Same-Day Financial Transaction Settlement via Relationship Bank Routing
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Solution Overview
Problem
Current financial transaction systems, such as Automated Clearinghouse (ACH) transactions, require at least one day to settle, resulting in a day of deposit float and associated opportunity costs, which is problematic for entities seeking immediate access to funds, especially in high-interest environments.
Innovation Solution
A method and system for same-day settlement of financial transactions by identifying eligible transactions using routing or transit numbers, processing information to determine eligibility, and electronically transferring funds through a relationship bank, allowing for immediate settlement and reducing float.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If ACH transactions are used for settling financial transactions, then low-cost settlement is achieved, but at least one day of deposit float is required
Solution Approach 1:
The patent segments financial transactions into two categories: same-day settlement transactions (for relationships with approved banks) and conventional ACH transactions (for other relationships). This segmentation allows the system to achieve fast settlement for eligible transactions while maintaining low-cost processing for all transactions, resolving the contradiction between settlement speed and cost.
Solution Approach 2:
The system dynamically adjusts the settlement process based on the relationship between the originator and receiving bank. For approved relationships, the system enables same-day settlement; for other relationships, it uses conventional ACH processing. This dynamic approach optimizes both time and cost based on actual transaction conditions.
2Loss of time
If same-day settlement is implemented for all transactions, then immediate access to funds is achieved, but system complexity increases
Solution Approach 1:
The patent applies local quality by providing same-day settlement only for specific transactions that meet certain criteria (approved bank relationships), while maintaining conventional processing for other transactions. This selective approach achieves fast settlement where beneficial without imposing the complexity of same-day processing on all transactions uniformly.
Solution Approach 2:
The system uses an intermediary processing layer that receives transactions, determines eligibility for same-day settlement based on relationship status, and routes them accordingly. This intermediary function manages the complexity centrally while keeping individual transaction processing simple.
3Loss of time
If same-day settlement is implemented, then deposit float is reduced, but transaction processing costs increase
Solution Approach 1:
The patent applies partial action by implementing same-day settlement only for a subset of transactions (those with approved relationships) rather than all transactions. This partial implementation reduces float for eligible transactions while avoiding the full cost burden of same-day processing across the entire transaction volume.
Solution Approach 2:
The system changes the settlement parameter (settlement timing) based on the relationship status between originator and receiving bank. For approved relationships, same-day settlement is enabled; for others, conventional timing applies. This parameter-based differentiation optimizes the balance between float reduction and processing cost.
Data Source
AI summary
A system and method to receive a financial transaction and transfer funds associated with the financial transaction into an account associated with an originator of the financial transaction to settle the financial transaction on the same day that the financial transaction is originated. The financial transaction may be one of a plurality of financial transactions and the financial transaction is identified as being eligible for same-day settlement using routing or transit numbers associated with an entity that receives the financial transaction.