Does the merchant receive the payments instantly?

[ag114]

My question is about payments to merchants through their websites (not by Paypal.com > send to person). As you know, every transaction has a pending state which is when either 1) the bank who made the card is given notice and it appears as "pending" in customer account 2) a bank transfer is scheduled that will occur a few dates later. My question is: Does PayPal pay the merchant in advance? If so, in both of these cases? Besides, when it's a card transaction, is the transition to the "completed" state triggered by the bank, or by Paypal, or the merchant? Many thanks.

[sharpiemarker · Accepted solution]

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@ag114 wrote:

My question is about payments to merchants through their websites (not by Paypal.com > send to person). As you know, every transaction has a pending state which is when either 1) the bank who made the card is given notice and it appears as "pending" in customer account 2) a bank transfer is scheduled that will occur a few dates later. My question is: Does PayPal pay the merchant in advance? If so, in both of these cases? Besides, when it's a card transaction, is the transition to the "completed" state triggered by the bank, or by Paypal, or the merchant? Many thanks.

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If you pay by bank account backed by a linked card aka ‘instant transfer’, yes, PayPal pays the merchant in advance while waiting for the bank payment to clear but is still subject to authorization & capture policy in which case, the Completed state is triggered by the merchant when they decide to capture payment on the authorization.

Authorization & capture is 2 step payment processing method merchant websites use. It offers merchants flexibility in voiding a transaction without needlessly paying processing fees or delay capturing  payment to check stock, prep order ready to ship, adjust final total charged due to shipping/handling, sales tax, order changes, gratuity, accommodations/car rental incidental charges, etc because by default the one step is used and the Complete status is triggered and fees are deducted as soon as checkout/payment is finalized.

When paying with card, the merchant is paid instantly by the card issuer when the merchant is ready to capture payment on the pending authorization.

When bank payment goes as eCheck (no card linked) and payment is captured by the merchant, then both buyer and merchant must wait for the eCheck to clear before merchant receives payment to proceed with order processing.

[ag114]

Thanks, if I understood correctly, when paying with a bank account, PayPal pays early and handles authorization&capture updates on its own, ie, only the net amount is to be processed by the bank, and the rest is updated values on PayPal until taken from the customer, whereas with the card, PayPal communicates the updates to the issuing bank until the merchant finalizes the transaction, which is when PayPal directly transfers from the card to the merchant (ie, no prepayment with the card?). And with eChecks, no prepayments likewise.