Transaction Conversion System Reducing Card Not Present Fees
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Solution Overview
Problem
Merchants face significant costs and security issues due to higher transaction fees associated with 'Card Not Present' (CNP) transactions, which are prevalent in industries like airlines and e-commerce, where the physical card cannot be presented for authentication.
Innovation Solution
A system and method that allows CNP transactions to be converted into 'Card Present' (CP) transactions when the consumer arrives at a point of authentication, using the same or a different card instrument, reducing transaction fees and enhancing security by physically presenting the card for processing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If merchants accept Card Not Present (CNP) transactions for remote purchases, then consumer convenience and sales volume increase, but transaction fees increase significantly
Solution Approach 1:
The system performs preliminary authentication by capturing card data at the point of purchase (either through swipe or manual entry). This preliminary action allows the transaction to be authorized remotely while maintaining verification that the cardholder is present, enabling CNP transactions with reduced fees.
Solution Approach 2:
The patent introduces an intermediary authentication mechanism that bridges CP and CNP transaction types. By using card data capture and verification as an intermediary step, the system enables remote transactions to be processed with the same fee structure as card-present transactions.
2Ease of operation
If merchants process CNP transactions without physical card presentation, then transaction convenience increases, but security and fraud risk worsen
Solution Approach 1:
The system performs preliminary card data capture and verification before authorizing the remote transaction. This preliminary authentication ensures that the cardholder is present and authorized, maintaining security while enabling convenient remote transactions.
Solution Approach 2:
The patent replaces the mechanical requirement of physical card presentation with an electronic verification system. By capturing and verifying card data through electronic means (swipe or manual entry followed by remote verification), the system maintains security without requiring the card to be physically present at the remote location.
3Reliability
If merchants require physical card presentation for all transactions, then transaction security improves, but consumer convenience and sales volume decrease
Solution Approach 1:
The system performs preliminary card data capture at the point of purchase, creating a verified record that can be used for remote authorization. This preliminary security measure enables merchants to accept remote transactions without requiring physical card presentation, thereby maintaining security while improving convenience and sales volume.
Solution Approach 2:
The patent implements a dynamic transaction processing system that adapts between CP and CNP modes based on the situation. The system can require physical card presentation when necessary for security while allowing remote processing when the preliminary authentication has been completed, providing flexibility that maintains both security and convenience.
Data Source
AI summary
The invention comprises a system and method for converting initial financial transactions into final financial transactions entailing lower transaction fees or which are otherwise more advantageous. According to one embodiment of the invention, a card not present (CNP) transaction is conducted for a remote consumer buying goods/services. When the consumer later arrives at a point of authentication (POA), the consumer is presented with an opportunity to have the CNP transaction effectively converted to a card present (CP) transaction using the same card instrument or a different card instrument. The merchant benefits because the transaction fees are much reduced for the CP transaction compared to the CNP transaction. The consumer may benefit from rewards/rebates or other inducements to authorizing the subsequent transaction. One preferred embodiment implements the invention in the airlines environment, wherein tickets ordered over the phone or on-line using a first CNP transaction are converted to a CP transaction when the consumer swipes his/her card at an airport kiosk card reader device.