Automated Credit Extension System Using Alternative Data Verification
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Solution Overview
Problem
Current credit extension methods rely heavily on credit scoring and historical payment data, limiting access to credit for sub-prime and underbanked consumers, and result in higher profit risks for sellers due to the need for 100% payment upfront or high borrowing capacity.
Innovation Solution
A system and method that pre-calibrates risk through a series of automated debits and structured payment plans, independent of customer credit-worthiness, allowing sellers to offer credit with reduced risk by using proprietary profit factors and electronic funds transfer, enabling customers to pay over time without interest or additional charges.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional credit scoring methods are used to assess customer credit-worthiness, then sellers can identify reliable customers, but access to credit is limited for sub-prime and underbanked consumers
Solution Approach 1:
The patent changes the assessment parameters from traditional credit scores to alternative data points including bank account balances, transaction histories, and employment verification. This allows sub-prime and underbanked consumers to qualify for credit based on their actual financial behavior rather than conventional credit scoring metrics.
Solution Approach 2:
The patent introduces an intermediary verification system that acts as a mediator between sellers and customers. This system pre-qualifies customers using alternative data sources and provides verification to sellers, enabling credit extension to sub-prime consumers without requiring traditional credit scores.
2Reliability
If sellers require 100% upfront payment to eliminate credit risk, then profit security is maximized, but customer access to credit is restricted
Solution Approach 1:
The patent performs preliminary verification of customer financial status before extending credit. Sellers receive pre-qualified customer information including verified bank account balances and employment status, allowing them to extend credit with reduced risk without requiring 100% upfront payment.
Solution Approach 2:
The patent implements a feedback mechanism where customers provide ongoing financial verification through automated bank account monitoring and employment verification. This continuous feedback allows sellers to maintain profit security while enabling credit terms that are convenient for customers.
3Adaptability or versatility
If sellers extend credit without pre-verification, then customer access is improved, but risk of lost profits increases
Solution Approach 1:
The patent performs preliminary verification of customer financial status before extending credit. Sellers receive pre-qualified customer information including verified bank account balances and employment status, allowing them to extend credit with reduced risk without requiring 100% upfront payment.
Solution Approach 2:
The patent introduces an intermediary verification system that acts as a mediator between sellers and customers. This system pre-qualifies customers using alternative data sources and provides verification to sellers, enabling credit extension to sub-prime consumers without requiring traditional credit scores.
4Productivity
If automated payment systems are implemented, then collection efficiency is improved, but system complexity increases
Solution Approach 1:
The patent implements self-service automated payment collection where customers authorize direct debit from their bank accounts. The system automatically verifies employment status and monitors account balances without requiring manual intervention, improving collection efficiency while keeping infrastructure requirements manageable.
Data Source
AI summary
A system and method for extending a firm offer of credit without regard to the credit risk profile of the credit applicant is disclosed. Using seller-defined and/or system and method provider configured business rules and related payment computations, the system derives a series of initial payments representing a “down payment.” After the down payment is collected, the goods or services are delivered. The purchaser may elect upfront from a plurality of payment options, including the automatic collection through recurring pre-authorized electronic funds transfers to a deposit account or via authorized and settled credit or debit card authorization(s). A purchaser using either of these options has the option, upon receipt of the goods or services, to pay the remaining balance through the continuation of electronic funds transfers or, at any point prior to completion of payments using a “one-time authorized amount for the balance due” alternative form of payment like cash, credit or debit card, to pay off the remaining balance.