Distributed Rules-Based Payment System Fee Reduction
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Solution Overview
Problem
Current payment systems, such as those using credit and debit cards, incur high transaction fees for merchants and consumers due to interchange fees, which can increase the cost of goods and services and deter usage of payment cards.
Innovation Solution
An event-triggered distributed rules-based system (DRBS) processes payments by directing transactions through a virtual holding account, allowing for lower fee card-to-card transfers instead of traditional purchase transactions, and aggregates funds for merchants via ACH transactions at the end of a settlement period, reducing transaction costs and eliminating the need for consumer registration.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If traditional payment card transactions are used, then payment processing is straightforward, but high interchange fees increase transaction costs
Solution Approach 1:
The patent introduces a DRBS intermediary system that mediates between consumers and merchants, replacing direct payment card interchange transactions. The DRBS receives payment information, transfers funds via lower-fee card-to-card transfers to virtual accounts, and handles settlement, thereby eliminating high interchange fees while managing payment processing complexity centrally.
Solution Approach 2:
The patent segments the payment process into distinct phases: authorization (receiving payment information), fund transfer (card-to-card transfer to virtual accounts), and settlement (transferring funds to merchants). This segmentation allows each phase to be optimized independently, using low-fee transfer mechanisms for the fund transfer phase while maintaining regulatory compliance through the settlement phase.
2Loss of energy
If card-to-card transfers are used instead of purchase transactions, then transaction fees are reduced, but the payment process structure becomes more complex
Solution Approach 1:
The DRBS system automatically performs the complex card-to-card transfer operations and virtual account management without requiring consumer action. Consumers simply initiate payments as usual, while the DRBS self-manages the low-fee transfer mechanism, virtual account crediting, and fund aggregation, maintaining ease of operation for users while achieving fee reduction.
Solution Approach 2:
The DRBS serves multiple functions: it acts as a payment processor, maintains virtual accounts for consumers and merchants, manages fund transfers, handles settlement, and ensures regulatory compliance. This multi-functionality allows the system to implement complex fee-reduction mechanisms while presenting a unified, simple interface to users.
3Reliability
If consumer registration is required for payment processing, then regulatory compliance is ensured, but the payment process becomes more cumbersome
Solution Approach 1:
The DRBS performs preliminary actions by pre-establishing virtual accounts and pre-authenticating consumers through the card-to-card transfer process before the actual payment transaction. This preliminary authentication and account setup ensures regulatory compliance is achieved in advance, allowing the actual payment process to proceed without additional registration steps.
Data Source
AI summary
The present disclosure provides systems and methods directed to processing payments using an event-triggered distributed rules-based system (“DRBS”). In one embodiment, a system comprises a DRBS comprising a DRBS virtual holding account associated with the DRBS, a merchant virtual account associated with a merchant, the merchant being a member of the DRBS, and/or a consumer virtual account associated with a consumer. The system also comprises a database configured to manage virtual balance information for the plurality of virtual accounts. The DRBS is configured to receive payment information associated with a payment transaction of the consumer at the merchant, receive funds from a consumer financial account associated with the consumer into a DRBS financial account associated with the DRBS, credit virtual funds to the DRBS virtual holding account or the consumer virtual account, transfer the virtual funds to the merchant virtual account, and transfer the funds from the DRBS financial account to a merchant financial account associated with the merchant.