Automated Payment Authorization via ACH Intermediary
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Solution Overview
Problem
Current payment systems, such as credit card transactions and electronic funds transfer, face issues like high fees, limited acceptance, and increased risk for sellers, particularly with delayed and uncertain payments, which can lead to inefficiencies and security concerns in online commerce.
Innovation Solution
A software facility provides a third-party authorization system that enables automatic financial payments based on predefined private instructions, allowing users to define payment usage sets that control debit transactions from bank accounts or other financial sources, with verification processes to ensure authorized payments and protect user information.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If credit card transactions are used for online payments, then purchasers receive protection from fraudulent activity and unauthorized charges, but transaction fees charged to sellers become problematic and high
Solution Approach 1:
The patent introduces an automated clearing house (ACH) system as an intermediary between purchasers and sellers for payment processing. This mediator enables direct bank account-to-bank account transfers, eliminating the need for credit card networks and their associated fees while maintaining secure transaction processing through established financial infrastructure.
Solution Approach 2:
The patent extracts the payment processing function from the credit card ecosystem and relocates it to the ACH network. By separating the payment authorization and clearing functions from credit card processors, the system eliminates dependency on high-fee credit card infrastructure while preserving the essential payment transfer capability.
2Loss of energy
If debit-based payments via electronic funds transfer are used, then fees are lower and availability to purchasers is greater, but purchasers have less protection from fraudulent activity and may be reluctant to provide account details
Solution Approach 1:
The patent employs the ACH system as a trusted intermediary that handles sensitive bank account information securely. This mediator allows purchasers to make debit-based payments with lower fees while the ACH network's established security protocols and fraud detection mechanisms provide protection comparable to or exceeding credit card systems.
Solution Approach 2:
The system implements verification processes where the ACH network provides feedback on transaction validity, account availability, and fraud detection. This feedback mechanism reassures purchasers that their bank account information is protected and transactions are monitored, reducing reluctance to provide account details despite the lower cost structure.
3Ease of operation
If payments are scheduled to occur after delivery of purchased items, then sellers face increased risk and uncertainty, but purchasers benefit from delayed payment obligation
Solution Approach 1:
The patent implements preliminary verification of purchaser bank accounts and payment authorization before items are delivered. The ACH system pre-authors payments and verifies sufficient funds availability in advance, creating a binding payment obligation that reduces seller risk while still allowing purchasers to benefit from delayed actual fund deduction until after delivery.
Solution Approach 2:
The ACH system serves as a neutral intermediary that holds payment obligations in trust until delivery conditions are met. This mediator protects sellers by ensuring payment authorization is secured beforehand while protecting purchasers by delaying actual fund transfer until after they receive and verify the delivered items.
Data Source
AI summary
Techniques are described for facilitating interactions between computing systems, such as by using an authorization system to automatically authorize financial payments between parties in accordance with previously specified private authorization instructions of at least one of the parties. In some situations, some or all of the payments are associated with commerce-related or other transactions, such as transactions initiated by a consumer via the Web to acquire items from a retailer. The authorization instructions may include predefined instruction sets that regulate conditions under which a potential payment can be authorized, with the instruction sets each associated in some situations with a reference. After one or more parties each supply one or more such references or otherwise indicate one or more such instruction sets for use with a potential payment, the authorization system can determine whether to authorize the payment based on whether the instruction sets are compatible or otherwise satisfied.