Dynamic BIN Allocation for Virtual Payment Card Interchange Fees
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Solution Overview
Problem
The existing payment systems incur significant interchange fees for merchants, particularly in card-based transactions, due to complex and variable interchange rate structures, making it challenging to dynamically manage these fees, especially in virtual payment card transactions.
Innovation Solution
A system that automatically adjusts the effective interchange rate by selecting a BIN account based on specific factors such as card type, transaction type, and payment details to generate a virtual payment card that meets predefined interchange fee targets, allowing for dynamic interchange rate management.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of manufacture
If traditional fixed BIN accounts are used for virtual payment cards, then card issuance is simplified, but interchange fees become unpredictable and potentially excessive
Solution Approach 1:
The system dynamically assigns BIN accounts based on transaction characteristics rather than using fixed BIN accounts. The BIN selection changes depending on factors such as transaction amount, merchant category, and card type, enabling the system to optimize interchange rates for each specific transaction while maintaining simplified card issuance processes.
Solution Approach 2:
The system changes the BIN parameter based on transaction parameters to optimize interchange fees. By selecting different BIN accounts corresponding to different interchange rate structures, the system adapts the fee structure to match the specific transaction context, improving fee predictability without complicating card issuance.
2Loss of energy
If dynamic BIN selection is implemented to optimize interchange rates, then interchange fee control improves, but system complexity increases
Solution Approach 1:
The system automatically selects the appropriate BIN account based on pre-defined criteria and transaction characteristics without requiring manual intervention. The automated selection process reduces the need for complex manual configuration while still achieving optimal interchange rate selection, thereby controlling fees without proportionally increasing system complexity.
Solution Approach 2:
The system incorporates feedback mechanisms that monitor transaction outcomes and interchange fee performance to continuously optimize BIN selection. By learning from past transactions and adjusting selection criteria accordingly, the system improves fee control over time while the feedback loop automates the complexity rather than requiring manual system management.
3Adaptability or versatility
If multiple BIN accounts are maintained for different interchange rate structures, then interchange rate flexibility improves, but account management complexity increases
Solution Approach 1:
The system creates a universal BIN selection framework that can handle multiple interchange rate structures through a single unified process. Rather than requiring separate management systems for different BIN types, the universal selection mechanism evaluates transaction characteristics and routes to appropriate BIN accounts, achieving interchange rate flexibility while simplifying overall account management through consolidation.
Data Source
AI summary
Preauthorized payments may be made to service providers, repair shops and even vendors serving employees on business trips through credit card processing. The approved payment amount is authorized on a virtually created payment card which is then sent to the payee. These transactions incur interchange fees for the card processing. Therefore, unlike a check or EFT payment, the payee receives the approved payment less interchange fees. Interchange rates vary based on the payment card product offered by an issuing bank in addition to factors relating to how the payment card is processed. The current invention is a method of automatically generating a virtual payment card and/or processing the card in a manner to achieve a target interchange fee.