Acquirer Routing Using Pricing Models and Interchange Mapping
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Merchants face significant variations in markup rates charged by different acquirers for payment transactions, leading to varying discount fees, especially for large volumes of transactions, and the process of finding the least cost acquirer is burdensome due to differing messaging formats and complex pricing models.
Innovation Solution
A marketplace server system that identifies the least cost acquirer by mapping transaction information to interchange rates and markup rates across multiple acquirers, translating messaging formats, and routing transactions to the lowest cost acquirer for efficient communication and processing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If merchants manually search for and sign up with the least cost acquirer for each transaction, then transaction costs may be reduced, but the process becomes extremely burdensome and time-consuming
Solution Approach 1:
The patent introduces an intermediary system (payment gateway or processor) that automatically compares pricing models from multiple acquirers and selects the least cost option for each transaction. This intermediary handles the complex task of evaluating different acquirers' pricing models, markup rates, and interchange categories, relieving merchants of the manual search and comparison process while maintaining optimal cost selection.
Solution Approach 2:
The system performs preliminary actions by pre-establishing relationships with multiple acquirers and storing their pricing models, markup rates, and qualification criteria in advance. Before processing each transaction, the system has already prepared the necessary data about available acquirers and their pricing structures, enabling rapid automated selection without manual intervention at transaction time.
2Adaptability or versatility
If acquirers use arbitrary markup rates and different pricing models, then acquirers have flexibility in pricing strategy, but merchants face difficulty in comparing and selecting the best acquirer
Solution Approach 1:
The patent transforms the complex, arbitrary pricing parameters from different acquirers into a standardized comparison framework. The system normalizes various pricing models (tiered, interchange plus, flat rate) by calculating the actual cost impact on each transaction type, converting diverse markup rates and interchange categories into comparable effective rates that merchants can evaluate systematically.
Solution Approach 2:
The system implements feedback mechanisms that provide merchants with transparent information about which acquirer offers the lowest cost for each transaction type and why. The intermediary system continuously monitors and compares pricing from multiple acquirers, providing real-time feedback to merchants about the selected acquirer and the cost savings achieved, enabling informed decision-making.
3Loss of energy
If merchants work with multiple acquirers to access different pricing models, then cost optimization opportunities increase, but the complexity of managing multiple messaging formats and communication protocols increases
Solution Approach 1:
The patent creates a universal intermediary system that can communicate with multiple different acquirers through standardized interfaces. This single multi-functional system handles communication with various acquirers using different messaging formats and protocols, translating and normalizing all communications into a unified format that the merchant system can process, eliminating the need for merchants to directly manage multiple complex integrations.
Solution Approach 2:
The intermediary payment gateway acts as a mediator between the merchant and multiple acquirers with different messaging formats. It handles the complexity of translating between various acquirer protocols and the merchant's system, managing authentication, data formatting, and communication standards, thereby simplifying the merchant's interface to a single standardized system while maintaining access to multiple acquirers.
Data Source
AI summary
Systems and methods are disclosed for least cost acquirer routing based on pricing models. One method comprises: receiving transaction-related information from a merchant, the transaction-related information including a payment network identifier of the payment network used in the initiated payment transaction; identifying the payment network used based on the payment network identifier determining the primary qualification criteria pertaining to the payment network used; determining an interchange rate and an interchange category based on the primary qualification criteria and the received transaction related information; determining a pricing model of an acquirer that yields the lowest fees applicable to the merchant based on one or more of, the transaction related information, the primary qualification criteria, and the interchange category; and transmitting the transaction-related information to the acquirer.