Financial Transaction Authentication via Pre-Deposit Verification
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Card not present transactions, such as those over the Internet or phone, lack effective verification methods for account holders, as they cannot confirm the authenticity of account information without physical presence, leading to increased risks of fraudulent activities.
Innovation Solution
A computerized method where a merchant system prepares transaction data including account holder account data and unique authentication information, which is obtained from the account holder's financial institution and verified to ensure authenticity, potentially reducing transaction fees by using a single transaction and incorporating randomly generated credits or text messages within the ISO 200 message format.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional authentication methods (PIN, CVV) are used for card not present transactions, then the transaction process is simple, but fraud risk increases due to inability to verify account holder authenticity
Solution Approach 1:
The system performs preliminary authentication by depositing funds into the account holder's account before the actual purchase transaction. This preliminary action creates a verifiable trail that proves the account holder's identity and authorization, thereby reducing fraud risk while maintaining operational simplicity.
Solution Approach 2:
The system requires the account holder to view their transactions to see the deposited amount and then provide this information back to the merchant. This feedback loop verifies that the person making the purchase is the legitimate account holder, enhancing reliability without significantly complicating the process.
2Reliability
If pre-registration with fund deposit is required for authentication, then fraud risk is reduced, but transaction time and fees increase due to requiring two separate transactions
Solution Approach 1:
The system merges the authentication process with the purchase transaction itself. By integrating the fund deposit and authentication verification into a single coordinated transaction flow, the system eliminates the need for separate pre-registration and purchase transactions, thereby reducing transaction time while maintaining security.
Solution Approach 2:
The authentication mechanism serves multiple functions simultaneously: it verifies account holder identity, authorizes the transaction, and provides a fraud prevention trail. This multi-functionality allows the system to maintain high security standards while streamlining the transaction process into a single operation.
3Measurement precision
If authentication information is transmitted through multiple systems (merchant, payment network, financial institution), then verification accuracy improves, but system complexity increases
Solution Approach 1:
The verification process is segmented into distinct functional components: the merchant system initiates the authentication, the payment network transmits the transaction data, and the financial institution processes the verification. This segmentation allows each system to perform its specific function accurately while maintaining overall system manageability and clarity.
Data Source
AI summary
In one embodiment, a computerized method for authenticating a financial account when making a purchase utilizes a merchant computer system which receives a purchase request from an account holder. The merchant computer system prepares transaction data that comprises account holder account data and authentication information. The transaction data is transmitted to a financial institution of the account holder. Subsequently, the merchant computer system receives the authentication information that was obtained by the account holder from the financial institution. The authentication information from the account holder is analyzed and future transactions are authenticated if the authentication information is correct.