Merchant Terminal AID Selection for Interchange Fee Reduction

Solution Overview

Problem

Current EMV standards do not allow merchants to control the application and payment vehicle used for transactions, potentially leading to higher interchange fees and lack of merchant preference in payment processing.

Innovation Solution

A system and method that enables merchants to use a preferred list of application identifiers (AIDs) for transactions, allowing them to select the payment application and network used, by storing a merchant file with preferred AIDs and comparing it with the candidate list from the card issuer and acquirer to determine the final AID for processing.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Ease of operation

If current EMV standards are used for transaction processing, then the transaction can be conducted using smart card, but the merchant cannot control the application and payment vehicle used, leading to higher interchange fees

Engineering Contradiction:

Improvemerchant control over payment processingVSAvoidinterchange fees

Core Design Contradiction:

Ease of operationVSLoss of energy

Solution Approach 1:

The merchant pre-configures a list of preferred application identifiers (AIDs) in the terminal before transactions occur. This preliminary setup enables the terminal to automatically select from preferred payment applications during transaction processing, giving merchants control over which payment vehicles are used and potentially reducing interchange fees without requiring real-time intervention.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system dynamically selects payment applications by comparing the candidate list from EMV standards with the merchant's preferred list of AIDs. This dynamic selection process allows the terminal to adaptively choose the most appropriate payment application based on merchant preferences while still complying with EMV transaction requirements.

Inventive Principle:

Principle #15Dynamics

2Adaptability or versatility

If multiple payment applications are available on the smart card, then the cardholder has payment options, but the merchant cannot select the preferred payment vehicle

Engineering Contradiction:

Improvepayment application selectionVSAvoidmerchant preference control

Core Design Contradiction:

Adaptability or versatilityVSEase of operation

Solution Approach 1:

The merchant pre-configures a list of preferred application identifiers (AIDs) in the terminal before transactions occur. This preliminary setup enables the terminal to automatically select from preferred payment applications during transaction processing, giving merchants control over which payment vehicles are used and potentially reducing interchange fees without requiring real-time intervention.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The merchant's preferred list of AIDs acts as an intermediary layer between the EMV candidate list and the final payment application selection. This intermediary mechanism reconciles the cardholder's multiple payment options with the merchant's preferred payment vehicles, enabling automated selection that satisfies both parties' requirements.

Inventive Principle:

Principle #24Intermediary (Mediator)

3Reliability

If the terminal uses the candidate list from card issuer and acquirer, then EMV compliance is maintained, but merchant preferred payment networks cannot be prioritized

Engineering Contradiction:

ImproveEMV standard complianceVSAvoidmerchant preferred network selection

Core Design Contradiction:

ReliabilityVSAdaptability or versatility

Solution Approach 1:

The system merges the EMV candidate list (which ensures compliance) with the merchant's preferred list of AIDs (which enables merchant control). By combining these two lists and selecting from their intersection, the system simultaneously maintains EMV standard compliance and allows merchants to prioritize their preferred payment networks and applications.

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The merchant pre-configures a list of preferred application identifiers (AIDs) in the terminal before transactions occur. This preliminary setup enables the terminal to automatically select from preferred payment applications during transaction processing, giving merchants control over which payment vehicles are used and potentially reducing interchange fees without requiring real-time intervention.

Inventive Principle:

Principle #10Preliminary action

Data Source

PatentUS9436939B2Selecting mobile wallet application for a transaction conducted using a smart card

Publication Date: 2016.09.06 FIRST DATA CORP

AI summary

A merchant point-of-sale terminal may include a local merchant file having a list of preferred AIDs (application identifiers) determined by the merchant and used to select the payment vehicle used to conduct a transaction with a smart card. The list of preferred AIDs may be used in a priority established by the merchant.