Early Payment Rewards System for Credit Issuers
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Solution Overview
Problem
Credit card issuers incur a funding burden due to transactors who pay their balances just before or on the due date, preventing the issuers from earning interest and incurring unprofitable accounts with additional fees.
Innovation Solution
Implementing an early payment rewards system that identifies and rewards cardholders for paying their balances early, reducing funding burdens by offering rewards for timely payments, thereby encouraging early payment behavior.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If credit card issuers allow transactors to pay balances at the due date without restrictions, then card holders can maximize their interest earning capacity, but credit issuers bear the cost of funding without receiving interest
Solution Approach 1:
The patent inverts the traditional rewards model by rewarding early payments instead of late payments. Transactors receive rewards for paying before the due date, which shifts the payment timing from the end of the billing cycle to earlier dates, thereby reducing the funding burden on issuers while maintaining transactor benefits
Solution Approach 2:
The patent changes the parameter of payment timing by introducing variable rewards based on how early the payment is made. The reward amount or percentage varies according to the number of days early the payment is received, incentivizing transactors to pay progressively earlier in the billing cycle
2Productivity
If credit card issuers offer rewards and benefits to transactors, then transactors are attracted to use the credit cards, but interchange revenues are offset by these rewards and benefits making accounts unprofitable
Solution Approach 1:
The patent applies preliminary action by offering rewards in advance for early payments. Instead of providing rewards after the billing cycle ends, the system provides immediate or near-immediate rewards when early payments are detected, creating a direct incentive that reduces funding duration while maintaining profitability through targeted reward allocation
3Use of energy by moving object
If credit card holders wait until the due date to pay their balances, then they maximize their own interest earning capacity, but credit issuers incur funding costs without receiving interest
Solution Approach 1:
The patent implements feedback by monitoring payment timing and automatically applying rewards based on early payment detection. The system provides real-time or near-real-time feedback to transactors about the rewards they earn for early payments, creating a closed-loop system that continuously incentivizes earlier payment behavior and reduces overall funding duration across the cardholder base
Data Source
AI summary
Embodiments of the invention are directed to a computer-implemented method for reducing funding burden on a credit issuer by offering an early payment rewards program to qualified card holders. The method may include identifying card holders having a payment history illustrating payment of an entire credit balance each month, determining whether each of the identified card holders generates an account-related fee total not exceeding a pre-selected threshold, and selecting the card holders having a history of payment of the entire credit balance each month and generating account-related fees not exceeding the pre-selected threshold. The method may further include offering the early payment rewards program to the selected card holders, wherein upon enrollment in the early payment rewards program the selected card holders receive rewards for early payment behavior. Additional aspects of the method include receiving notification of a payment at an early payment rewards system, determining if the received payment generates early payment rewards, and evaluating the received payment based on retrieved early payment rules to calculate a reward amount. The method may further include adding the calculated reward amount to a participant account.