Payouts and withheld Deposit amounts

In this article, we will explain what is a 'Payout' and when it happens, what is the concept of 'Payout delay', and how to reconcile your transactions.

Payouts

Payouts are the transfers Adyen makes to your bank account for the transactions you have processed minus the transaction processing fees. 

Payouts are done in 'Batches' and each batch pays out the funds for certain transactions, based on the 'Payout delay' allocated to your account (see below for 'Payout delay').

Generally, payouts are done every workday as long as there are transactions to be paid out.

Payout delay

Whenever you process a transaction, the funds initially are held within an Adyen account opened for you after your successful KYC application. This is necessary due to several reasons: depending on the payment method, it might take longer for Adyen to receive the funds (usually with certain 'alternative payment methods', not with major card brands); Adyen to have funds available in case of a chargeback or need for refund and others.

The duration for which they are held in your Adyen account depends on the Risk score Adyen has allocated to you throughout the KYC process. This Risk score is determined by various factors including the type of business, the types of transactions you will process, and many others. 

The following table shows an example payout schedule with a daily payout frequency and a payout delay of two days.

You can check for which transactions the payout from a 'Batch' is by reviewing the Settlement Details report in your Essentials platform.

Withheld deposit amounts

If at a certain point in time, your Exposure is much higher than your Coverage, Adyen may withhold a certain amount from the payout to you as a deposit in order to cover your Exposure (risk). Let's elaborate on what that means. 

Exposure

Your Exposure (risk) is calculated by 3 different factors:

- The Fulfillment exposure is determined based on the delivery date (which is the arrival date of the reservation) of advance payments. Whenever a payment is processed, its delivery date is automatically forwarded to Adyen in the form of metadata. When an advance payment is made, Adyen regards the transaction amount as a liability since the service hasn't been provided, even though the payment has been accepted.

- The Chargeback exposure is gauged by looking at the chargebacks from the past 120 days, thereby forecasting the potential risk for the upcoming 120 days. This exposure metric is updated daily. The volume of chargebacks a company experiences influences the risk assessment Adyen makes for each merchant.

- Similarly, the Refund exposure is determined by analyzing refunds from the preceding 30 days and is predictive for the subsequent 30 days. This metric is also refreshed daily. The frequency of refunds a business handles directly affects the risk evaluation Adyen assigns to each merchant.

The calculation of these 3 factors brings your total Exposure (risk). 

Coverage

As the payment processing party, Adyen will incur huge financial risk if merchant funds are not available to cover that exposure (in case of future chargebacks or business bankruptcy, for example), hence, if your Exposure is much higher than your Coverage, Adyen will hold amounts from payouts in order to balance the Coverage and Exposure.

Your Coverage is determined by:

- Your Processing coverage - these are the pending (transactions that are SentForSettle) and payable (Settled) balances.

- Your Securities coverage - deposit amounts already withheld by Adyen for this purpose.

Required Deposit

Once the Exposure and Coverage are calculated, the Required Deposit is determined. If your Processing coverage is enough to cover your Exposure, no amounts will be withheld for the Required deposit. However, if your Processing coverage is not enough, Adyen will calculate the required deposit and withhold that amount from your payouts.

- The Required deposit will be automatically lowered if the deposit (total Coverage) is higher than 140% of the current exposure over a period of 7 calendar days.

- The Required Deposit will be automatically increased if the deposit (total Coverage) is lower than 60% of the current exposure over a period of 7 calendar days.