Payment Routing System for Broker Risk Reduction
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Solution Overview
Problem
Brokers face challenges as 'high-risk' merchants due to financial institutions' classification, leading to unfavorable business terms, credit access issues, and burdensome reconciliation processes, exacerbated by delayed settlement times and high fees associated with electronic payment transactions.
Innovation Solution
A system and method for generating on-demand outgoing payment details, utilizing a network-connected interface to receive customer payment details, store transaction records, and generate payment information for suppliers, which includes a payment gateway to request authorization and manage transaction tracking, fraud detection, and dynamic fee updates, enabling real-time payment processing and reconciliation.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If brokers act as merchants of record to process customer payments, then they can facilitate transactions, but they are classified as high-risk merchants facing higher fees and stricter terms
Solution Approach 1:
The patent introduces a payment processor as an intermediary that handles the actual payment processing for brokers. This mediator absorbs the high-risk classification burden, allowing brokers to process transactions without directly facing the harmful effects of being categorized as high-risk merchants by financial institutions.
Solution Approach 2:
The system separates the broker's function (receiving customer payments) from the payment processing function (handled by the payment processor). This segmentation allows the broker to operate without directly managing the complex and risky payment processing operations, thereby reducing the harmful effects of high-risk classification.
2Productivity
If brokers use separate merchant accounts for each supplier to manage payments, then they can process transactions, but they face increased administrative complexity and reconciliation burden
Solution Approach 1:
The payment processor serves as a universal platform that handles payments to multiple suppliers through a single integrated system. This multi-functional approach consolidates what would otherwise require multiple separate merchant accounts and reconciliation processes into one unified solution, significantly reducing administrative complexity.
Solution Approach 2:
The system merges multiple payment processing functions into a single integrated platform. By combining supplier payment processing, transaction tracking, and reconciliation into one unified system, the patent eliminates the need for brokers to maintain separate accounts for each supplier, thereby reducing complexity.
3Productivity
If financial institutions provide merchant accounts to brokers, then transactions can be processed, but settlement delays of 24-72 hours create cash flow challenges
Solution Approach 1:
The payment processor performs preliminary actions by pre-authorizing transactions and holding funds in advance. This allows the system to prepare for future payments and reduce the settlement delay effect, enabling brokers to access funds more quickly while maintaining processing capability.
Solution Approach 2:
The system implements real-time feedback mechanisms that track transaction status and settlement progress. This feedback loop allows for dynamic adjustment of payment timing and settlement schedules, reducing the effective delay while maintaining the structural requirements of financial institution processing.
4Reliability
If brokers require personal guarantees and cash reserves to secure funding, then they can access credit, but their operational flexibility and growth are constrained
Solution Approach 1:
The payment processor acts as an intermediary that provides funding and credit services to brokers without requiring personal guarantees or large cash reserves from the brokers themselves. This mediator assumes the financial risk, allowing brokers to access the flexibility and growth capital they need without the constraints of traditional financing requirements.
Data Source
AI summary
Systems and methods for receiving customer payment details and generating outgoing payment details on-demand. A network-connected interface can receive customer payment details for payment of an incoming amount. A data store can store a plurality of transaction tracking records including a unique key code and an allocatable amount. A payment gateway can receive authorization data for payment of the incoming amount. An outgoing payment generator can respond to an outgoing payment request comprising an offered key code and an outgoing payment amount if the offered key code matches an existing transaction tracking record in the data store. Outgoing payment details can be generated if the outgoing amount is less than or equal to the allocatable amount. Embodiments can route the transaction such that the customer payment details are passed through to the supplier. Embodiments can make routing and generation decisions based on transaction preferences.