Payment Network Routing Using Predicted Authorization Approval
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Merchants face challenges in dynamically routing electronic payment transactions to minimize costs due to regulatory rules, contractual agreements, and unpredictable transaction declines, making it difficult to predict the ideal routing for transactions.
Innovation Solution
A system and method for routing electronic payment transactions using payment pseudo-networks and electronic transaction simulation, which involves generating pseudo-networks to simulate routing options, predicting authorization acceptance, and identifying the least cost PIN-less debit network based on transaction-related information.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If merchants use multiple payment networks and dynamic routing to minimize transaction costs, then transaction cost savings increase, but the complexity of analyzing and determining optimal routing decisions increases
Solution Approach 1:
The system performs preliminary actions by pre-calculating and storing optimal routing decisions in a rate sheet before transactions occur. The rate sheet contains pre-determined routing instructions based on various transaction types, merchant categories, and network preferences, allowing merchants to quickly determine optimal routing without complex real-time analysis.
Solution Approach 2:
The patent introduces an intermediary component (the rate sheet generation system and rate sheet itself) that mediates between the complex payment networks and the merchant's routing decisions. This intermediary pre-processes the complexity by consolidating network rates, preferences, and routing logic into a simplified lookup structure that merchants can easily use.
2Loss of energy
If merchants dynamically route transactions based on real-time authorization predictions, then transaction acceptance cost decreases, but the complexity of predicting authorization outcomes increases
Solution Approach 1:
The system performs preliminary analysis by evaluating multiple payment networks and predicting authorization outcomes before the actual transaction routing decision is made. This allows the system to identify the least cost PIN-less debit network in advance based on predicted authorization acceptance, reducing real-time decision complexity.
Solution Approach 2:
The routing system dynamically adapts to different transaction scenarios by evaluating network-specific factors such as PIN-less network eligibility, authorization prediction scores, and cost structures. The system adjusts routing decisions based on real-time transaction characteristics while maintaining a structured approach through the rate sheet framework.
3Measurement precision
If merchants analyze multiple factors including regulatory rules and contractual agreements to determine routing, then routing accuracy improves, but the time and resources required for analysis increase
Solution Approach 1:
The system performs preliminary consolidation of regulatory rules, contractual agreements, and network preferences into the rate sheet during off-peak times. This pre-processing captures complex factors such as Durbin amendment exemptions, preferred network agreements, and volume threshold requirements, making them readily available for quick reference during transaction routing.
Solution Approach 2:
The patent segments the complex routing analysis into distinct components: network eligibility criteria, cost structure analysis, authorization prediction, and regulatory compliance checks. Each segment is independently evaluated and combined to form the final routing decision, improving both accuracy and efficiency.
Data Source
AI summary
A method for routing electronic payment transactions includes receiving transaction-related information from a merchant, extracting transaction routing criteria from the received transaction-related information, dynamically identifying one or more eligible payment networks based on extracted transaction routing criteria, predicting a likelihood of authorization acceptance for each identified network based on the transaction-related information, dynamically identifying one or more breakeven transaction amounts for each identified eligible payment network, each breakeven transaction amount defining a point at which two or more eligible payment networks have the same expenses for a given transaction amount, the expenses including costs associated with a low predicted likelihood of authorization acceptance, and routing signature debit transactions from the merchant to a least cost PIN-less debit network selected from the eligible payment networks based on identification of a desired breakeven transaction amount for the PIN-less debit network.