Variable Discount Settlement System for Merchant Financing
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Smaller merchants lack the resources and infrastructure to offer competitive financing options and private label benefits to customers, as they are unable to negotiate variable settlement rates with providers like larger merchants.
Innovation Solution
A computer-implemented method and system that allows for variable settlement at discount rates over an open payment network, enabling merchants to offer financing options by receiving authorization records, identifying payment plans, creating settlement records, and determining discount rates based on transaction data, allowing for flexible financing plans and consolidated billing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If smaller merchants use traditional open payment networks, then they can process transactions, but they cannot offer variable discount rates or competitive financing options
Solution Approach 1:
The system allows a single open payment network infrastructure to serve multiple functions: standard authorization and settlement, variable discount rate negotiation, and financing plan management. This enables smaller merchants to access private label capabilities without building separate specialized systems.
Solution Approach 2:
The system introduces an intermediary layer between the open payment network and the merchant that handles complex settlement negotiations and financing arrangements. This intermediary manages the variability in discount rates and financing terms, shielding smaller merchants from the complexity while enabling competitive offerings.
2Ease of operation
If larger merchants negotiate variable settlement rates, then they can offer competitive financing options, but smaller merchants lack the resources to do the same
Solution Approach 1:
The system enables automated negotiation and implementation of financing plans through electronic systems rather than requiring manual negotiation resources. Smaller merchants can access variable discount rates and financing options through automated processes that do not require large dedicated negotiation teams.
Solution Approach 2:
The system changes the parameters of settlement by introducing variable discount rates and multiple financing plan options into the traditional fixed-rate model. This allows merchants of all sizes to access flexible financing terms that were previously only available through extensive negotiation resources.
3Adaptability or versatility
If traditional fixed discount rates are used, then settlement is simple, but merchants cannot offer competitive financing plans
Solution Approach 1:
The system transitions from static fixed discount rates to dynamic variable discount rates that can change based on transaction characteristics, merchant agreements, and financing plan selections. This dynamic approach enables competitive financing plans while the system manages the complexity through automated determination processes.
Solution Approach 2:
The settlement process is segmented into distinct phases: authorization through the open payment network, separate determination of variable discount rates, and independent selection of financing plans. This segmentation allows each function to be optimized independently while maintaining overall system manageability.
Data Source
AI summary
According to one embodiment, the present invention relates to a method and a system for emulating a private label network over an open network where settlement occurs at varying discount rates with one or more merchants or providers. A computer implemented method and system for settling a transaction at a discount rate may include receiving an authorization record for the transaction initiated by a customer over an open payment network; identifying payment plan data associated with a transaction; creating a settlement record based at least in part on the authorization record and the payment plan data; determining a discount rate for the settlement record; and settling with a provider for the transaction at the discount rate.