Push-Based Payment System Inversion for Fee Reduction
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Solution Overview
Problem
The existing pull-based payment models in financial transactions are costly for merchants, expose consumer account information to theft, and result in chargeback liabilities for fraudulent transactions, while lacking real-time payment capabilities and secure authentication processes.
Innovation Solution
A system that enables real-time, secure payment transactions through a push-based model where a consumer's financial institution processes payments directly from their account to the merchant's account using a mobile application, integrating identity authentication and minimizing exposure of account information to third parties, with the financial institution handling authentication and liability for fraudulent use.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If a pull-based payment model is used, then merchants can process payments through their bank and payment processor, but transaction fees are significant and merchants are liable for chargebacks
Solution Approach 1:
The patent inverts the traditional pull-based payment model by implementing a push-based model where the consumer's financial institution initiates the payment to the merchant, rather than the merchant pulling funds through multiple intermediaries. This reversal eliminates the need for acquirers and reduces transaction fees while transferring chargeback liability from merchants to consumers.
Solution Approach 2:
The patent extracts and eliminates the acquirer entity from the payment processing chain. By enabling direct push payments from consumer accounts to merchant accounts through the consumer's financial institution, the system removes the intermediate acquirer that traditionally charged fees and added complexity to the transaction process.
2Ease of operation
If consumer account information is provided to third parties for payment processing, then payments can be processed, but account information is exposed to theft
Solution Approach 1:
The patent uses the consumer's financial institution as a secure intermediary that handles all payment processing without requiring consumer account information to be exposed to merchants or other third parties. The financial institution acts as a trusted mediator that authorizes and processes payments while keeping account details confidential, thus eliminating the security risk of information exposure.
3Productivity
If a push-based payment model is used, then real-time payment capability is achieved, but the model is generally not used for in-store transactions
Solution Approach 1:
The patent makes the push-based payment model universally applicable to both online and in-store transactions by implementing a standardized protocol that works across different transaction types. The system enables real-time push payments at point-of-sale terminals while maintaining the same security and efficiency benefits, thus extending the versatility of the model beyond its traditional recurrent bill-pay use cases.
Data Source
AI summary
A method including receiving, at a first system from a first entity, a request comprising a merchant identifier. The method also includes determining, at the first system, using the merchant account database, first information comprising an account identifier of a second account of the merchant maintained by a second financial institution. The method additionally includes sending the first information from the first system to the first financial institution. The method further includes receiving, at the first system from the first financial institution, payment information regarding a deposit to be made in the second account from the first account to pay the merchant for one or more items to be purchased from the merchant by the consumer for the payment amount. The method additionally includes sending, from the first system to the second financial institution, the payment information such that the second financial institution, upon receiving the payment information, notifies the merchant to satisfy an expectation of the merchant for payment from the consumer. Other embodiments are provided.