Direct Extended-Reach Payment Routing for Non-Card Endpoints
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Existing payment systems fail to efficiently facilitate financial transactions to non-card based endpoints due to regulatory restrictions and low payment card penetration, limiting the reach of financial services.
Innovation Solution
A system utilizing pseudo bank identification numbers (BINs) and APIs to route payments through Payment Service Providers (PSPs), enabling financial transfers to non-card based endpoints by integrating them into card-based networks, with pre-checks for anti-money laundering (AML) and know your customer (KYC) compliance.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If traditional card-based networks are used for financial transfers, then transaction processing is reliable and regulated, but the reach is limited to card-based endpoints only
Solution Approach 1:
The patent introduces Payment Service Providers (PSPs) as intermediary entities that bridge card-based networks and non-card endpoints. PSPs receive payment instructions from the card network and forward them to alternative endpoints such as bank accounts or digital wallets, enabling expanded reach while maintaining security through regulated intermediaries
Solution Approach 2:
The system segments the payment ecosystem into distinct layers: the card network layer, the PSP intermediary layer, and the endpoint layer. This segmentation allows each layer to operate with appropriate security measures while enabling communication between incompatible systems, resolving the contradiction between versatility and reliability
2Adaptability or versatility
If payment instructions are routed to non-card endpoints without verification, then endpoint reach is expanded, but transaction rejection rate increases due to invalid destinations
Solution Approach 1:
The system performs preliminary verification of non-card endpoints through PSPs before routing payment instructions. Endpoint validation, account existence verification, and compliance checks are conducted in advance, ensuring that only valid destinations receive payment instructions, thereby maintaining high transaction success rates while expanding destination options
3Reliability
If AML and KYC information is collected for all endpoints, then compliance is ensured, but processing time and complexity increase
Solution Approach 1:
AML and KYC information is collected and verified in advance through PSPs before payments are initiated. Endpoint validation including compliance checks is performed preliminarily, so that when payment instructions are routed, the compliance verification is already complete, reducing processing time while ensuring regulatory compliance
Solution Approach 2:
PSPs perform self-service compliance verification by maintaining their own AML and KYC databases for their network endpoints. This distributes the compliance burden to intermediaries who have direct relationships with endpoints, reducing the time and complexity for the overall payment system while ensuring regulatory requirements are met
Data Source
AI summary
Transactions between account-based endpoints are performed in a two-step process that first qualifies the recipient's validity and then performs the actionable transfer. The qualification step, unlike a payment pre-qualification, validates the recipient account validity while collecting information required for filling out a transaction data set. The information may include anti-money laundering and know-your-customer information as well as specific account details needed for on-boarding. A recipient payouts service provider may be assigned a tokenized bank identification number for use in routing the transfer through existing financial processing networks. Data constructs, minimum required information, and format checks may be facilitated by initiator-side and recipient-side application program interfaces.