Note: Descriptions are shown in the official language in which they were submitted.
CA 02254378 1998-11-23
KVAS MILLER EVERITT CANADA
File No. 353-FISH188
TITLE: CARD BASED TRANSACTIONAL SYSTEM
INCLUDING DISTRIBUTIONS TO
CHARITIES
INVENTOR DAVID F. WOODROW
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CARD BASED TRANSACTION SYSTEM
INCLUDING DISTRIBUTIONS TO CHARITIES
FIELD OF THE INVENTION
The present invention relates to a card based transaction system and more
specifically
to a system wherein a portion of a purchase transaction between a
participating consumer and
a participating merchant is rebated back to the consumer to keep or use in
making a
contribution to a pre-approved charity.
BACKGROUND OF THE INVENTION
1 o It has been proposed that a company sponsor a line of credit and debit
cards to be
known as company cards. The company cards are to be issued to cardholders by
banks
entering into license agreements with the company. The cardholder will be
asked to
designate a charitable organization to receive periodic payments based on the
use of the
company card at participating retailers.
The company will negotiate with retailers that want to become participating
company
card retailers. Pursuant to the licensing agreements, when a cardholder uses a
company card
to purchase an item from a participating retailer, a percentage of the
purchase price will be
transferred to the company. To identify a participating retailer, the
cardholder will be given a
list of participating retailers and the percentage of purchase price that each
retailer will pay to
2o the company.
A .fter a sale by a participating retailer to a cardholder, the agreed-upon
percentage of
the purchase price will be transferred to the company. The company will retain
an
administrative fee with the balance of the percentage of the purchase price
being transferred
to a custodial account maintained by the company on behalf of each cardholder.
At
predetermined intervals, the moneys in a custodial account will be transferred
to the
charitable organization.
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There are significant problems with the proposed system. First, consumers do
not
want to have to carry a specialized card that only can be used at
participating merchants for a
charitable donation to be made to a pre-designated charity. Second, neither
the merchants nor
the cardholders are assured that the moneys collected will be used responsibly
by a pre-
selected charity. Further, by allowing any charity to be designated, charities
serving the same
general purpose within a geographic region may actually compete with each
other for moneys
generated 'oy the system. The charities compete as equals without regard to
the quality or
extent of their services.
Another system is known which is associated with a more traditional credit
card. A
i o credit cardholder may make a donation to a cardholder-selected charity any
time he makes a
purchase using the credit card. The system comprises a credit card which
identifies on its
magnetic strip the charities which are to receive a charitable donation. As
part of a credit card
transaction, the charity information is read from the card's magnetic strip.
The donated
amounts may be paid by the card issuing organization or the cardholder
herself. A merchant
does not participate in the program. There are significant drawbacks with this
system as well.
The problem with monitoring the use of the moneys discussed above is still
present. The
encoding of information on the magnetic strip of a credit card requires
substantial
modifications to the traditional credit card transaction system to process the
charitable
contributions. and is not currently feasible. Further, a consumer is not able
to easily modify
2o the charity of choice without receiving a new encoded card.
SUMMARY OF THE INVENTION
The present invention is directed to a card transaction system for providing a
purchase
rebate that involves a charity, a foundation, a cardholder, a merchant, a card
issuing
organization and a charge settlement operation. The foundation pre-approves
the charity's
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participation in the system, receiving information from a plurality of
charities, comparing the
information to pre-determined criteria and indicating which of the charities
are pre-approved
within the system. Similarly, the foundation pre-approves the merchant's
participation in the
system, receiving information from a plurality of merchants, comparing the
information to
pre-determined criteria and indicating which of the merchants are pre-approved
within the
system.
In practice a cardholder participating in the system can conduct purchase
transactions
with participating and non-participating merchants. When the purchase
transaction is entered
into with a merchant participating in the system for a product or service, the
merchant agrees
to to provide a purchase rebate to the cardholder based upon a percentage of
the purchase
transaction.
After the purchase transaction between the cardholder and the merchant takes
place, it
is then forwarded to a charge settlement operation wherein the purchase rebate
portion of the
purchase transaction is transferred to the charity or to the cardholder who
chooses to keep the
I5 rebate for personal use. The remainder of the purchase transaction amount
by the cardholder
less settlement processing fees is transferred to the merchant. In practice,
the charge
settlement operation either involves a single entity or multiple entities such
as a merchant
card processor, a switch, an issuing bank, and a merchant bank. The merchant
card processor
and the merchant bank are associated with the merchant and the issuing bank
has a direct
20 relationship with the cardholder.
For the system to work, a database is required which includes information
concerning
the participation of cardholders, merchants and charities, the amount of the
purchase
transaction, and the relationship of the cardholder to the charge settlement
operation. The
foundation and the charge settlement operation all require select access to
the database.
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BRIEF DESCRIPTION OF THE DRAWINGS
The features and inventive aspects of the present invention will become more
apparent
upon reading the following detailed description, claims, and drawings, of
which the following
is a brief description:
Figure 1 is an overview of the process steps related to an inventive card
transaction
system of the present invention.
Figure 2 is an overview of the pre-screening and qualification of charities by
a non-
profit foundation which is then communicated to an issuing bank and to a
cardholder as well
as stored in a database.
Figure 3 is an overview of the pre-screening and qualification of merchants by
the
foundation which is then communicated to an issuing bank and a merchant
acquiring agency
as well as stored in a database.
Figure 4 is an overview of various database components intended for use in the
inventive system.
I S Figure 5 is an overview of the process steps associated with completing a
specific
transaction once a charge with related information is received by the issuing
bank.
Figure 6 is a first alternative embodiment with a merchant card processor
having
direct access to the database of the system such that it may directly deduct a
purchase rebate
from the amount of money to be paid to a participating merchant and then
either forward the
2o purchase rebate to a charity, to the issuing bank, or the merchant bank by
means of a system
switch .
Figure 7 is a second alternative embodiment showing the merchant's
participation in
the system being directly communicated by the merchant as part of the charge
sent to the
merchant card processor, the merchant card processor deducting the purchase
rebate from the
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amount of money to be paid to the participating merchant and then forwarding
the purchase
rebate to the issuing bank by means of a system switch.
Figure 8 is a third alternative embodiment with a switch having direct access
to the
database of the system such that it may directly deduct a purchase rebate from
the amount of
money to be paid to a participating merchant and then either forward the
purchase rebate to a
charity or to the issuing bank.
Figure 9 illustrates that a third party agency may be associated with the
issuing bank
to provide many of the services of the system and to communicate directly with
the
merchants, charities, foundation, as well as the system database.
Figure 10 illustrates a simplified version of the inventive system when the
merchant
bank, merchant card processor, switch, and card issuing bank are the same
entity.
DETAILED DESCRIPTION OF A PREFERRED EMBODIMENT
The present invention adds a number of significant improvements to the
traditional
card transaction systems that are known. It changes the way that individuals
and businesses
think and act upon supporting the needs of their community. In contrast to the
prior art, it is
an attractive, stable and cost effective way to support vital, nonprofit
community service
organizations. The invention links both individual and business cardholders
and
merchant/suppliers through the purchase of products and services to create
funds to donate to
approved community service organizations. The donation opportunities are
created through a
pre-negotiated merchant/supplier purchase rebate or similar customer incentive
program to
encourage customers to purchase products or services through bank issued
credit, debit,
private label or similar card products. The purchase rebates earned by the
customers may be
used as tax deductible charitable contributions to prescreened, qualifying
charities selected by
the cardholders or their company. Typically, the purchase rebates are a fixed
percentage of
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the purchase transaction amount. The merchant/supplier incentive program, card
products,
card system network, electronic funds transfer, charity and merchant screening
and the use of
a specialized database are fundamental to creating, controlling and delivering
donations from
the cardholder to the nonprofit community service organizations and in
providing reports on
donations for information and tax purposes.
The innovative card transaction system 10 is illustrated in Figure 1. It is
envisioned that
system 10 will apply to general purpose credit cards through existing card
associations or
bank card systems, private label cards, debit cards for individuals and
businesses and
corporate credit cards for procurement and travel/entertainment. It is also
envisioned that the
t o system will rely on existing bank card system networks and electronic
funds transfer
processes such as ACH and Fedwire which provide credit and debit card
authorization access
for merchants and settle card transactions including confirming card
authorization. There are
a number of depository bank membership organizations that provide credit and
debit card
authorization access to a merchant and processing networks for the settlement
of card
I S transactions. Such organizations include VISA~, MasterCard~, Discover~,
and American
Express~.
System 10 includes a cardholder 12 which refers to individuals or businesses
who use
credit and debit bank cards 14 to pay for purchases of products and services
from a supplier
or merchant 16. In an individual cardholder card application process, the
individual assumes
2o the liability for all purchases on a card 14 issued by an issuing
organization such as an issuing
bank 18. In the business cardholder card application process, the business is
viewed as the
primary cardholder 12. As such, the business assumes the liability for all
purchases on the
cards it requests from issuing bank 18 for use by its employees for travel and
entertainment
or for business purchasing card programs.
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In practice, cardholder 12 uses card 14 to make a purchase transaction
involving the
charging of a product or service from merchant 16 as shown by line 20.
Merchant 16 scans
the card, which includes a magnetic strip or chip 22 with encoded information
about the
cardholder's account including cardholder account number 23 that also
identifies the issuing
bank 18 and transmits the information, transaction amount 24, and merchant
identifier 26 by
means of a traditional credit card authorization and settlement process. If
the transaction is
approved, the cardholder receives the product or service.
Merchant 16 submits the cardholder's charge to its merchant card processor 28
as
shown by line 30. Merchant card processor 28 submits the cardholder's charge
as shown by
to line 34 to a switch 36. The switch 36 includes representative credit card
switches such as
VISA' or MasterCard~, while one representative debit card switch is
MagicLine~. The
switch 36 performs the settlement process. From the switch 36 a merchant bank
39
maintaining a bank account for the merchant 16 is reimbursed, as shown by line
37 in Figure
1, for the cardholder's purchase less the purchase rebate and the
processor/interchange
settlement fee. The processor and card association portions of the discount
fee are paid and
the card-issuing bank 18 is charged by line 38. The issuing bank pays the
amount of the
cardholder's purchase less its portion of the discount fee as shown by line
40. Once the
merchant bank 39 receives the reimbursement, it can forward it directly to the
merchant 16 as
shown by line 32.
2o All of this is part of the switch interchange process. For example, if the
purchase
price is 100, a typical processor/interchange settlement fee is 1.9 percent.
Thus, the merchant
16 receives 98.1 percent, the processor 28 0.27 percent, the card association
portion of the
switch 36 0.08 percent, and the issuing bank pays 98.45 percent.
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Finally, the issuing bank 18 will charge cardholder 12 for the transaction as
shown by
line 42 as part of a periodic statement and the cardholder will pay the cost
of the transaction
to the issuing bank as shown by line 44. If a debit card is used, then the
amount of the charge
is directly deducted from a direct deposit account ("DDA") of a cardholder 12.
Once again,
however, the cardholder 12 is notified at periodic intervals of the
transaction.
Unlike a traditional card transaction system, issuing bank 18 or a business
entity
associated with the issuing bank has a relationship with a non-profit
foundation 50 as shown
by line 52. In turn foundation 50 has relationships with pre-approved
charities 56, shown by
line 58. Foundation SO also has relationships with pre-approved merchants 16,
shown by line
l0 60.
A key feature of the present invention is the approval of charities 56 to
participate in
system 10. As shown in Figure 2, foundation 50 will pre-approve charities 56
as shown by
lines 58 according to a number of different parameters to determine whether
they may
participate in the system. Information concerning the approval of a charity 56
is stored in a
database 64 as shown by line 66, where it may be queried by the issuing bank
18, as shown
by line 68. Issuing bank 18 will pay a charity 56, shown by line 69, as
discussed below.
The types of charity database components 70 stored in database 64 are
illustrated in
Figure 4. Charity database components preferably include at least the
following components:
charity name;
2o a unique charity identifier established by Foundation 50;
the charity's federal identification number (e.g., to allow foundation 50 to
verify a
charity's non-profit status or to allow the bank 18 to report the transmittal
of the charity
amount to the appropriate governmental agencies);
charity address information;
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charity corporate form (e.g., is it an IRS approved 501(c)(3) type charity);
EFT transit information (to permit the issuing bank 18 to deposit accrued
purchase
rebates into the bank account of a particular charity);
application processing information (e.g., application receipt and approval
dates,
approval renewal dates, and rejection date if applicable);
charity classification (e.g., national or local charity, the type of charity
such as food,
health services, social services, child care, missing persons care, clothing,
shelter, education
programs supporting the arts or programs supporting the environment);
charity evaluation scoring (e.g., the accept or reject value if a numeric
scoring is
1 o undertaken);
charity donation statistics (e.g., accrued unpaid account balance and total
amount of
donations, as well as the total donation made by each cardholder); and
Single donor transaction amounts above a fixed amount (e.g., $250 in the
United
States) or more by the cardholder by charity for tax deduction reporting to
the cardholder.
The status of a particular charity 56 may be updated at any time.
The selection and on-going screening of charities 56 and merchants 16 by
foundation
50 provides a number of significant benefits. The screening provides
assurances to the
cardholder 12 and participating merchants 16 that only qualifying
organizations are receiving
donations and participating in the system 10. The screening process is an
efficient, low-effort
2o means to support pre-screened, qualifying nonprofit, charitable causes at
the local community
level as well as at the national and international levels. Yet, if a charity
56 acts in a way that
is not desired by a cardholder 12, the cardholder may easily change a charity
selection, thus
forcing charities to be responsive to the concerns of their contributors.
Further, the merchants
16 are able to provide a significant, stable, and more predictable source of
charitable
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contributing based on sales and can advertise their efforts to assist
charitable organizations.
The charities themselves receive a more predictable, continuous source of
funding.
Another key feature of the invention is the willingness of a merchant 16 to
provide a
purchase rebate for use by cardholder 12 as opposed to traditional rebates and
the like which
have been sponsored by issuing bank 18. To facilitate such a rebate, a third
party merchant
acquiring agency 71 may have a relationship with both foundation 50 and with
the merchant
16 as shown by lines 72 and 74 respectively. Agency 71 approaches a merchant
16 to
encourage it to participate in system 10. If the merchant 16 agrees, the
foundation 50
conducts a review such as that in Figure 3 and represented by line 60 to make
sure that the
I o participation is in the best interest of both the charities 56, the
issuing bank 18, and the
cardholder 12. Such agencies are in the business of acquiring merchants to use
bank cards
and have pre-existing card relationships. In many cases, the agencies 71
provide point-of sale
materials and supplies to the merchants 16.
Information concerning the merchant, including the merchant identifier 26 for
use
within system 10 and approval for participation in system 10 is also stored in
database 64 as
shown by line 66. Agency 71 may access information about a merchant 16 by
querying the
database as shown by line 76, but it may not directly add information about
the merchant. In
some situations, as with national based merchants, a relationship may have
been developed
directly between foundation 50 and the merchant 16 as shown by line 60 without
the
2o assistance of agency 71. In such situations, agency 71 plays no role.
Often, issuing bank 18
plays the role of agency 71. However, unlike foundation 50, an issuing bank 18
cannot
typically unilaterally determine the participation of a merchant 16 within
system 10.
Preferred information stored in database 64 as merchant database components 78
include:
to
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the merchant name;
merchant identifier 26 provided by the traditional card approval system as
discussed
above;
federal identification number;
merchant address information;
application processing information (e.g., application receipt and approval
date,
approval renewal date, and rejection date if applicable);
rebate type (e.g., the percentage of contribution based on transaction amount
or
comparable discount or incentives);
t0 merchant evaluation scoring (e.g., the accept or reject value if a numeric
scoring is
undertaken);
the type of rebates that the merchant will provide (e.g., the amount of the
rebate may
be lower if the cardholder decides to keep it as opposed to donating it); and
merchant purchase rebate volumes (e.g., cumulative annual dollar amount in
total, by
1 s keepers, by donors, by charity; and number of purchase rebate transactions
in total, by
keepers, by donors and by charity). As with charities 56, the merchant
database components
78 may be updated at any time.
The issuing bank 18 offers transaction card system 10 to qualified individuals
and
corporate clients employing cardholders 12 as shown by line 42 in Figure 1. At
the time of
2o applying for participation and subsequently on a periodic basis, either the
cardholder or its
employer, in the case of a corporate program, provides many of the cardholder
database
components 80 which are stored in database 64, as illustrated in Figure 4.
If the cardholder 12 already has a card from the issuing bank 18, pre-existing
cardholder database components 80 may include the cardholder name, cardholder
account
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number 23, cardholder security number or company information, cardholder
address
information, and cardholder purchase transaction information (e.g., by
merchant, merchant
classification, and by amount). New information to be added to database 64
includes a yes/no
switch based on cardholder participation in system 10, and a yes/no switch
based on
"keeping" or "donating" the purchase rebate. If cardholder 12, or her company
in the case of
a corporate card, decides to donate the purchase rebate then database 64
includes the unique
charity identifiers associated with the charities 56 selected by the
cardholder and approved by
foundation 50 as discussed above. The charity information is retrieved by the
issuing bank 18
from database 64 as shown by line 68 and provided to the cardholder as shown
by line 42.
t o It is also envisioned that a cardholder 12 may decide to make additional
voluntary
additional contributions, such additional contributions may be based, for
example, on a
percentage of purchases or a fixed amount per billing period. Alternatively, a
cardholder 12
may submit an additional charitable donation at the time of paying the
cardholder billing
statement and indicating the additional amount to be directed to one or more
selected
charities. Such modifications are included as part of the rebate type. Thus,
the term "rebate
type" typically includes fixed monetary percentages or comparable incentives
agreed to by a
merchant 16, modifications made by the issuing bank 18 (e.g., making a
contribution to the
purchase rebate amount), and modifications made by the cardholder 12 (e.g.,
making an
additional charitable contribution).
2o When a cardholder 12 earns purchase rebates, the information is also stored
in the
database 64. Such purchase rebate statistics preferably include the cumulative
annual dollar
amount and how the purchase rebate has been distributed.
Many of the database components are intended only to be illustrative. However,
for
system 10 to function, the database components must include the ability to
determine
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cardholder, merchant, and charity participation as well as the transaction
amount. As shown
in Figure 5, when a charge 38 reaches the issuing bank 18, the information
associated with
the charge includes the merchant identifier 26, the transaction amount 24, and
the cardholder
account number 23. At process point 81 the issuing bank 18 provides whatever
information
is required on the cardholder 12 and charges the full purchase price
associated with the
merchant transaction as represented by line 42 in Figure 1. Then the merchant
portion of the
transaction terminates at end point 90. At process point 82, the cardholder 12
pays the
issuing bank 18 the full amount of the charge or at least a minimum amount
with the
remaining balance paid over time as represented by line 44 in Figure 1. The
cardholder
1 o portion of the transaction then terminates at end point 84. At the same
time, however, at
decision point 86 database 64 is queried by means of an identifying criteria
such as
cardholder account number 23 to determine if the cardholder associated with
the charge is
participating in the transaction system 10. If the answer is "yes" then the
database is again
queried at decision point 88 to determine if the merchant identifier
corresponds to a merchant
16 participating in the system. If either the cardholder 12 or the merchant 16
associated with
a charge 38 received by issuing bank 18 is not participating in system 10,
then the merchant
portion of the transaction terminates at end point 90. However, if both the
cardholder 12 and
the merchant 16 are participating in the system 10, then at decision point 92,
the database 64
is queried to determine if the cardholder is keeping the purchase rebate or
donating it. If the
2o cardholder 12 decides to donate the purchase rebate then the process
branches so that at
process point 94, the selected charities are determined. It is envisioned that
a cardholder 12
might decide to donate a portion of purchase rebate and retain the remainder
for herself.
Then at process point 96 the type of rebate is determined based on the
decisions made by the
merchant 16, issuing bank 18, and the cardholder 12, as discussed above. At
process point 98
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the rebate is calculated based on the transaction amount and the rebate type.
Then at process
point 100 the issuing bank charges the purchase rebate amount as represented
by line 102 in
Figure 1. In turn, the merchant pays the purchase rebate amount as shown at
process point
104 and represented by line 106 in Figure I. The received purchase rebate is
put in escrow
accounts by the card issuing bank 18 for either the cardholder 12 or the
selected charities 56
as shown in process point 108, and database 64 is updated. Then the merchant
portion of the
transaction terminates at end point 90.
While not shown, it is possible that a portion of the purchase rebate may be
paid to the
foundation S0, associated agency 114 (as shown in Figure 9 and discussed
further below) or
to to the issuing bank 18 to cover their administrative and processing costs.
Further, the issuing
bank 18 may pay a portion of the purchase rebate in lieu of other incentives
to gain greater
merchant acceptance of the system 10 or to encourage additional cardholders
12. To
participate in system 10, the charities 56 may be required to make periodic
payments to the
foundation 50 to cover the screening and evaluation process.
l5 At predetermined times, the issuing bank 18 will make payments to either
the
charities 56 or to the cardholder 12, as shown by line 69, based upon the
purchase rebate
escrowed. The issuing bank 18 will inform the cardholder of the amount and
nature of the
payments in a fashion discussed above. Such information will typically include
the names of
the charities selected and the cash amount received by each charity. However,
in some cases,
2o a charity 56 may need to directly communicate with a cardholder 12, such as
to provide a
receipt to confirm a donation of the purchase rebate. In such cases, the
communication is
represented by line 113 in Figure 1. The charity 56 receives the necessary
information
directly from the foundation 50.
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The ability of a cardholder 12 to claim a tax deduction is based on various
criteria that
are an integral part of system 10. The cardholder 12 earns a purchase rebate
that is valued as
and is convertible to cash. The cardholder has control of the purchase rebate
and can choose
to keep it or to donate it. If making a donation, the cardholder 12 has the
right to select from
various approved charities 56 to receive the donation. System 10 also provides
for the
cardholder 12 to periodically change the choices for the receipt of the
purchase rebate without
having to be issued a new card having the information encoded thereon.
In summary, the present invention provides an elegant, powerful mechanism for
charitable giving, empowering individual consumers and business purchasers to
use their
lU purchasing power at qualifying, participating merchants to bring funding to
qualifying
charitable organizations. The new channel of giving of the present invention
creates lasting
relationships which link the various participants.
From a broad economic and philanthropic perspective, the present invention is
a win-
win for all of the participants. The benefits to charities include the stable,
predictable, low
effort source of funding. The benefits to the cardholder include the tax
deduction for their
giving and the ability to effortlessly support their preferred, qualifying
charities through the
use of their card for purchases. In essence, the cardholders can "vote" with
their purchasing
behavior with participating merchants to support deserving, responsible
charities. This
empowerment extends to corporate cardholders as well. Business will have the
opportunity
2o through corporate and purchasing cards to designate qualifying charities
and broaden the base
of their financial support (e.g., through procurement processes with
participating, qualifying
suppliers). For many businesses, this will greatly simplify the giving
process. The benefits
to the merchant include growing a loyal base of customers who choose to do
business with
the merchant because of its participation and support for charitable causes.
For merchants,
CA 02254378 1998-11-23
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the piesent invention also streamlines charitable giving by leveraging the
foundation's pre-
qualification of charitable organizations. The invention also encompasses the
use of debit
cards, which allows a broader range of consumers to participate and increases
the funding
potential for qualifying charities.
A first alternative embodiment to the portion of system 10 involving charging
a
merchant 16 the purchase rebate amount is shown in Figure 6. In the first
alternative
embodiment, merchant card processor 28 has access to database 64. Therefore,
if the
cardholder 12 and the merchant 16 are participants, the merchant card
processor 28 can
determine the rebate type, compare the transaction amount to the type of
rebate, and then
1 o discount the payment back to the merchant bank 39 as shown by line 37' by
the amount of the
purchase rebate. In turn, merchant bank 39 discounts the payment back to the
merchant 16 as
shown by line 32'. Thus, merchant card processor 28 can pay the purchase
rebate directly to
the pre-selected charities 56 as queried from the database 64 and shown by
line 110.
Alternatively, merchant card processor 28 can forward the purchase rebate to
the merchant
bank 39 which will then escrow the purchase rebates and pay them at
predetermined times or
itself immediately forward a purchase rebate as shown by line 110'. If neither
the merchant
card processor 28 nor the merchant bank 39 pay a charity 56 then the merchant
processor 28
forwards the entire charge with purchase rebate to switch 36 for forwarding to
issuing bank
18. The latter process is followed if the cardholder 12 decides to keep the
purchase rebate or
2o if it is preferable for issuing bank to escrow the donated purchase rebate
before forwarding it
to the designated charities 56.
A second alternative embodiment of the present invention is shown in Figure 7.
In
the second alternative embodiment, additional information 112 such as the
participation of a
merchant 16 is provided as part of the information forwarded as part of the
charge represented
16
_,
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CA 02254378 1998-11-23
by line 30'. Thus, the information is provided at the point of sale. Other
possible information
to capture at the point of sale may include the product type or SKU,
particularly if the nature
of the product affects the ability to provide a purchase rebate (e.g.,
alcoholic or tobacco
products may not be subject to a rebate. The merchant card processor 28 then
has the ability
to decipher the participation and rebate type that the merchant has agreed to
and can discount
the payment bac6: to the merchant by the amount of the purchase rebate. Then
the charge and
the purchase rebate are forwarded to the switch 36 by means of line 34.
A third alternative embodiment to the portion of system 10 involving charging
a
merchant 16 the purchase rebate amount is shown in Figure 8. In the third
alternative
to embodiment, switch 36 has access to database 64. Therefore, if the
cardholder 12 and the
merchant 16 are participants, the switch 36 can determine the rebate type,
compare the
transaction amount to the type of rebate, and then discount the payment back
to the merchant
bank 39 as shown by line 37' by the amount of a purchase rebate. In tum,
merchant bank 39
can charge the merchant 16 the purchase rebate amount or deduct it from the
payment to the
merchant. Thus, switch 36 can pay the purchase rebate directly to the pre-
selected charities
56 as queried from the database 64 and shown by line 110". Switch 36 may
escrow the
purchase rebates and pay them at predetermined times or immediately forward a
purchase
rebate. Alternatively, switch 36 may forward the entire charge 38 with
purchase rebate to
issuing bank 18. The latter process is followed if the cardholder 12 decides
to keep the
2o purchase rebate or if it is preferable for issuing bank to escrow the
donated purchase rebate
before forwarding it to the designated charities 56.
An advantage of the three alternative embodiments is that the issuing bank 18
does
not have to separately charge a merchant 16 for the purchase rebate as
discussed above. A
current disadvantage of the alternative embodiments is that the implementation
requires
1~
CA 02254378 1998-11-23
65314-002
modification to the traditional card processing system currently used. The
second alternative
embodiment also limits the type of rebate types that are used since access to
the database 64
is not provided. Further, the three alternative embodiments make it more
difficult for the
issuing bank to contribute to the purchase rebate.
Figure 9 shows an issuing bank 18 associated with a separate agency 114 as
represented by line 115. It is envisioned that an issuing bank may involve the
services of a
separate agency to administer many of the functions of transaction system 10.
A portion of
the purchase rebate may be used to administer the functions of the separate
agency.
Alternatively, the issuing bank 18 may pay the agency directly. The types of
services to be
provided by the outside agency 114 may include acquiring participating
merchants in a
manner similar to that of agency 71, interacting with foundation S0, and
maintaining the
charity portion of the database 64 on behalf of the issuing bank 18. One
agency 114 may
serve a number of different issuing banks 18 and may even be licensed by the
foundation S0.
Typical ly, the issuing bank 18 stays as part of the transaction system 10 as
shown in Figure 1,
1S from the standpoint of settling charges 38 received from switch 36 as
represented by line 40;
charging cardholder 12 as represented by line 42 and receiving payments as
represented by
line 44; and charging a merchant 16 as represented by line 102 and receiving a
payment as
represented by line 106.
The location of database 64 within transaction system 10 is flexible, as long
as the
necessary parties have access to it when required. Typically, the database
will reside with the
foundation 50, the agency 114, or the issuing bank 18. It is also possible for
portions of the
database 64 to be split among one or more of the parties as part of their own
data processing
systems. Thus, each of the parties can carefully control the appropriate
access to information
which they deem confidential or proprietary and make sure that access is
appropriately
~s
CA 02254378 1998-11-23
65314-002
controlled. For example, in the embodiment of Figure 6, the merchant bank
processing
system may comprise a portion of database 64. If the database 64 is split,
however, the
foundation 50 controls the information associated with both participating
charities 56 and
participating merchants 16 as discussed above.
While not shown, it also possible to provide direct access to database 64 to
the
cardholders 12 so that they may determine the participation of select
merchants 16, the types
and amounts of contributions made to date, and revise their selection of
charities 56. Such
access may be provided, for example, by an Internet web site. However, at the
very least, the
necessary information will be provided by the issuing bank 18 in the form of
card statement
inserts or other forms of notification.
A simplified version of a transaction system 10' is illustrated in Figure 10.
In
practice, merchant card processor, switch 36, merchant bank 39, and issuing
bank 18 and any
associated agency 114 and the traditional connections between them represent a
charge
settlement organization. The functions of these various entities may be
combined into a
I S single entity known as a closed loop card arrangement 116. Examples of
systems 10' include
Discover~ and American Express. As a result, the number of connections between
the
various participants to the system has been greatly simplified.
In practice, the cardholder 12 goes to a merchant 16 and charges a product or
service.
The transaction information, including the charge, is transmitted to
arrangement 116 by way
of line 30. Arrangement 116 will query database 64 as shown by line 68 and
determine if
both the cardholder 12 and the merchant 16 are participants in the purchase
rebate portion of
the system. If so, then the arrangement 116 will then pay the merchant 16 the
purchase price
less the purchase rebate as shown by line 32'. Arrangement 116 will charge and
inform the
cardholder 12 by way of line 42 and receive information and payments by way of
line 44.
19
CA 02254378 1998-11-23
65314-002
The closed loop card arrangement 116 will periodically pay the pre-selected
charities as
shown by line 69, and the charity will inform the cardholder 12 if required as
shown by line
113. The line of communication between foundation SO and the arrangement 116
is shown
by line 52. Finally, the foundation 50 will approve and monitor both the
charities 56 and the
merchants 16 in the manner discussed above, as represented by lines 58 and 60
respectively.
The disclosed embodiments and examples are given to illustrate the present
invention.
However, they are not meant to limit the scope and spirit of the present
invention. For
example, if a debit card is used as opposed to a credit card, a charge 38 is
taken directly from
the cardholder's account. The cardholder is then informed of the deduction
from the account
l o as part of a periodic statement. Therefore, the present invention should
be limited only by the
appended claims.
