Dynamic Settlement Window Assignment for Transaction Risk Management
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Solution Overview
Problem
Current funds settlement systems lack flexibility and efficiency, particularly for participants like acquirers who pre-fund merchants, as they tie up funds until a predetermined settlement time and complicate the movement of funds when high-risk transactions are detected, leading to potential delays and burdens.
Innovation Solution
A computer-implemented method and system for dynamically designating a preferred settlement window within a settlement cycle between an acquirer and an issuer, using a settlement decisioning engine that processes transaction records to match business criteria with available settlement windows, allowing for flexible settlement times and risk detection to prevent high-risk transactions from delaying the process.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If a single predetermined settlement time is used to settle all transactions, then the settlement process is simplified and standardized, but funds are tied up for extended periods and flexibility for individual participants is lost
Solution Approach 1:
The patent divides the single settlement process into multiple settlement windows throughout the day. Each window processes a subset of transactions independently, allowing participants to receive funds sooner rather than waiting for a single end-of-day settlement. This segmentation resolves the contradiction by providing flexible timing options while maintaining efficient processing.
Solution Approach 2:
The system dynamically assigns transactions to different settlement windows based on real-time conditions, participant preferences, and risk assessments. This dynamic approach allows the settlement process to adapt to individual participant needs while optimizing fund turnover, thereby increasing flexibility without sacrificing efficiency.
2Reliability
If all transactions are processed in a single batch settlement, then processing is straightforward, but high-risk transactions can delay the entire settlement process
Solution Approach 1:
By segmenting transactions into multiple settlement windows, the patent isolates high-risk transactions to specific windows. This allows the majority of low-risk transactions to be settled in other windows without delay, maintaining overall settlement productivity while preserving process stability through targeted risk management.
Solution Approach 2:
The system extracts potentially high-risk transactions from the main settlement batch and places them in separate settlement windows for enhanced scrutiny. This extraction allows the primary settlement process to proceed efficiently with low-risk transactions, while high-risk transactions receive dedicated attention without blocking overall productivity.
3Ease of operation
If acquirers pre-fund merchants, then merchant transactions can be processed immediately, but acquirers bear the burden of tied-up funds until settlement
Solution Approach 1:
The patent enables acquirers to participate in multiple settlement windows throughout the day, allowing them to receive funds from different transaction batches at different times. This segmentation reduces the total amount of funds tied up at any given moment, as acquirers can stagger their settlement receipts to match their funding needs, thereby maintaining ease of merchant operations while reducing capital burden.
Data Source
AI summary
Provided is a computer-implemented method for dynamically designating a settlement window for a transaction within a settlement cycle between an acquirer and an issuer. The method includes receiving a plurality of transaction records associated with a plurality of transactions, determining a first settlement window of a plurality of settlement windows to assign a transaction record of the plurality of transaction records, assigning the transaction record of the plurality of transaction records to the first settlement window based on determining the first settlement window of the plurality of settlement windows to assign the transaction record, and performing a settlement function for a transaction associated with the transaction record assigned to the first settlement window based on assigning the transaction record of the plurality of transaction records to the first settlement window. A system and computer program product are also disclosed.