Recurring Payment Tokenization System for Fraud Prevention
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Solution Overview
Problem
Existing systems for processing recurring payment transactions lack effective protection against merchant abuse of consumer credit card details, as merchants can continue to process payments after the subscription period ends, compromising sensitive information.
Innovation Solution
An electronic system and computerized method utilizing a payment network server with a transaction module, token management module, and authorization module, which generates virtual payment instruments linked to real payment instruments, ensuring each recurring payment is validated against a unique payment token associated with a specific period, preventing fraudulent or excessive transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a virtual credit card is used for recurring payments, then consumer credit card information is protected, but the virtual credit card can still be compromised and abused by the merchant after the subscription period ends
Solution Approach 1:
The patent segments the payment authorization into multiple time-limited tokens, each valid for a specific recurring period. Instead of providing a single long-term virtual credit card, the system generates discrete authorization tokens for each billing cycle, preventing merchants from using the payment instrument beyond the authorized period.
Solution Approach 2:
The system performs preliminary authorization by generating valid payment tokens before each recurring period begins. These tokens are pre-configured with expiration timestamps, ensuring that merchants can only process payments within the authorized time window, and the tokens automatically become invalid after the subscription period ends.
2Productivity
If a virtual payment instrument is provided to the merchant, then recurring payments can be processed automatically, but the merchant may continue to process payments after the subscription period has ended
Solution Approach 1:
The patent implements dynamic validity periods for payment tokens, where each token is configured with a specific start time and end time corresponding to a recurring period. The system automatically manages the lifecycle of these tokens, generating new tokens for subsequent periods while ensuring previous tokens expire, thus dynamically controlling the duration of payment instrument validity.
Solution Approach 2:
The payment network server acts as an intermediary between the consumer and merchant, managing the issuance and validation of time-limited payment tokens. This intermediary controls the duration of payment instrument effectiveness by validating tokens against their embedded temporal constraints, preventing merchants from using expired tokens for unauthorized payments.
3Ease of operation
If the merchant possesses consumer credit card details, then payments can be processed smoothly, but the credit card details may be compromised during or after the subscription period
Solution Approach 1:
The patent extracts the sensitive credit card details from the merchant's possession by introducing time-limited payment tokens as a replacement. The tokens contain only the necessary authorization information for a specific period, removing the merchant's access to actual credit card numbers while maintaining payment processing capability during the authorized window.
Solution Approach 2:
The system employs disposable, short-lived payment tokens instead of reusable credit card details. Each token is designed to be used once or for a limited period, then discarded and replaced with a new token for the next recurring period. This approach eliminates the risk of long-term credential compromise while maintaining operational convenience.
Data Source
AI summary
The present disclosure generally relates to systems and methods for processing recurring payment transactions. In various embodiments, the system receives details of the set of recurring payment transactions and stores the details in a recurring transaction details table. The system generates a virtual payment instrument and associates it with the consumer's payment instrument. The system transmits the virtual payment instrument to the consumer. The system then generates a set of payment tokens for the set of recurring transactions and links the tokens to the virtual payment instrument. Each token is associated with a discrete recurring period. The system encodes each token with a sequence of values and stores the tokens in the recurring payment token table. The system receives a recurring transaction request that includes the virtual payment instrument. The system validates the request against a token associated with the recurring period, processes the transaction, and deletes the token.