many online businesses shut abruptly.

According to some reports, 82 percent of failed businesses cite lack of cash flow as a contributing factor for shutting down.

How do payment settlements work?

It is often observed that even though a customer pays on time, the payment gateway takes a certain amount of time to credit the money into the merchant’s account. This is because there are quite a few steps between the payment event and the amount actually being credited to the business bank account. These steps are as follows:

  • The customer initiates a payment on your website or app
  • The customer’s transaction information is then securely encrypted and authenticated by the payment gateway and the payment processor
  • This information about the transaction is then passed to the issuing bank and the transaction is approved (or not)
  • Once approved, funds then flow through the payment network into your merchant account

Timely settlement: Need of the hour

Most payment gateways offer T+2, excluding holidays, as the standard settlement time (T being the day when a transaction is initiated). However, if analysed further, it usually takes more than just two days to settle a transaction into the business owner’s account.

  • T+2 indicates transaction plus two working/business days. Hence, if a transaction is initiated towards the end of the week, the settlement takes more than two days.
  • Festivals and other occasions can extend the time-off and your funds can virtually get stuck for as much as six days before they reach you.
  • Bank holidays can further delay the settlement time.
  • T+2 settlement is likely to be breached for a staggering 47 percent of days of the year - which means your money won’t reach you on time for almost half of the year.
  • According to Paytm’s analysis, the settlement time will be more than four days for 113 days in the next year. That’s about one third of the year!

This becomes detrimental to a business’s ability to manage its cash flows, especially if you are a startup with low margins.

Paytm Payment Gateway to the rescue

Startups need to opt for faster ways to get the transaction settled. One of the easiest ways to solve this problem is to choose a better payment gateway partner. Paytm for instance has a facility that offers a standard of T+1 settlement throughout the year without any hassle. As a pioneering and leading payment gateway, Paytm believes in prioritising settlement for online businesses, irrespective of holidays and weekends. Here is a comparative analysis that gives you an idea on how Paytm settles transactions faster than any other payment gateway.

As observed above, Paytm’s T+1 settlement cycle (without holidays) is way faster than other payment gateways and a better alternative for online merchants. With a proven track record of faster settlements, Paytm is empowering merchants to make financial decisions without worrying about their overdue payments.

A trusted payment partner

Although settlement time is one of the most important factors to look for in a payment gateway partner, other factors contribute significantly to a business’s growth journey.

Paytm payment gateway along with quick settlements also offers a range of benefits for businesses like safe and secure transactions, an interactive dashboard with data and insights, high payment success rate and more. Hence, more and more startups are choosing Paytm as a trusted payment gateway partner for their business. You can read more about them on their payment gateway website.


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