Payment Authorization Optimization Using Historical BIN Data
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Solution Overview
Problem
The existing payment card transaction authorization process relies solely on the cardholder's issuing country to determine the merchant acquiring bank, which does not optimize approval rates, leading to suboptimal transaction approvals.
Innovation Solution
A method and apparatus that determine the issuing country of the cardholder's bank using the Bank Identification Number (BIN) and identify potential merchant countries with which the bank has previous transaction history, ranking authorization rates to select the optimal merchant acquiring bank for higher approval probabilities, while excluding irrelevant transactions and adjusting for sample size.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If the merchant acquiring bank is determined solely by the cardholder's issuing country, then the authorization process is simple and straightforward, but the approval rate is suboptimal
Solution Approach 1:
The system performs preliminary actions by pre-calculating and storing authorization approval rates for multiple merchant acquiring banks associated with each issuing country. When a transaction is initiated, the system retrieves pre-computed statistics and rankings, avoiding real-time complex calculations while optimizing approval rates.
Solution Approach 2:
The system dynamically selects the merchant acquiring bank based on real-time transaction characteristics (BIN, merchant category code) and historical performance data. The selection is not static but adapts to each transaction context by ranking acquiring banks according to their historical approval rates for specific issuing country-BIN-MCC combinations.
2Reliability
If multiple merchant acquiring banks are evaluated based on historical authorization rates, then the approval rate is optimized, but the determination process becomes more complex
Solution Approach 1:
The system performs preliminary actions by pre-calculating and storing authorization approval rates for multiple merchant acquiring banks associated with each issuing country. When a transaction is initiated, the system retrieves pre-computed statistics and rankings, avoiding real-time complex calculations while optimizing approval rates.
Solution Approach 2:
The system uses historical transaction data to automatically update and refine its own selection criteria. By analyzing past authorization outcomes, the system self-optimizes the ranking of merchant acquiring banks for different issuing countries and merchant categories, improving future selections without external intervention.
3Measurement precision
If the system collects and analyzes historical authorization data for multiple countries and banks, then the optimization accuracy is improved, but the data processing complexity increases
Solution Approach 1:
The system segments the data processing by creating separate tracking structures for each issuing country-BIN-merchant category code combination. This segmentation allows the system to maintain precise historical authorization rates for specific contexts without requiring a single complex data structure to handle all possible combinations, thereby improving measurement precision while managing complexity through modular organization.
Data Source
AI summary
A apparatus and method is disclosed for optimizing authorization approval in a proposed payment card transaction. In one embodiment an issuing country of the cardholder issuing bank is identified together with a plurality of potential merchant acquiring banks that could be used to process an authorization request for the proposed payment card transaction. Using historical data regarding previous proposed payment card transactions, historical approval rates are identified for each of the identified potential merchant acquiring bank configurations. The merchant acquiring bank configuration with the highest historical approval rating is selected as the optimal merchant bank configuration for processing authorization approval. To improve the ranking of a given configuration, the apparatus and method may exclude from consideration transactions that do not include: the specific bank identifying number (BIN) on the payment card, the collection of BINs belonging to the cardholder issuing bank, and/or the at least one merchant category code associated with the merchant.