Intermediary Payment System Using Virtual Card Accounts
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Solution Overview
Problem
Current payment processing systems incur significant overhead costs for credit card transactions, making it unprofitable for third-party intermediaries to facilitate payments between consumers and merchants without incurring substantial infrastructure and risk costs, known as interchange fees.
Innovation Solution
A method where an intermediary establishes a virtual payment card account with a higher interchange rate than the consumer's card account, allowing the intermediary to process payments on behalf of consumers and merchants, thereby minimizing the initial transaction loss and maximizing the second transaction profit.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If a third party intermediary vaults the patient's credit card information and makes a separate payment on behalf of the patient, then the intermediary can facilitate payments between consumer and vendor, but the intermediary only receives $97 from the first transaction while needing to pay the vendor's full $100 amount
Solution Approach 1:
The patent introduces a second intermediary (the invention's system) that sits between the first intermediary and the vendor. This second intermediary receives the $97 from the first intermediary, adds the $3 interchange fee differential, and pays the full $100 to the vendor, thereby resolving the financial shortfall while maintaining the payment facilitation function
Solution Approach 2:
The patent converts the harmful interchange fee differential (the $3 loss) into a benefit by having the second intermediary charge a higher interchange rate on the second transaction, thereby capturing the differential as profit and eliminating the financial barrier to payment facilitation
2Loss of energy
If an intermediary charges a higher interchange rate on the second transaction through a virtual payment card account, then the intermediary can profit from the interchange fee differential, but this requires establishing additional card accounts and processing infrastructure
Solution Approach 1:
The patent uses the second intermediary as a mediator that leverages existing card account infrastructure (the virtual payment card account) to enable the interchange rate differential strategy, thereby recovering fees without requiring entirely new processing systems
Solution Approach 2:
The virtual payment card account serves multiple functions: it acts as the payment instrument for the second transaction, stores card information securely, and enables the interchange rate differential mechanism, thereby reducing the need for separate specialized infrastructure
3Ease of operation
If consumers vault their credit card data with a merchant, then subsequent payments are convenient and secure, but this requires the merchant to have vaulting infrastructure and security implementations
Solution Approach 1:
The patent introduces the second intermediary as a mediator that provides the vaulting infrastructure and security implementations, thereby relieving the merchant of these requirements while still enabling convenient subsequent payments through the established card account
Data Source
AI summary
A payment intermediary vaults credit card data of a consumer for regular, simplified payments to one or more merchants. Consumer authorizes intermediary to charge the credit card so that intermediary can, in turn, pay a selected merchant. Intermediary tracks the interchange fees incurred on the first card transaction (between consumer and intermediary) and then automatically selects a payment card account with a higher interchange rate than that incurred on the first card transaction to pay merchant.