Fintech and payments · Financial services and fintech
Fintech books that keep money held for others apart from money earned
A payments or fintech platform moves far more money than it earns, and most of what it moves belongs to merchants, customers or partner banks. We reconcile every escrow, settlement and partner account so funds held for others agree to the rupee. Fee income, processing cost, chargebacks and fraud loss are then reported as the business they actually are.
In one paragraph
Fintech companies — payment aggregators and gateways, prepaid instrument and card programmes, banking-as-a-service and neobank front ends, and B2B payments platforms — move volumes many times their revenue. Most are at Series A or beyond. Lending-led platforms are covered separately. For founders and finance heads, the ledger must account for two kinds of money. One is the platform's own; the other is funds it holds or routes for others, under bank arrangements and often an RBI authorisation.
Chief financial officer or founder, often with the head of operations or compliance
The economics
How the money moves in this trade
Revenue is typically a merchant discount, platform or subscription fee, interchange share or per-transaction charge. Cost is what the partner bank, card network or processor charges for the same transaction. Both are small percentages of large flows. Settlement to merchants follows a cycle, and refunds, reversals and chargebacks unwind transactions days or weeks later. Every movement has to agree across the platform's ledger, the bank statement and the processor's reports.
Funds belonging to merchants or customers sit in escrow or pooled accounts that the platform operates but does not own. A non-bank payment aggregator must keep merchant funds in an escrow account with a scheduled commercial bank. Its day-end balance must cover what is payable to merchants, and its auditor certifies this every quarter. Reconciling daily is the practical way to show it. Fraud losses, disputed transactions and partner-bank penalties add costs that are easy to bury in a general expense line.
The problem
Where the numbers usually break down
Escrow balances not reconciled daily
The pooled or escrow account is checked against merchant payables only at month-end, so breaks accumulate and become hard to trace.
Fee income netted against processing cost
Revenue is booked net of bank and network charges, so neither the gross fee nor the true cost of processing is visible.
Chargebacks and refunds held in suspense
Disputed and reversed transactions sit in suspense until resolved, and losses are recognised only when someone clears the balance.
Partner invoices accepted as issued
Charges from partner banks and processors are paid without checking them against transaction volumes and agreed rates.
GST on fees applied by habit
Platform fees, merchant charges and partner costs carry different GST treatments that are applied from memory rather than from a documented position.
What we do
The work, and the result each part produces
Daily escrow and settlement reconciliation
Escrow, pooled and settlement accounts matched daily to merchant payables, processor reports and the platform ledger.
Funds held for others agree every day, with breaks explained.
Gross revenue and processing cost
Fees recorded gross, with bank, network and processor costs recorded separately and matched by transaction type.
Take rate and processing margin are reported per product.
Dispute and loss ledger
Chargebacks, refunds, fraud losses and recoveries tracked from initiation to closure, with provisions for open items.
Loss is recognised when it is likely, not when it is cleared.
Partner invoice verification
Partner-bank and processor invoices recomputed from transaction data and contract rates before payment.
Overcharges are claimed back.
Indirect-tax mapping
GST position mapped for each fee and cost type, with withholding on partner payments applied consistently.
Tax treatment follows a documented position.
Controls over money movement
Maker-checker approvals, access rights and payout authorisation reviewed and tested.
Funds cannot move without the approvals the business has defined.
Where we start
The first steps of an engagement
Escrow statements and processor reports
We ask for escrow and settlement bank statements, processor and card-network reports, merchant payable ledgers, partner-bank invoices and the platform's transaction exports.
Day-by-day escrow reconciliation
Escrow and settlement balances are matched to merchant payables and processor data day by day. Open breaks are aged and traced to their source.
Gross fees and payout approvals
Fees are recorded gross with processing cost shown separately, and maker-checker approval is confirmed on every payout route.
Funds held for others report
The first report shows funds held for others reconciled to merchant payables, open breaks by age, and take rate by product.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Escrow and settlement breaks, by day and age
- Take rate and processing margin, by product
- Chargebacks, refunds and fraud loss, opened and closed
- Partner invoices against recomputed charges
- Funds held for others reconciled to merchant payables
- Exceptions in payout approvals, by month
Who it suits
Written for, and not the right fit for
- You want someone to apply for or hold an RBI authorisation, or act as your compliance officer; that responsibility stays with your company.
- You need a system audit, the statutory audit or the auditor's escrow certificate signed; an independently engaged licensed professional does that.
- Payment aggregators, gateways and B2B payment platforms operating pooled or escrow accounts.
- Prepaid, card and banking-as-a-service programmes run with partner banks.
- Fintechs preparing for an authorisation application, a bank partner review or a funding round, who need records that hold up.
Services
Services this work draws on
Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Finance technology and automation
Systems configured around your process, not the other way round.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Internal audit
Independent process review that closes findings rather than filing them.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
Does a daily escrow reconciliation need a large team?
Not usually. Once bank, processor and platform data are mapped, most transactions match automatically. The daily work is investigating exceptions, which is a small team's job if it's done every day rather than once a month.
What support do you give on a payment aggregator authorisation?
We prepare the financial statements, reconciliations and supporting records an application draws on. The application and the authorisation are your company's responsibility, and any certificate it needs is issued by an independently engaged professional.
How should chargebacks be accounted for?
As a receivable or a loss depending on who bears it, with a provision for open disputes based on your actual recovery history. The key is to track each one from initiation to closure rather than leaving it in suspense.
5th Quadrant is not a payment system operator or an RBI-regulated entity. Authorisations, licences, regulatory returns and filings with the Reserve Bank of India are the company's own responsibility; 5th Quadrant prepares accounting data, reconciliations and supporting records only. Statutory audits, system audits, auditor's escrow certificates and any prescribed certification are signed by an independently engaged licensed professional. Full detail is on our Professional Scope page.
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