What happens during the clearing and settlement phase?

During the clearing and settlement phase, the issuer debits the acquirer for payment. This is a crucial step in the payment processing cycle. In this phase, the acquirer, which is the financial institution that processes credit and debit card payments on behalf of the merchant, submits the transaction data to the issuer, the bank that issued the cardholder's credit or debit card.

The issuer then validates the transaction, ensuring that sufficient funds are available or credit is accessible for the transaction amount. Once validated, the issuer debits the acquirer, transferring the funds necessary to complete the purchase made by the cardholder. This process ensures that the merchant is compensated for the sale, while the cardholder's account is adjusted accordingly.

In contrast, the other choices do not accurately describe the clearing and settlement phase. For example, a merchant receiving cash directly from the consumer typically occurs at the point of sale rather than in the clearing phase. Refund processes and reports sent to the cardholder, while related to transactions, occur at different stages and purposes within the overall payment process. The clearing and settlement phase specifically focuses on the financial transfer and account adjustments between the involved parties.