Financial Instrument Verification via Identifier-Based Authentication
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Solution Overview
Problem
Current methods for verifying the legitimacy of financial instruments in online transactions are inadequate, leading to fraud and increased costs for merchants, as they cannot reliably confirm the ownership of the financial instrument being used, especially in cases of stolen instruments and foreign currency transactions.
Innovation Solution
A method that requires the shopper to use identifier information to solve a question or complete a task, which is sent to the financial institution along with the payment request, ensuring the shopper's legitimacy by confirming their access to the financial instrument account, using a simple coding scheme that is difficult to defeat.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If current verification methods are used, then the transaction process is simple and fast, but the reliability of verifying financial instrument legitimacy is poor leading to fraud
Solution Approach 1:
The system performs preliminary verification actions by embedding identifier information in transaction data before the actual transaction completes. The shopper must access this information through proper authentication channels and provide verification data in advance, ensuring legitimacy is confirmed before goods are released or services rendered.
Solution Approach 2:
The patent introduces an intermediary verification mechanism where identifier information acts as a mediator between the shopper and the merchant. This information, embedded in transaction data and accessible only through proper authentication, serves as a trusted intermediary that proves the shopper's legitimacy without requiring direct verification from the merchant.
2Reliability
If identifier information is embedded in transaction data, then fraud is reduced, but the ease of operation decreases due to additional verification steps
Solution Approach 1:
The system enables self-service verification where the shopper independently accesses identifier information through their authenticated account and provides it to complete the transaction. This eliminates the need for manual verification by the merchant or intermediary parties, as the shopper's own authenticated access serves as the verification mechanism.
Solution Approach 2:
The verification process provides immediate feedback to the shopper about whether their identifier information is correct and whether the transaction can proceed. The system responds in real-time to verification attempts, allowing shoppers to correct errors quickly without lengthy manual verification processes.
3Measurement precision
If AVS system is used, then billing address verification is improved, but the system can be defeated and is not available internationally
Solution Approach 1:
The patent implements a universal verification system that works across international boundaries and different financial instrument types. Instead of relying on region-specific systems like AVS, the identifier information mechanism can be embedded in any transaction data format and verified through standardized authentication protocols that work globally with credit cards, debit cards, and other financial instruments.
Solution Approach 2:
The system adapts to different verification scenarios by changing the parameters of identifier information embedded in transaction data. Depending on the transaction type, financial instrument, and risk level, the system can adjust what identifier information is required, how it's formatted, and the authentication method used, making it versatile across international and diverse transaction contexts.
Data Source
AI summary
An apparatus and method for verifying the legitimacy of a financial instrument used by a shopper is disclosed. A seller accepts details about goods and services to be delivered, and information about a financial instrument to be used in a purchase by a shopper. Identifier information is send to a financial institution issuing the instrument. The legitimate user of the instrument must access the instruments issuer's database to obtain the identifier information and derive verification information needed to answer a question posed by the seller. If the shopper can prove possession of the verification information then the goods are shipped or delivered to the shopper and payment is settled. The questions used to prove the shopper has the verification information may come in a variety of forms such as simple math equations, anagrams, or word to symbol matching problems.