# From Mandate to Settlement: How It Works

Every charge on the Monato platform follows the same lifecycle, regardless of whether it was submitted via API or batch file.

## Charge Flow


```
Customer          Merchant          Monato           Banking Partners
   |                  |               |                    |
   |--- Accepts DD -->|               |                    |
   |    mandate       |               |                    |
   |                  |-- Requests -->|                    |
   |                  |   DD charge   |                    |
   |                  |               |-- Risk             |
   |                  |               |   verification     |
   |                  |               |                    |
   |                  |               |-- Penny            |
   |                  |               |   validation*      |
   |                  |               |                    |
   |                  |<- Verification|                    |
   |                  |   response    |                    |
   |                  |               |--- Sends charges ->|
   |                  |               |    for processing  |
   |                  |               |                    |
   |                  |               |<-- Bank responses -|
   |                  |<- Results     |                    |
   |                  |   delivered   |                    |
   |                  |               |                    |
```

*Penny validation only applies to new instruments. See [Key Concepts](/products/directdebit/content/introduction/key-concepts#penny-validation).

## Process Steps

**1. Customer accepts the Direct Debit mandate**
The customer authorizes the merchant to collect payments via direct debit. This step happens outside the Monato platform — the merchant is responsible for capturing and storing the mandate.

**2. Merchant requests a charge**
The merchant submits the charge to Monato via the [REST API](/products/directdebit/content/guides/api/charges) or a [batch file over SFTP](/products/directdebit/content/guides/sftp/onboarding).

**3. Risk verification**
Monato's risk engine evaluates the charge. If the charge is rejected at this stage, the merchant receives a `risk_engine` error in the response.

**4. Penny validation** *(new instruments only)*
For instruments that have not been previously verified, the platform initiates a small debit to confirm account ownership. This happens automatically and is transparent to the merchant — a webhook event is sent when the validation completes.

**5. Verification response**
Monato returns an initial response to the merchant confirming the charge has been accepted for processing or indicating a pre-processing rejection.

**6. Charges sent to banking partners**
Approved charges are submitted to the banking network in a batch at the [daily cutoff time](/products/directdebit/content/reference/times-and-settlements) (3:00 PM Mexico City time on business days).

**7. Bank responses**
Banking partners return a confirmation or decline for each charge, typically by the next business day.

**8. Results delivered**
Monato sends charge results back to the merchant via [webhook](/products/directdebit/content/guides/api/webhooks) (`charge_result` event) and makes them available via the API and Portal.