Distributed Payment Clearing With Real-Time Account Authorization
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Solution Overview
Problem
Existing financial systems, particularly ACH transfers, suffer from delays and inaccuracies in transferring funds, leading to risks for card issuers and customers due to uncertain account statuses, resulting in potential penalties and inefficient transaction processing.
Innovation Solution
A distributed payment system with a facilitation agent managing a facilitator clearing and servicing account to facilitate real-time money transfers between different banks, enabling instantaneous transaction processing and account balance checks.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If ACH transfers are used for money movement between banks, then funds can be transferred between different banks, but transfer delays and uncertainty in account status occur
Solution Approach 1:
The system performs preliminary balance checks and authorization before initiating the transfer. The facilitation agent checks the customer's account balance and authorizes the transaction in advance, ensuring funds are available before the transfer occurs, thus eliminating delays caused by post-transfer balance verification
Solution Approach 2:
A facilitation agent is introduced as an intermediary between the customer's bank and the merchant's bank. This agent coordinates the transfer process, manages balance verification, and ensures real-time communication between banks, eliminating the delays and uncertainty inherent in traditional ACH transfers
2Reliability
If real-time balance checks are performed during transactions, then accurate account status can be confirmed, but transaction processing time increases due to multiple checks
Solution Approach 1:
The balance verification process is made continuous rather than discrete. The facilitation agent maintains real-time connection with both banks, continuously monitoring account status throughout the transaction process, which eliminates the need for multiple separate balance checks and speeds up processing
Solution Approach 2:
The system implements real-time feedback mechanisms where the facilitation agent receives immediate balance information from the customer's bank and provides instant updates to the transaction status. This continuous feedback loop ensures accurate balance verification without requiring multiple sequential checks
3Productivity
If ACH transfer processes are initiated without confirmation of sufficient funds, then transaction speed is maintained, but failed transfers and penalties occur
Solution Approach 1:
The system performs preliminary balance verification before initiating the transfer process. The facilitation agent checks whether sufficient funds are available in the customer's account before authorizing the transaction, ensuring high transfer success rates while maintaining quick processing through automated real-time checks
Data Source
AI summary
A distributed payment system may include a first bank at which a user deposit account of a customer is established where the user deposit account is associated with a vehicle of the customer to fund transactions initiated via the payment vehicle, a second bank at which a facilitator account of a card issuer of the payment vehicle is established, and a facilitation agent in communication with a first bank agent of the first bank and a second bank agent of the second bank to issue messages or system triggers associated with money transfers within the distributed payment system. The facilitation agent establishes a facilitator clearing account to hold unreconciled funds of customers having payment vehicles and deposit accounts at the first bank, and establishes a facilitator servicing account to hold reconciled funds of the customers having payment vehicle and deposit accounts at the first bank. The facilitation agent facilitates real time transfer of money into and out of the user deposit account with respect to the facilitator clearing account responsive to the customer initiating a transaction, facilitates a net transfer of money between the facilitator clearing account and the facilitator servicing account based on summing all transactions in a given period, and facilitates a transfer of funds between the facilitator servicing account and the facilitator account of the second bank based on the summing of all transactions in the given period.