The Klara transaction and settlement layer is the part of the system that bridges your onchain credit with real world payments. This is where your card swipes, online purchases, tap payments, and recurring charges turn into actual processed transactions that merchants receive.

The settlement layer handles every step between the merchant, the card network, the credit engine, and your vault data. Even though everything behind the scenes is powered by smart contracts and onchain logic, to the outside world it works exactly like a normal payment processor.

Below is the full breakdown.

6.1 How Klara Processes a Transaction

Whenever you pay with your Klara Card, a sequence of events kicks off instantly.

Here is the exact path:

1. You swipe, tap, or input your virtual card details.

2. The merchant sends an authorization request to the card network.

3. The card network forwards that request to Klara’s authorization system.

4. Klara routes the request into the Credit Engine.

5. The Credit Engine checks your available credit and health ratio.

6. If everything looks good, the engine approves the transaction.

7. The authorization flows back to the merchant as an approved payment.

8. The settlement layer logs the transaction and updates your account state.

This entire cycle usually happens in under a second.

The important thing is this:
your crypto stays in your vault. Only your credit is used.

6.2 How Purchases Are Settled

After a transaction is authorized, the settlement layer takes over.

It handles:

• converting your credit usage into a settlement amount
• forwarding the merchant payout
• debiting your used credit
• syncing the data onchain
• updating your credit engine balances
• logging everything in your activity feed

Settlement is what finalizes the payment. Authorization checks if you can afford it. Settlement is the confirmation that it went through and the merchant gets paid.

The Klara settlement layer ensures your credit engine and app always reflect the exact state of your spending.

6.3 Offchain to Onchain Flow

The Klara system bridges two completely different financial worlds.

Offchain:

• card networks
• merchants
• terminals
• processors
• fiat rails

Onchain:

• vault
• collateral
• credit
• price feeds
• health ratio
• repayment data

The settlement layer translates between both worlds. When a payment is approved offchain, the settlement engine logs it onchain. This keeps everything auditable and ensures your credit engine stays in sync with reality.

There is no manual reconciliation.
Everything is automatic.

6.4 Merchant Payments and Payout Flow

Merchants receive money as if the Klara card were a traditional debit or credit card. The merchant does not know that your payment is backed by crypto or that your balance comes from a credit engine.

Behind the scenes:

• Klara covers the merchant payout
• the card network clears and settles
• your credit line is reduced accordingly

This means your spending experience feels exactly like using any mainstream financial card. You keep all the benefits of decentralization without any of the friction.

6.5 FX Handling and International Spending

Klara supports global spending.
When you pay overseas or in a different currency, the settlement layer handles:

• currency conversion
• foreign exchange rates
• cross border fees (if any)
• syncing the converted amount with your credit engine

The app always shows the converted value so your credit usage remains clear and predictable.
There are no hidden surprises.
No silent conversions.
No backend adjustments without user visibility.

6.6 Error Handling and Declines

Sometimes a transaction cannot go through.
Klara handles declines in a structured way based on:

• insufficient credit
• unusual merchant behavior
• suspected fraud
• mismatched region preferences
• unsafe health ratio
• expired virtual cards
• disabled card profile

Every decline is paired with an in-app notification explaining exactly what happened. Nothing is vague or mysterious.

6.7 Logging and Data Sync

The settlement layer records every transaction in a way that is:

• timestamped
• merchant identified
• categorized
• converted to stable units
• linked to credit usage
• stored onchain for auditing

This allows the app to show detailed analytics.
It also lets users track spending trends and long term credit behavior.

6.8 Why the Settlement Layer Matters

The Klara settlement layer is the reason the card works globally while staying onchain.

It does three important jobs:

1. keeps user credit accurate

2. connects blockchain value with real world payments

3. creates an auditable history of every action

Without the settlement layer, the card would either be:

• too slow
• too centralized
• too unpredictable
• or completely impossible

This component is the backbone that turns Klara from a crypto concept into a real financial tool that works anywhere card networks work.