Escrow Payment System for Fraud Prevention in B2B Transactions
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Solution Overview
Problem
Current payment systems for business-to-business, consumer-to-consumer, and business-to-consumer transactions lack effective fraud prevention and insolvency protection, often placing risk on vendors or buyers, with existing methods like letter of credit relying heavily on banks and offering limited control over transactions.
Innovation Solution
A fraud prevention trading and payment system that uses an e-wallet or bank account system where both parties can block funds and generate split codes for transactions, allowing step-by-step control and secure payment, enabling reverse transactions in case of disputes.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If payment on account is used, then buyer can verify quality before payment, but vendor faces risk of cash loss from fraud or insolvency
Solution Approach 1:
The patent introduces a payment platform as an intermediary that holds funds in escrow during the transaction. The platform mediates between buyer and vendor, releasing funds only when predefined conditions are met (such as goods delivery confirmation or quality verification), thereby protecting both parties while maintaining transaction control
Solution Approach 2:
The system requires buyers to deposit funds into the platform's escrow account before the transaction begins. This preliminary action ensures funds are secured and available, eliminating the risk of non-payment for vendors while giving buyers confidence that their money is protected until conditions are satisfied
2Reliability
If payment in advance is used, then vendor is protected, but buyer faces risk of fraud or non-conforming goods
Solution Approach 1:
The payment platform acts as a mediator that receives advance payment from the buyer but does not immediately transfer it to the vendor. Instead, the funds are held in escrow and only released to the vendor when the buyer confirms receipt and satisfaction with the goods, protecting buyers from fraud while ensuring vendors receive payment
Solution Approach 2:
The system implements a feedback mechanism where the buyer must confirm receipt and quality of goods before the platform releases funds to the vendor. This feedback loop ensures that vendors only receive payment when their obligations are fulfilled, reducing buyer risk while maintaining vendor protection
3Reliability
If letter of credit is used, then high security standard is achieved, but high costs and long duration result
Solution Approach 1:
The patent replaces the complex, expensive, and time-consuming letter of credit system with a simplified digital escrow mechanism. The escrow account serves as a lightweight, cost-effective security instrument that provides comparable protection without the bureaucratic overhead, high fees, and lengthy processing times of traditional letter of credit arrangements
Solution Approach 2:
The system substitutes the manual, paper-based letter of credit process with an automated digital platform that uses electronic fund transfers and automated condition monitoring. This replacement eliminates the need for bank intermediaries and manual documentation, dramatically reducing transaction time and costs while maintaining security standards
Data Source
AI summary
A code system for preventing fraud in trading and at the same time a safe payment method for business and consumer. The code system of the present invention ensures security and control for the contracting parties regarding the previously defined attributes of the goods and the payment including all decisional steps of the transactions as well as of the reverse transactions in case of complaint. The contracting parties act complementary, money and goods or money and services are never at the same time under control of one contracting party.