Payment-Split Policy for E-Commerce Transaction Risk
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
E-commerce transactions face challenges in balancing customer and merchant interests, particularly in payment modes where customers prefer 'cash on delivery' to avoid upfront payments, while merchants incur costs and losses due to order returns and limited global acceptance of digital wallets, which lack security and fairness in payment processes.
Innovation Solution
A method and system implementing a Payment-Split Policy (PSP) that allows merchants to set the percentage of payment due at order placement and the rest at delivery, using a Prepared-Payment Reference (PPR) and Multi-Hold Technique (MHT) to manage payment holds and releases between customers and merchants, facilitated by a payment network connecting e-wallets, merchants, and carriers.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If customers choose cash on delivery payment mode, then customer security is improved (no upfront payment risk), but merchant losses increase (cash handling costs, reconciliation hassles, delayed receipt)
Solution Approach 1:
The payment is segmented into two parts: a deposit portion paid at order placement and a balance portion paid at delivery. This segmentation allows customers to maintain security by not paying the full amount upfront while merchants receive partial payment early to cover shipping costs and reduce losses.
Solution Approach 2:
The merchant collects a deposit payment in advance at order placement. This preliminary action ensures merchants receive funds before shipping to cover costs, while customers only commit a portion of the total payment, maintaining their security and ability to refund the balance if unsatisfied.
2Loss of energy
If customers prepay the full transaction amount online, then merchant cash flow is improved (immediate receipt), but customer security deteriorates (risk of paying for damaged or missing items)
Solution Approach 1:
The full payment amount is segmented into a deposit portion and a balance portion. Customers pay only the deposit upfront, reducing their financial risk, while merchants receive immediate cash flow from the deposit to cover operational costs.
Solution Approach 2:
Instead of requiring full prepayment, the system implements partial prepayment where customers pay only a portion (deposit) at order placement. This partial action provides merchants with sufficient cash flow for shipping while protecting customers from paying the full amount before receiving goods.
3Loss of energy
If merchants require full payment at order placement, then merchant losses are reduced (no shipping cost losses on returns), but customer flexibility deteriorates (no payment options at delivery)
Solution Approach 1:
The payment structure is segmented into deposit and balance portions with different payment timings. This allows merchants to secure sufficient funds upfront to cover shipping costs and reduce losses, while customers retain flexibility to complete or cancel the transaction at delivery.
Solution Approach 2:
The payment system is made dynamic by allowing customers to choose when to complete payment - either the full deposit at order placement or the balance at delivery. This dynamic approach provides payment flexibility to customers while ensuring merchants receive adequate funding to cover operational costs.
Data Source
AI summary
Solutions in the field of digital payments using e-wallets, cards, or any digital payment methods; and in particular, to e-commerce online payments are provided. In e-commerce field, customers prefer full payment on-delivery after checking delivered goods; this introduces risk on merchants. In contrast, merchants prefer to process the full payment on-order before sending the shipment; this introduces risk on customers. Both options of full payment on-order or full payment on-delivery are not satisfactory or making fairness for both parties (customers and merchants). A solution for having a payment method that can automatically split the payment amount, based on a payment-split policy that merchant offers and customer accepts, to enable merchants to get part of the payment on-order then claim the rest of payment on-delivery is also provided.