Pre-authorization Identity Verification for Payment Fraud Mitigation
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Solution Overview
Problem
Card-not-present transactions in e-commerce are vulnerable to fraud due to the difficulty in validating the authenticity of payment and consumer identity, leading to increased risks for merchants and credit card issuers, with existing fraud prevention measures being costly and adding friction to the payment process.
Innovation Solution
Implementing pre-authorization authentication and consumer identity verification using digital trust credentials (DTCs) that include decentralized identifiers and digitally signed attestations, allowing merchants to verify consumer identity through a cryptographic proof, reducing the need for additional security challenges and shifting fraud liability to the credit card issuer.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional fraud prevention measures are implemented in card-not-present transactions, then fraud detection capability is improved, but cost increases and payment process friction increases
Solution Approach 1:
The system performs authentication challenges and verification of consumer identity in advance, before the actual payment transaction. By validating the consumer's identity and issuing digital trust credentials beforehand, the system establishes trust prior to the transaction, eliminating the need for complex real-time fraud detection mechanisms during payment processing.
Solution Approach 2:
The patent introduces a third-party authentication service that acts as an intermediary between the merchant and the consumer. This intermediary performs the authentication challenge and issues digital trust credentials, allowing the merchant to verify consumer identity without implementing complex fraud detection systems themselves, thus reducing cost and complexity.
2Reliability
If additional security challenges are added to verify consumer identity, then fraud verification is improved, but payment process friction increases
Solution Approach 1:
The system allows consumers to perform self-authentication by receiving and responding to authentication challenges through their own devices. Consumers use their personal authentication credentials (such as passwords or biometric data) to verify their identity, making the process seamless and eliminating the need for merchants to implement complex verification systems that would increase friction.
Solution Approach 2:
The patent replaces traditional mechanical security measures (such as manual verification, phone calls, or complex multi-step authentication) with digital trust credentials and cryptographic verification. This substitution enables secure identity verification through electronic means that are both secure and seamless, avoiding the friction associated with traditional methods.
3Reliability
If merchants perform thorough identity verification, then fraud liability is reduced, but cost and operational complexity increase
Solution Approach 1:
The patent introduces an intermediary authentication service that assumes the role of performing thorough identity verification. This third-party service handles the complex verification processes, including issuing and managing digital trust credentials. By using this intermediary, merchants can obtain fraud liability protection without building their own complex verification systems, as the intermediary absorbs the operational complexity.
Solution Approach 2:
The system creates digital copies of authentication credentials and trust credentials that can be verified without requiring the merchant to store or process sensitive consumer data. By working with encrypted digital representations of authentication information, merchants can verify identity thoroughly while avoiding the complexity of managing their own verification infrastructure.
Data Source
AI summary
A computing platform is configured to (i) receive, from a user, a request to initiate a payment using a payment instrument, (ii) cause an authentication challenge to be presented to the user, the authentication challenge including a request for credential information indicating an identity of the user of the payment instrument, (iii) receive, from a client device associated with the user, an authentication challenge response including (a) an identifier for a credential issuer that previously verified the identity of the user and (b) credential information indicating the identity of the user, the credential information encrypted using a private key of the credential issuer, (iv) use the identifier for the credential issuer to obtain a public key of the credential issuer, (vii) use the public key to decrypt the credential information, (viii) verify that the credential information indicates the identity of the user of the payment instrument, and (ix) execute the payment.