Peer-to-Peer Transaction Risk Rating System
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Solution Overview
Problem
Conventional peer-to-peer transactions lack a reliable method for assessing the risk of payment completion, particularly in transactions between unfamiliar individuals or in uncertain environments, as existing credit rating systems do not provide transaction-specific risk assessments.
Innovation Solution
A computer-implemented risk rating system that analyzes previous peer-to-peer transactions of a counter-party to generate a risk rating for a proposed transaction, considering factors like success rate, transaction value, dispute rate, and social network connections, to provide a score indicating the likelihood of successful transaction completion.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If conventional credit rating systems are used to assess payor risk, then general credit history is available, but transaction-specific risk assessment is not provided
Solution Approach 1:
The patent segments the risk assessment into two distinct components: a general payor risk rating based on historical transaction data, and a specific transaction risk rating that combines the payor rating with transaction-specific factors. This segmentation allows the system to provide both general creditworthiness information and transaction-specific risk assessment without requiring a completely new complex system.
Solution Approach 2:
The system performs preliminary risk assessment by calculating the payor risk rating in advance based on historical P2P transaction data. This pre-computed rating is then reused for multiple transactions, avoiding redundant analysis and enabling faster transaction-specific risk assessments while maintaining comprehensive evaluation capabilities.
2Adaptability or versatility
If P2P transactions are conducted with unfamiliar individuals, then transaction flexibility increases, but risk of non-completion increases
Solution Approach 1:
The system implements feedback mechanisms by continuously monitoring P2P transaction outcomes and using this data to update payor risk ratings. This feedback loop enables the system to adapt to new information about payor reliability, dynamically adjusting risk assessments for transactions with unfamiliar individuals based on their actual transaction history and behavior patterns.
Solution Approach 2:
The patent introduces an intermediary risk rating system that mediates between the payor and payee in P2P transactions. This intermediary provides independent risk assessment based on objective transaction data, enabling transactions between unfamiliar parties by offering a third-party verification of payor reliability without requiring personal relationships or trust between the transacting parties.
3Measurement precision
If comprehensive transaction analysis is performed to determine risk rating, then accuracy of risk assessment improves, but processing time increases
Solution Approach 1:
The system performs preliminary risk assessment by calculating the payor risk rating in advance based on historical P2P transaction data. This pre-computed rating is then reused for multiple transactions, avoiding redundant analysis and enabling faster transaction-specific risk assessments while maintaining comprehensive evaluation capabilities.
Solution Approach 2:
For transaction-specific risk ratings, the system applies partial analysis by focusing only on the specific transaction factors relevant to that transaction rather than re-analyzing the entire transaction history. This selective approach maintains accuracy for the specific transaction while significantly reducing processing time compared to comprehensive re-evaluation.
Data Source
AI summary
The invention provides a computer-implemented method for generating a risk rating for a peer-to-peer transaction. The method comprises receiving a request to generate a risk rating for a proposed peer-to-peer financial transaction; identifying information associated with a plurality of previous peer-to-peer transactions of the payor; identifying one or more of the previous peer-to-peer transactions that are related to the proposed transaction; assigning a score to each of the related peer-to-peer transactions, the score being based at least in part on a determination of a level of success of each of the related peer-to-peer transactions; determining the risk rating for the proposed transaction based on the scores assigned to the transactions related to the proposed transaction; determining a payor risk rating for the payor; adjusting the risk rating for the proposed transaction based on the payor risk rating of the payor; and presenting the risk rating for the proposed transaction.