When a Merchant settlement is created, we net out two types of fees:

• PLATFORM_FEES: Defined via Fee Profiles which you see on the dashboard
• APPLICATION_FEES: Set when capturing an Authorization

PLATFORM_FEES

PLATFORM_FEES are generated by Fee Profiles that represent a pricing scheme that is automatically applied to each transaction. When the Merchant receives a settlement, the resulting fees are automatically deducted and disbursed as a credit to the Payment Facilitator. Fee profiles support interchange plus, percentage-based pricing (e.g. 2.9%), and fixed-based fees (e.g. $0.20 per transaction).

Furthermore, Fee Profiles follow a tree-like data structure - all Applications and subsequently their Merchants inherit from a single default Fee Profile but that can be overridden to set custom billing for individual Applications or Merchants. We set the default Fee Profile during implementation.

 APPLICATION_FEES

APPLICATION_FEES are primarily utilized by the Payment Facilitators that we work with who have referral partners, ISVs, or ISOs that also take a cut of the Merchant settlement. These fees are allocated to the Application. The APPLICATION_FEE is the difference between the fee amount passed when capturing an authorization and the PLATFORM_FEE that is automatically calculated via the Fee Profiles. This ensures that the Payment Facilitator always collects its predefined fees. It is possible to set the Fee Profiles to 0 and have you set all the fees when capturing the Authorization.  

In either case, the APPLICATION_FEE and PLATFORM_FEES both issue a credit to the Payment Facilitator's operating account.

Previous Settlement Engine

In the V1 Settlement Engine, the Funding Instruction's destination Payment Instrument is linked to the Application Owner's Bank Account. This is the bank account associated with the Application Owner. We always pay out Application Fees to the Payment Facilitator's Bank Account. 

{"id" : "TRgPZEUzfXGZGTBjAiznx6ey",
 "amount" : 1788347,
 "tags" : { },
 "state" : "SUCCEEDED",
 "trace_id" : "620a0ff5-7a53-4372-8a2c-6328f290bffd",
 "currency" : "USD",
 "application" : "APepnj4Z4j6wWcPCji15FE8n",
 "source" : null,
 "destination" : "PIboJmcs2G1jUeUi57b2ZcQQ",
 "ready_to_settle_at" : null,
 "fee" : 0,
 "statement_descriptor" : null,
 "type" : "CREDIT",
 "messages" : [ ],
 "raw" : null,
 "created_at" : "2020-04-21T22:37:35.02Z",
 "updated_at" : "2020-04-21T22:40:29.08Z",
 "idempotency_id" : null,
 "merchant_identity" : "IDitT5ZDzH68jxya784vckaQ",
 "subtype" : "SETTLEMENT_MERCHANT",
 "_links" : {
 "application" : {
 "href" : "https://internal.sandbox-payments-api.com/applications/APepnj4Z4j6wWcPCji15FE8n"
 },
 "self" : {
 "href" : "https://internal.sandbox-payments-api.com/transfers/TRgPZEUzfXGZGTBjAiznx6ey"
 },
 "merchant_identity" : {
 "href" : "https://internal.sandbox-payments-api.com/identities/IDitT5ZDzH68jxya784vckaQ"
 },
 "payment_instruments" : {
 "href" : "https://internal.sandbox-payments-api.com/transfers/TRgPZEUzfXGZGTBjAiznx6ey/payment_instruments"
 },
 "reversals" : {
 "href" : "https://internal.sandbox-payments-api.com/transfers/TRgPZEUzfXGZGTBjAiznx6ey/reversals"
 },
 "fees" : {
 "href" : "https://internal.sandbox-payments-api.com/transfers/TRgPZEUzfXGZGTBjAiznx6ey/fees"
 },
 "disputes" : {
 "href" : "https://internal.sandbox-payments-api.com/transfers/TRgPZEUzfXGZGTBjAiznx6ey/disputes"
 },
 "destination" : {
 "href" : "https://internal.sandbox-payments-api.com/payment_instruments/PIboJmcs2G1jUeUi57b2ZcQQ"
 }
 }
}

New Settlement Engine 

In the V2 Settlement Engine, the Funding Instruction's destination Payment Instrument is linked to the Platform Bank Account. This is the bank account associated with the Platform.