Variable Rate Payment Card Accelerating Cash Flow

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Solution Overview

Problem

In business-to-business scenarios, buyers prefer check payments for control and fraud protection, leading to inefficiencies and delayed cash flow for suppliers, as traditional card payment systems do not allow for timely payment control.

Innovation Solution

A variable rate payment card scheme that offers rebates to suppliers based on the speed of invoice approval, with a standard interchange rate assessed if payment is made within a predetermined early date and a reduced rate if payment is delayed, incentivizing early payment approval and accelerating cash flow.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If buyers use check payments, then fraud protection and payment control are improved, but payment speed and cash flow efficiency deteriorate

Engineering Contradiction:

Improvefraud protectionVSAvoidpayment speed

Core Design Contradiction:

ReliabilityVSSpeed

Solution Approach 1:

The payment process is segmented into distinct phases: invoice approval, payment authorization, and actual payment execution. This allows buyers to maintain control over when payment occurs while enabling suppliers to receive payment faster once authorized, separating the control function from the execution function

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

Buyers perform preliminary actions by pre-approving invoices and authorizing payments in advance. This preliminary authorization enables faster payment processing when the actual payment date arrives, maintaining buyer control while accelerating the payment execution phase

Inventive Principle:

Principle #10Preliminary action

2Productivity

If buyers delay payment via check, then cash flow management is improved, but supplier efficiency and electronic payment adoption deteriorate

Engineering Contradiction:

Improvecash flow managementVSAvoidelectronic payment adoption

Core Design Contradiction:

ProductivityVSEase of operation

Solution Approach 1:

The payment system transitions from static check-based delays to dynamic electronic payment scheduling. Buyers can dynamically adjust payment timing within authorized parameters, and suppliers can dynamically process payments electronically once authorized, combining cash flow management with operational efficiency

Inventive Principle:

Principle #15Dynamics

Solution Approach 2:

The system implements feedback mechanisms where buyers receive information about payment status, rebate earnings, and cash flow impact. This feedback enables informed decision-making about payment timing while maintaining electronic payment efficiency throughout the process

Inventive Principle:

Principle #23Feedback

3Reliability

If suppliers wait for full payment term, then buyer control is maintained, but supplier cash flow and early payment benefits deteriorate

Engineering Contradiction:

Improvebuyer controlVSAvoidcash flow delay

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The payment timeline is segmented into approval phase and execution phase. Suppliers receive rapid payment once invoices are approved, while buyers maintain control during the approval phase. This segmentation eliminates the delay between approval and payment that plagues traditional systems

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

Buyers take preliminary action by pre-approving invoices and setting payment parameters in advance. This preliminary authorization eliminates delays during the actual payment phase, allowing suppliers to receive payment quickly while buyers maintain their control framework

Inventive Principle:

Principle #10Preliminary action

4Productivity

If variable interchange rates are implemented, then early payment incentive is improved, but payment system complexity deteriorates

Engineering Contradiction:

Improveearly payment accelerationVSAvoidpayment system complexity

Core Design Contradiction:

ProductivityVSDevice complexity

Solution Approach 1:

The system changes the interchange rate parameter dynamically based on payment timing. Early payments receive higher interchange rates while later payments receive standard rates. This parameter change provides clear financial incentives for early payment without requiring complex contractual negotiations

Inventive Principle:

Principle #35Parameter changes

Solution Approach 2:

The variable interchange rate system provides immediate feedback to both buyers and suppliers about the financial impact of payment timing. This automated feedback mechanism simplifies the complexity by providing transparent, real-time information about rebate earnings and payment priorities

Inventive Principle:

Principle #23Feedback

Data Source

PatentUS8533086B1Variable rate payment card

Publication Date: 2013.09.10 JPMORGAN CHASE BANK NA

AI summary

A method of arranging for payment of a purchase includes receiving, from a supplier, agreement to accept a payment from a buyer via use of a payment card having variable payment terms; after a purchase by the buyer from the supplier, assessing the supplier a standard interchange rate; receiving, from the buyer, approval to pay the invoice; and issuing, to the supplier, a rebate, based upon when the approval to pay the invoice was received. the variable payment terms are calculated by: determining a first early payment date; determining a second standard payment date; assessing against the supplier a first percentage of the standard interchange rate if the invoice is approved by the first early payment date; and assessing against the supplier a second percentage of the standard interchange rate if the invoice is approved on or after the second standard payment date.