Payment Exchange Server Auction Routing
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Solution Overview
Problem
The traditional credit card transaction process is inefficient and costly for merchants due to high fees incurred from acquirers, card networks, and issuers, which are passed on to consumers, offering little control over fee structures and transaction routing.
Innovation Solution
Implementing a payment transaction auction system that allows payment processors to bid on processing fees and routing options, with a payment exchange server selecting the winning bid to minimize fees and offer incentives, enabling cost-effective transaction execution.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If traditional credit card transaction routing is used, then transaction execution is guaranteed through established channels, but processing fees are high and merchants have no control over fee structures
Solution Approach 1:
The patent implements dynamic transaction routing where the merchant can select from multiple available payment networks and processors for each transaction based on current fee structures, availability, and transaction characteristics. This transforms the static, predetermined routing of traditional systems into a flexible, real-time selection process that adapts to changing conditions, enabling merchants to optimize fees while maintaining execution guarantees through multiple validated channels.
Solution Approach 2:
The system changes the routing parameters dynamically by evaluating multiple payment networks and processors against criteria including fee rates, transaction limits, and availability. The merchant can adjust routing decisions based on transaction amount, type, and desired speed of execution, transforming the fixed parameter approach of traditional systems into a multi-parameter optimization process that reduces fees while maintaining service quality.
2Loss of energy
If multiple payment networks and processors are evaluated for each transaction, then fee reduction opportunities increase, but transaction processing time and system complexity increase
Solution Approach 1:
The patent implements preliminary evaluation and pre-qualification of payment networks and processors, maintaining updated profiles of each channel's fees, capabilities, and availability. This pre-processing of routing options eliminates the need for real-time evaluation of all parameters during transaction execution, allowing the system to quickly match transactions with optimal pre-validated channels while still achieving fee reduction through comprehensive channel assessment.
Solution Approach 2:
The system employs lightweight, cached routing decisions for common transaction types and amounts, using simplified evaluation rules for frequent scenarios. This disposable approach to routing logic—using pre-computed or cached decisions for standard transactions—reduces processing time significantly while maintaining fee optimization benefits, reserving full evaluation only for unusual or high-value transactions.
3Loss of energy
If merchants can select from multiple payment channels, then fee optimization is possible, but the system requires complex routing logic and multiple channel integrations
Solution Approach 1:
The patent introduces a payment network selector as an intermediary component that manages the complexity of multiple channel integrations. This selector acts as a standardized interface between the merchant system and various payment networks, handling the complex routing logic, authentication, and coordination internally while presenting a simple, unified interface to the merchant. This intermediary absorbs the system complexity, enabling fee optimization without burdening the merchant with complex integrations.
Data Source
AI summary
Disclosed are method and apparatus that host auctions for completing payment transactions that benefit a party of the transactions. The technique transmits bidding invitations for completing a payment transaction to multiple payment processors. Among the received auction bids, the technique selects a winning bid from an individual payment processor that offers a best benefit to a party involved in the payment transaction (e.g., a consumer or a merchant). Through the auction process, the technique enables a cost-effective routing for completing the payment transaction.