Central Payment System for Automated Merchant Settlement
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Solution Overview
Problem
Current payment systems lack an efficient method for initiating and managing settlements between merchants and customers, particularly in systems where customers authorize payments at a later date, leading to complexities in tracking and processing transactions.
Innovation Solution
A central payment system that determines settlement types and dates, transmits settlement requests between acquirer and issuer systems, confirms transaction status, and notifies merchants of received funds, ensuring seamless and automated settlement processes.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If a central payment system implements automated settlement processes with centralized ledger management, then settlement efficiency and automation extent are improved, but system complexity increases
Solution Approach 1:
The central payment server acts as an intermediary between acquirer systems and issuer systems, managing the centralized ledger and coordinating settlement processes. This mediator approach consolidates control in a single entity, improving settlement efficiency while the standardized communication protocols and predefined settlement windows help manage the inherent system complexity.
Solution Approach 2:
The system implements periodic settlement cycles with predefined settlement windows, where settlements are initiated at specific intervals rather than continuously. This periodic action simplifies the management of the centralized ledger by batching transactions into manageable cycles, thereby improving productivity while controlling the complexity of real-time coordination.
2Loss of time
If the system consolidates multiple transactions into a single settlement request, then settlement processing time is reduced, but tracking and confirmation complexity increases
Solution Approach 1:
Multiple individual transactions are merged into a single consolidated settlement request that is processed together in one batch. This combining of transactions significantly reduces the total processing time compared to handling each transaction separately, while the centralized ledger maintains detailed records of individual transaction compositions within each settlement batch.
Solution Approach 2:
The system implements comprehensive feedback mechanisms where the central payment server sends settlement requests to acquirer systems and receives confirmation messages that verify fund transfers. This feedback loop provides real-time tracking of consolidated settlements, allowing the system to monitor the status of each consolidated batch while maintaining the efficiency benefits of batch processing.
3Reliability
If the system provides guaranteed settlement to merchants, then merchant reliability is improved, but financial risk for the payment system increases
Solution Approach 1:
The system performs preliminary actions by authorizing transactions and recording them in the centralized ledger before the actual settlement occurs. This preliminary recording creates a committed obligation that guarantees settlement for merchants, while the system manages the associated financial risk by processing settlements in controlled batches within predefined windows and maintaining detailed audit trails of all authorized transactions.
Data Source
AI summary
Method and system for initiating a settlement process for a merchant, based on accumulated customer transactions in a transaction period, are provided. The system provides a configurable interface for the merchant that allows for the merchant to manually settle customer debts for accumulated transaction over an agreed period of time or designate an automatic settlement date. A central payment server receives a request to initiate a settlement process between an acquirer system associated with the merchant and an issuer system associated with a customer. The central payment server establishes a payment system that guarantees the settlement of all transactions for the merchant, through an assured agreement between the customers and the issuer systems.