Pre-authorization Hold for Cryptocurrency Transaction Delay Risk
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Solution Overview
Problem
Cryptocurrency transactions are associated with delays, which limit their adoption in day-to-day transactions, particularly in retail environments, due to concerns about volatility and non-completion of transactions.
Innovation Solution
Implementing a pre-authorization hold mechanism using value transfer cards, where a request is sent to reserve the transaction amount, and a timer is initiated to monitor the receipt of cryptocurrency at a blockchain address. If the cryptocurrency is received before the timer expires, the hold is released; otherwise, it is settled.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If cryptocurrency transactions are used, then alternative payment method is provided, but transaction completion time increases
Solution Approach 1:
The system performs preliminary actions by placing a pre-authorization hold on the payment card before the cryptocurrency transaction is initiated. This hold reserves the funds in advance, so that when the cryptocurrency transaction completes (or fails), the merchant is already guaranteed payment or can quickly charge the card, significantly reducing the effective transaction time while maintaining cryptocurrency payment options
2Adaptability or versatility
If cryptocurrency transactions are allowed, then payment flexibility is improved, but transaction reliability decreases
Solution Approach 1:
The system provides beforehand cushioning by implementing a pre-authorization hold that cushions against the risk of cryptocurrency transaction failure or delay. The hold ensures that even if the cryptocurrency transaction does not complete, the merchant has a guaranteed backup payment method ready, thus maintaining transaction reliability while preserving payment flexibility
Solution Approach 2:
The pre-authorization hold mechanism acts as an intermediary between the merchant and the customer, bridging the reliability gap. It provides a traditional payment guarantee that mediates the uncertainty of cryptocurrency transactions, allowing merchants to accept cryptocurrency with reduced risk
3Productivity
If cryptocurrency value is held during transaction, then payment is processed, but value volatility risk increases
Solution Approach 1:
The system performs preliminary action by converting the cryptocurrency to fiat currency at the time of pre-authorization rather than holding the volatile cryptocurrency during the transaction period. This preliminary conversion action eliminates exposure to cryptocurrency value fluctuations while still enabling the transaction to process, thus maintaining productivity while ensuring value stability
Data Source
AI summary
Systems and methods for mitigating transaction delay risk are provided. A system may receive transaction data, including at least a transaction amount, associated with a transaction. The system may then obtain transfer credentials associated with a value transfer card, send a request for a pre-authorization hold of the transaction amount using the transfer credentials, and initiate a timer. The system may then monitor a blockchain address for receipt of cryptocurrency associated with the transaction. When the cryptocurrency is received prior to an expiration of a time period associated with the timer, the system may release at least a portion of the pre-authorization hold. When the cryptocurrency is not received prior to an expiration of a time period associated with the timer, the system may settle the pre-authorization hold.