Dynamic Payment Rail Conversion for Cost Reduction
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Solution Overview
Problem
The financial services industry faces significant costs associated with processing debit card transactions, which are often passed on to merchants and ultimately to consumers, leading to increased expenses and reduced satisfaction for smaller merchants.
Innovation Solution
Implementing systems and techniques that utilize less expensive payment rails, such as the Automated Clearing House (ACH) system, to facilitate transactions between customers and merchants, while obtaining customer consent and using machine learning to predict available funds and optimize payment rail selection.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If debit card transactions are processed through traditional payment networks, then transaction processing is reliable and widely accepted, but transaction costs are high
Solution Approach 1:
The system dynamically changes the payment rail parameter based on account balance thresholds. When the deposit account has sufficient funds, the transaction is routed through lower-cost ACH networks; when funds are insufficient, it automatically converts to higher-cost card network processing. This parameter change resolves the contradiction by adapting the payment method to cost conditions while maintaining transaction reliability.
Solution Approach 2:
The patent introduces an intermediary conversion mechanism between ACH and card networks. This intermediary system automatically converts transaction types based on fund availability, acting as a mediator that selects the optimal payment rail. The intermediary resolves the contradiction by intelligently routing transactions through the most cost-effective path while ensuring successful processing.
2Loss of energy
If ACH payment rail is used to reduce transaction costs, then transaction cost decreases, but service level and transaction speed may be impacted
Solution Approach 1:
The system dynamically adjusts the payment rail selection based on real-time account balance conditions. The conversion between ACH and card networks is not static but adapts to changing fund availability. This dynamic approach ensures that the system maintains service quality by using faster card networks when necessary while optimizing for cost when ACH is sufficient, resolving the contradiction between cost reduction and service level maintenance.
Solution Approach 2:
The system performs preliminary checks of account balance before routing transactions. By anticipating fund availability issues in advance, the system can proactively convert ACH transactions to card transactions before processing failures occur. This preliminary action prevents service disruptions while maintaining the cost benefits of ACH processing when conditions are favorable.
3Loss of energy
If automatic conversion between payment rails is implemented, then transaction cost optimization improves, but system complexity increases
Solution Approach 1:
The system implements self-service automation where the conversion between ACH and card networks occurs automatically based on pre-defined balance thresholds. The system monitors its own account balances and autonomously makes conversion decisions without requiring manual intervention or complex external management. This self-service approach reduces operational complexity while maintaining the cost optimization benefits of multi-rail processing.
Data Source
AI summary
Systems and methods may generally be used for processing transactions. An example method may include receiving a request from a wallet application to perform a transaction to transfer funds from a payor account over a first payment rail. The first payment rail may be associate with a payment network corresponding with an element of the wallet application. The example method may include determining whether a second payment rail is available for processing the request based upon a determination that the second payment rail meets a requirement of the transaction. The example method may further include, upon determining that the second payment rail is available, converting the request to a request for processing using a second payment rail different from the first payment rail, and processing the request using the second payment rail.