Electronic Payment Processing With Dynamic Interchange Rates
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Solution Overview
Problem
Current electronic payment systems face challenges in processing non-physical payment cards, such as ghost and one-time use cards, which are cumbersome, risky, and costly for merchants due to fixed interchange rates and security issues, and lack mechanisms for dynamic discounting based on transaction volume or timeliness.
Innovation Solution
A system and method for processing card payments that securely transmits payment information, dynamically adjusts interchange rates based on factors like transaction volume and timeliness, and provides automated reporting, allowing merchants to incentivize early payment and volume transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If fixed interchange rates are applied to card payments, then card issuers receive consistent revenue, but merchants face high costs and lack incentive to accept card payments
Solution Approach 1:
The patent implements dynamic interchange rates that adjust based on transaction factors such as payment timeliness and volume. The system automatically modifies interchange rates in real-time, transitioning from fixed to variable rates to incentivize merchants while maintaining issuer revenue stability
Solution Approach 2:
The system changes the interchange rate parameter based on transaction characteristics. By adjusting the rate parameter dynamically according to payment conditions (early payment, volume thresholds), the system resolves the contradiction between rate consistency and merchant incentive
2Productivity
If merchants securely store card information for processing, then payment processing is efficient, but security risks and fraud exposure increase
Solution Approach 1:
The patent extracts card information from the merchant's environment entirely. Instead of storing card data locally, the system uses tokenization to replace sensitive information with non-sensitive tokens, removing the security vulnerability while maintaining processing efficiency
Solution Approach 2:
The system introduces an intermediary tokenization layer between the card information and the payment processing system. This intermediary transforms sensitive data into secure tokens that can be processed efficiently without exposing actual card details
3Adaptability or versatility
If multiple virtual card programs are managed by merchants, then payment options increase, but operational complexity and burden amplify
Solution Approach 1:
The patent creates a universal payment processing system that handles multiple virtual card programs through a single interface. The system performs multiple functions (processing different card types, managing tokens, calculating dynamic rates) through one unified platform, reducing merchant operational complexity
4Ease of operation
If fixed rebates are provided to buyers, then card usage is encouraged, but dynamic incentive mechanisms for early payment and volume transactions are lacking
Solution Approach 1:
The system implements dynamic rebate mechanisms that adjust based on transaction characteristics. Rebates are no longer fixed but vary according to payment timeliness, transaction volume, and other factors, enabling flexible incentive structures that adapt to different business needs
Data Source
AI summary
An encrypted payment message is received from a buyer relating to a transaction with a merchant. The payment message is parsed using a first parsing algorithm to obtain merchant identifying information. The merchant identifying information is associated with at least a second parsing algorithm or at least one settlement algorithm. The payment message is parsed using the second parsing algorithm to obtain payment information for the transaction. A first settlement algorithm is applied to the payment information to determine an adjusted interchange rate. The payment information including the adjusted interchange rate is submitted to a third party settlement processor on behalf of the merchant, using a payment algorithm. A second settlement algorithm applied to the payment information determines a buyer rebate which can be submitted to the settlement processor. A transaction result is reported to at least one of the merchant or the buyer.