Selective Authorization System for Online Transaction Risk Management
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Solution Overview
Problem
Merchants face a dilemma when payment for online transactions is not guaranteed, as they must decide between fulfilling orders at the risk of non-payment or delaying fulfillment, which can inconvenience customers and potentially lose business, especially in situations where payment processing systems are unavailable.
Innovation Solution
A Selective Authorization system that automatically determines whether to authorize and proceed with item acquisition transactions based on analyzing information about the transaction, customer, and prior transactions, allowing merchants to initiate fulfillment before payment is assured, with the option to withdraw orders if payment is not obtained later.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If the merchant waits for payment assurance before fulfilling the order, then the risk of non-payment is reduced, but customer convenience deteriorates and business may be lost
Solution Approach 1:
The system performs preliminary analysis of payment probability before the payment deadline arrives. By evaluating transaction information, customer history, and item characteristics in advance, the system identifies high-probability transactions and authorizes them for immediate fulfillment without waiting for actual payment confirmation, thus maintaining customer convenience while managing payment risk through pre-assessment
2Reliability
If the merchant requires payment assurance before fulfillment, then financial risk is reduced, but productivity deteriorates due to delayed order processing
Solution Approach 1:
The system conducts preliminary evaluation of payment probability using transaction data, customer history, and item characteristics before the fulfillment process begins. Transactions with high predicted payment probability are authorized in advance, enabling immediate fulfillment and maintaining high productivity while financial risk is managed through the pre-assessment mechanism
3Reliability
If the merchant uses traditional payment approval processes, then payment security is improved, but adaptability deteriorates when payment systems are unavailable
Solution Approach 1:
The system introduces an intermediary payment probability assessment mechanism that operates independently of the traditional payment processing system. This intermediary evaluates transaction risk based on available data and provides authorization decisions even when payment systems are unavailable, thus maintaining system adaptability while payment security is preserved through the risk assessment layer
Solution Approach 2:
The system performs preliminary risk assessment and authorization decisions based on transaction information and customer history before relying on external payment systems. This pre-evaluation enables the system to adapt to payment system unavailability by making informed authorization decisions using alternative data sources
Data Source
AI summary
Techniques are described for use in selectively authorizing proposed transactions under certain circumstances, such as when payments for the transactions are not assured. In some situations, when payments to a merchant from customers are not assured for proposed item acquisition transactions involving those customers, determinations are made to authorize and proceed with at least some of those proposed transactions in an automatic and selective manner without the assurance of receiving the payments for the selected transactions. For example, a selective determination of whether to authorize a proposed transaction may be made based on analyzing information about the proposed transaction (e.g., about the item(s) involved in the transaction, a payment amount of the transaction, the customer(s) involved in the transactions, etc.) and on information regarding other prior transactions. If a proposed transaction is authorized, the merchant may then proceed to initiate fulfillment of the transaction before the merchant receives payment.