Payment Strategy System for Interest Reduction
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Solution Overview
Problem
Financial institution customers face difficulties in managing multiple accounts and remembering payment dates and amounts, leading to hassles in making timely payments.
Innovation Solution
A method and system for determining, recommending, and executing a payment strategy that involves using funds from a first account to make multiple payments on a second account within a single pay period, based on payment due dates, transaction histories, and user inputs, to optimize payment timing and amount.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If customers make multiple payments on a second account during a single pay period, then interest costs are reduced and payment management is improved, but the complexity of tracking payment dates and amounts increases
Solution Approach 1:
The system enables automatic payment strategy execution where the financial institution's system automatically determines payment amounts, schedules payments, and tracks multiple payments without requiring customer intervention. The system monitors account balances, calculates optimal payment distributions, and executes payments automatically, allowing the system to serve itself rather than requiring customers to manually track and execute multiple payments.
Solution Approach 2:
The system continuously monitors account balances, payment histories, and transaction data to dynamically adjust payment strategies. It provides feedback to customers about payment status, recommended payment amounts, and projected interest savings, enabling informed decision-making while automatically managing the complexity of multiple payments.
2Reliability
If customers manually track and make payments for multiple accounts, then payment accuracy can be maintained, but time and effort are significantly consumed
Solution Approach 1:
The system pre-calculates optimal payment strategies by analyzing historical transaction data, account balances, and payment patterns before the payment due date. It prepares recommended payment amounts and schedules in advance, allowing customers to review and approve payments before execution, thereby ensuring accuracy while eliminating the need for manual tracking and calculation at the time of payment.
Solution Approach 2:
The system replaces manual mechanical processes of tracking, calculating, and scheduling payments with automated computational algorithms. The system automatically processes transaction data, calculates optimal payment distributions across multiple accounts, and executes payments electronically, substituting human manual effort with automated digital processes that maintain high accuracy while consuming minimal time.
3Ease of operation
If a single large payment is made on the second account, then the payment process is simple, but interest costs are maximized compared to multiple smaller payments
Solution Approach 1:
The system automatically segments a single large payment obligation into multiple smaller payment transactions scheduled at different times during the pay period. By dividing the total payment amount into strategic portions and executing them at optimized intervals, the system reduces the average daily balance on the account, thereby minimizing interest accrual while maintaining operational simplicity through automated execution.
Solution Approach 2:
Instead of executing a single lump-sum payment, the system implements periodic payment actions throughout the pay period. It schedules multiple payment transactions at strategically determined intervals, allowing the account balance to be reduced progressively rather than all at once, which minimizes the time that higher balances incur interest while maintaining a simple automated process for the customer.
Data Source
AI summary
Embodiments of the present invention relate to methods and apparatuses for determining, recommending, and/or executing a payment strategy. For example, in some embodiments, a method is provided for determining a payment strategy for using at least some funds from a first account to make two or more payments on a second account during a single pay period. In such embodiments, the method includes: (1) determining that the second account includes a payment due date and a minimum payment due; (2) determining a number of payments to make on the second account; (3) determining a payment amount for each payment, such that the total payment amount for all of the payments is sufficient to at least offset the minimum payment due; and (4) determining a triggering event for each payment, such that each of the payments is made on or before the payment due date.