Wireless Payment Authorization Segmentation for Credit Risk Control
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Solution Overview
Problem
Conventional postpaid wireless processing systems require credit checks for each customer, which are costly and exclude potential customers, and pose credit risk for service providers due to the need for specialized processing and fraud concerns, especially in a 'grab and go' retail environment.
Innovation Solution
A system utilizing credit card authorization to pre-reserve funds, separating authorization and settlement stages, and employing a financial risk management module to monitor usage and limit exposure, allowing for 'grab and go' sales without credit checks, maintaining a familiar customer experience while minimizing credit risk.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If credit checks are performed for each customer at purchase stage, then credit risk is reduced, but customer acquisition is limited and specialized processing is required
Solution Approach 1:
The patent segments the credit risk management process into two distinct stages: authorization stage (at purchase) and settlement stage (at billing). At the authorization stage, only a soft credit inquiry is performed to minimize impact on customer credit scores, while the full credit verification and collection process is deferred to the settlement stage. This segmentation allows more customers to qualify for service while maintaining credit risk controls.
Solution Approach 2:
The system performs preliminary authorization actions at the point of sale that are sufficient for immediate decision-making, without completing the full credit verification process. The authorization is granted based on initial criteria, and the complete credit check and collection process is performed preliminarily at the billing stage, allowing customers to be acquired without immediate credit barriers.
2Ease of operation
If conventional postpaid processing is used, then monthly billing is provided, but credit risk exposure occurs during billing cycle and after billing
Solution Approach 1:
The patent segments the billing process into authorization and settlement phases. The authorization phase occurs at purchase with minimal credit verification, while the settlement phase occurs at billing with complete credit verification and collection. This segmentation maintains the familiar monthly billing experience while reducing credit risk exposure during the billing cycle through continuous monitoring and controlled authorization.
Solution Approach 2:
The patent introduces an intermediary authorization mechanism that acts as a mediator between the customer and the billing system. This intermediary performs soft credit inquiries and preliminary approvals, allowing the billing process to proceed smoothly while the actual credit risk management is handled by the settlement system that performs complete verification and collection at the billing stage.
3Reliability
If credit card authorization is used to pre-reserve funds, then credit risk from overages is eliminated, but system complexity increases
Solution Approach 1:
The patent segments the authorization process into a simple initial authorization at purchase followed by continuous monitoring and controlled additional authorizations during the billing cycle. The system complexity is managed by performing the complex credit verification and fund reservation primarily at the settlement stage, while keeping the authorization stage relatively simple with soft inquiries and pre-established limits.
Solution Approach 2:
The system performs preliminary fund authorization and credit verification actions in advance at the settlement stage, so that during the authorization stage and throughout the billing cycle, the complex risk management has already been established. This preliminary action reduces the perceived complexity during active service delivery while maintaining strong credit risk controls.
Data Source
AI summary
A method and system for managing financial risk through the use of postpaid processing during use of wireless services is presented within the scope of the following invention. The present invention uses credit card authorization to pre-reserve credit card funds for wireless services in excess of planned usage. Authorizations eliminate the credit risk associated with overages and payment timing, and also maintain a customer experience identical to postpaid processing. The authorizations are invisible to the customer and no charge is brought to a customer's credit card until the monthly bill is settled. Separating the authorization and settlement stages of retail wireless payment processing allows the branded wireless provider to avoid inherent areas of credit risk during the tenure of a customer's wireless service, while maintaining a familiar customer experience.