Blog Post
Solving the Card Settlement Challenge: Visa & Mastercard Reconciliation Explained
For any bank or fintech issuing cards, the daily settlement file from Visa or Mastercard is both a blessing and a curse. It confirms your revenue, but it arrives as a cryptic, massive dataset (often in IPM or raw text formats) that must be reconciled against your Core Banking System down to the penny. The challenge isn't just volume; it's the "hidden" deductions—Interchange fees, Scheme fees, and cross-border assessments—that make 1-to-1 matching impossible. This guide explains the mechanics of card reconciliation and how to solve the puzzle.
The Great Disconnect: Clearing vs. Settlement
The first hurdle in card operations is understanding that money moves in two waves:
- 1. Clearing (The Data): This is the exchange of transaction details. Visa/Mastercard sends a file (e.g., VSS or IPM) listing every coffee and flight purchased by your customers. Your Core Banking System likely already debited the customer's account in real-time (Authorization).
- 2. Settlement (The Money): This is the actual movement of funds. Crucially, this is a NET figure. The scheme subtracts Interchange fees, scheme assessments, and other charges before sending you the money.
The Problem: You cannot match the "Gross" amount in your Core Banking System directly to the "Net" amount in the bank settlement account. The difference is the fee, and verifying that fee is complex.
The Hidden Cost: Fee Verification
Fees are dynamic. A "Premium Rewards" card carries a different interchange rate than a standard debit card. A cross-border transaction triggers different assessments than a domestic one.
Without automated software, banks often just "accept" the net amount deposited by Visa/Mastercard and write off the difference as "Cost of Sales." This is a mistake. Scheme errors happen, and overcharges on millions of transactions add up to significant revenue leakage.
How Automated Reconciliation Works
Modern tools like Reconwizz tackle this by performing a granular 3-way match similar to ATM reconciliation, but with a fee engine attached.
1. Ingesting the "Beasts" (IPM & VSS)
The software automatically ingests the raw scheme files (e.g., Mastercard T112, Visa VSS). These files contain the fee breakdown for every single transaction.
2. Reconstructing the Net Amount
The system takes your Core Banking log (Gross) and applies the fee schedule found in the scheme file to "reconstruct" the expected Net Settlement. It then compares this calculated Net against the actual cash received in your Nostro account.
3. Exception Management
If the calculated fee differs from the deducted fee, the system flags it. This allows the bank to file a "Fee Collection" or "Good Faith" claim with the scheme. It also highlights "Chargebacks" that need to be processed immediately to avoid losses.
Conclusion: Don't Just Accept the Net
In 2026, margins in card issuing are thinner than ever. You cannot afford to treat Scheme Fees as a black box. By automating the reconciliation of your Clearing and Settlement files, you gain visibility into your true profitability per card product. Whether you are using Reconwizz or a GL tool, the goal is the same: verify every penny before you book it.