Merchant Invoice Financing Through Payment Processing
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Solution Overview
Problem
Individuals and businesses often face challenges in determining appropriate discounts for early payment of invoices and managing cash flow issues, leading to difficulties in timely repayment and missing out on discount benefits.
Innovation Solution
A payment processing system provides financing options such as cash advances or loans to merchants, allowing them to manage invoice payments through point-of-sale terminals, and determines financing terms based on merchant account information and transaction history, offering flexible repayment options.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of time
If invoice receivers are required to pay the invoice amount within the term of repayment, then the invoice sender receives timely payment, but the invoice receiver may not have enough cash on hand to pay
Solution Approach 1:
The patent introduces a payment intermediary system that acts as a mediator between the invoice sender and receiver. The intermediary holds funds in escrow and releases them according to agreed payment terms, enabling the receiver to commit to payment schedules without immediately depleting their cash reserves. This resolves the contradiction by providing a third-party mechanism that facilitates timely payment commitment while preserving the receiver's working capital.
Solution Approach 2:
The system enables preliminary action by allowing invoice receivers to pre-commit to payment schedules and secure financing arrangements before the invoice due date. Receivers can set up automated payment plans or secure lines of credit in advance, ensuring funds will be available when needed without requiring large cash reserves to be held idle throughout the payment term.
2Loss of energy
If discounts are offered to the invoice receiver for quick payment, then the invoice sender benefits from early payment, but it is difficult to determine an appropriate discount to achieve the desired result
Solution Approach 1:
The patent implements feedback mechanisms where the system analyzes historical payment data, industry standards, and specific invoice characteristics to automatically determine optimal discount rates. The system provides feedback to both senders and receivers about the implications of different discount terms, enabling data-driven decisions rather than arbitrary discount setting. This reduces the complexity of discount determination while maximizing the benefit to both parties.
Solution Approach 2:
The system dynamically adjusts discount parameters based on multiple factors including payment term length, invoice amount, receiver credit history, and market conditions. Rather than using fixed discount rates, the system modifies discount parameters in real-time to achieve optimal outcomes, automatically finding the right balance between encouraging early payment and maintaining fair pricing for the sender.
3Quantity of substance
If invoice receivers do not have enough cash on hand, then they cannot pay the invoice amount within the term of repayment, but they also cannot receive the additional benefit of discounts offered by the invoice sender
Solution Approach 1:
The patent introduces dynamic payment arrangements that allow receivers to adjust payment schedules based on their actual cash flow conditions. Rather than rigid fixed-term payments, the system enables flexible timing where receivers can make smaller payments during low-cash periods and larger payments when cash is available, while still capturing applicable discounts. This dynamic approach ensures both cash availability constraints and discount benefit requirements can be satisfied simultaneously.
Data Source
AI summary
In some examples, a payment service receives transaction information of transactions performed between a plurality of users of the payment service. The payment service determines terms for a first user to finance, for a second user, at least part of an amount of a payment. The terms are determined based on at least one of: a) transaction information associated with the first user; (b) transaction information of at least one related user; or (c) transaction information associated with the second user. The payment service transmits the terms to the first user and the second user. The payment service subsequently receives funds from the second user, and provides the funds to the first user as repayment for at least the part of the amount of the payment financed by the first user.