Reducing Settlement Risk with Open Banking Flows

In B2B platforms, a single settlement misstep can disrupt operations. Unlike card-based processing, Open Banking separates funds leaving the payer (debtor) from those reaching the merchant (creditor) into distinct stages.

Updating balances too soon after payer-side settlement can create exposure before merchant-side confirmation. If funds aren't received promptly, workflows stall and orders are delayed.

The Challenge

With these pressures in mind, our clients were looking for a solution that could:

• Support timely balance updates without treating early payment status as final settlement.
• Use internal operational stages aligned with Open Banking payment statuses for payer-side and payee-side settlement.
• Reduce administrative overhead in reconciliation and exception handling.
• Maintain a smooth customer experience while minimising risk.

Operational and Financial Risks in Early Authorisation

Card-based authorisation and capture don't directly map to Open Banking, so here they serve only as internal labels. This created several operational challenges:

• Misaligned terminology and expectations — Teams treating pre-auth as funds guaranteed risked acting before actual settlement.
• Uncertainty of status reporting — Banks report varying levels of detail: some only show initiation (COMPLETED/Initiated), others show payer (ACSC) or payee (ACCC) settlement.
• Reconciliation complexity — Platforms manually tracked exceptions and pending payments, which increased operational costs and errors.
• User experience friction — Delays in confirming funds could lead to slower fulfilment or negative client perception.
• Financial exposure — If the client cancels a payment after approval (pre-auth), they may lack funds to pay the merchant and must cover the shortfall themselves.

How We Reduced Exposure in In-Flight Transactions

Payneteasy introduced a status-driven Open Banking payment flow built for B2B platforms.

Mapping Internal Operational Stages to ISO 20022 Payment Statuses

For internal operational, monitoring, and reconciliation purposes, transaction stages are aligned with ISO 20022 payment statuses.

Payer-side settlement status signals that funds have left the payer's account, which allows the platform to update internal records for monitoring. Payee-side settlement status indicates funds have reached the beneficiary, which marks the point for final settlement confirmation and reconciliation.

With this mapping in place, internal teams gain clearer visibility into transaction progression and can make operational decisions based on actual settlement status.

Status Monitoring

Platforms gain visibility from pre-auth to final settlement, with status changes monitored for confirmations and exceptions.

The monitoring logic can be applied across different payment rails, including Faster Payments, SEPA, and cross-border transfers, while accounting for differences in settlement timing and status reporting. This helps operational teams identify unresolved transactions earlier and reduce manual follow-up.

Improving Operational Flow

We enabled provisional balance updates once payer-side settlement was detected, while keeping final settlement and reconciliation tied to later confirmation.

Transactions that didn't reach payee-side settlement were automatically flagged, which reduced manual reconciliation and follow-up. Status events were also integrated with merchant workflows to update order fulfilment. Automated updates cut delays and eased operational friction across the payment lifecycle.

Managing In-Flight Payment Exposure

To reduce financial risk, the system enforces limits on in-flight transactions (those that are pre-authorised but not yet captured). Users face both count and amount restrictions.

All transactions are tracked per payer using identifiers, such as card holder and email, which gives platforms clear oversight of pending activity.

Reducing Risk and Handling Stale In-Flight Transactions

The system separates initiation, payer-side settlement, and payee-side settlement to show which payments are in progress, unresolved, or fully settled. If a transaction remains payer-settled but not merchant-settled for several days, this indicates unresolved settlement exposure that requires review.

By combining limits with status-based monitoring, the platform keeps in-flight exposure low without disrupting daily operations.

Key Operational Benefits for Platforms

Key outcomes of the new approach:

• Reduced financial exposure — Enforcing count and amount limits for in-flight transactions minimized the risk of covering funds that never reached the merchant.
• Clear visibility of all payments — Real-time status tracking across payer-side and payee-side settlement stages gave teams immediate insight into which payments were in flight, unresolved, or fully settled.
• Faster operational response — Automated alerts and exception handling allowed operational teams to address pending, rejected, or voided transactions quickly.
• Improved user experience — Early balance updates reflected pre-auths where appropriate, while limits on in-flight transactions prevented users from overcommitting funds.
• Integration across regions and networks — More predictable results across Faster Payments, SEPA, and the cross-border rails in scope, while still accounting for local timing and reporting differences.

Takeaway

Payneteasy's status-driven Open Banking flow provided a structured, risk-aware framework with ISO 20022 statuses, real-time monitoring, and pre-auth controls. Clear pre-auth/capture separation and enforced limits boosted security and efficiency. The key point is to treat payer- and merchant-side settlement as separate stages with controls between them.

See how this approach was applied in practice: Reducing Settlement Risk with Open Banking Flows — Case Study.