Smart-Contract-Based Automated Reconciliation Between PSPs, Acquirers, and Issuers

Abstract

Reconciliation between Payment Service Providers (PSPs), acquirers, and issuers remains one of the most operationally intensive challenges within modern digital payment ecosystems. Traditional reconciliation processes rely heavily on fragmented batch files, manual matching, and asynchronous data exchanges, leading to delays, discrepancies, financial exposure, and limited transparency across stakeholders. This study proposes a smart-contract-based automated reconciliation framework designed to enhance speed, accuracy, auditability, and trust within multi-party payment environments. The architecture leverages permissioned blockchain networks, event-driven data ingestion, verifiable transaction states, and deterministic matching logic executed through smart contracts. These components enable real-time validation, automated exception flagging, and the generation of settlement instructions while ensuring compliance with PCI-DSS, AML, FFIEC, and ISO 20022 data standards.
The proposed framework integrates seamlessly with existing payment infrastructures—including PSP APIs, acquirer processing systems, issuer authorization platforms, and card networks—using hybrid on-chain/off-chain data models that preserve privacy and operational scalability. A comparative evaluation of design options, including fully on-chain, hybrid, and zero-knowledge proof-enhanced models, shows that the hybrid architecture delivers optimal performance for high-throughput financial networks. The results demonstrate that smart-contract-based reconciliation can significantly reduce operational overhead, accelerate settlement finality, minimize disputes, and strengthen audit readiness. As digital payments continue to scale, this automated reconciliation layer offers a foundational component for future innovations such as programmable settlement, CBDC-based clearing, and AI-driven anomaly detection.