Digital Token Escrow for Microtransaction Fee Reduction
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Solution Overview
Problem
Traditional payment networks incur high processing fees for microtransactions, making it costly for merchants and consumers, especially for transactions valued less than a dollar or even pennies, which can result in significant revenue loss and increased transaction costs.
Innovation Solution
A method and system that supports microtransactions using digital tokens, where a processing server receives and processes transaction requests, forwards information to an issuer, receives authorization, and holds digital tokens in escrow for payment, reducing the need for traditional payment processing fees by utilizing a digital asset network.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional payment card processing is used for microtransactions, then transaction authorization and security are maintained, but processing fees erode the value of small transactions and make micropayments economically unviable
Solution Approach 1:
The patent introduces a payment processor as an intermediary that batches multiple microtransactions together for processing. Instead of charging fees for each individual microtransaction, the processor aggregates transactions and charges a single fee for the batch, significantly reducing the fee burden on micropayments while maintaining security and authorization standards.
Solution Approach 2:
The patent combines multiple small microtransactions into a single batched transaction for processing purposes. By merging numerous small-value transactions into one consolidated processing event, the system maintains the security and authorization benefits of traditional payment processing while eliminating the prohibitive fee structure that would otherwise apply to each individual microtransaction.
2Loss of energy
If merchants set a minimum transaction amount to cover processing fees, then processing fee coverage is improved, but consumer convenience and accessibility to small purchases are reduced
Solution Approach 1:
The payment processor acts as a mediator between merchants and consumers by absorbing the processing fees through batched transaction processing. This intermediary role allows merchants to accept microtransactions without setting minimum purchase amounts, as the processor's batching mechanism ensures fee coverage even for very small individual transactions when aggregated with others.
3Speed
If microtransactions are processed individually through traditional payment rails, then transaction speed and simplicity are maintained, but cumulative processing fees significantly reduce merchant revenue
Solution Approach 1:
The system performs preliminary actions by collecting and batching multiple microtransactions before processing them together. Transactions are gathered in a batch buffer and processed as a group, which maintains the speed and simplicity of individual transaction initiation while dramatically reducing cumulative fees through the batched processing model.
Data Source
AI summary
The disclosed method includes: receiving, by a receiving device of a processing server, a transaction request for a financial transaction, the transaction request including at least information associated with a consumer; forwarding at least the information associated with the consumer, the information associated with the merchant, and the transaction amount or projected transaction amount to an issuer; receiving an authorization from the issuer for the transaction amount or projected transaction amount; forwarding the authorization to the merchant; receiving a triggering event for the financial transaction between the consumer and the merchant; sending a request to the issuer for digital tokens to be held for payment of the transaction between the consumer and the merchant; receiving a plurality of digital tokens from the issuer for the payment of the transaction between the consumer and the merchant; and holding the plurality of digital tokens received from the issuer for the financial transaction.