Note: Descriptions are shown in the official language in which they were submitted.
CA 02295615 2000-O1-07
WO 99/03076 PCT/US98/13293
AUTOMATED PAYMENT SYSTEM AND METHOD
Cross-Reference to Related Application
This is a continuation-in-part of pending U.S. patent application serial no.
08/890,398
which was filed on July 9, I997.
Technical Field
This invention relates to systems and processes for automated payment for a
service or
product including repayment of a cash advance provided to a merchant via fees
levied through an
entity that processes customer payment transactions for the merchant.
Background Information
Card (e.g., credit, debit, charge, smart, etc.) transactions generally involve
at least
merchants, merchant processors, issuers, and cardholders. Such transactions
include
authorization, clearing, and settlement processes, and may include the use of
a system such as the
VisaNet or Cirrus system to authorize, clear, and settle the card payment.
Repayment of cash advances including loans generally is performed by the payor
sending
periodic payments directly to another entity by post or by electronic funds
transfer through the
banking system. Fees for products and services generally are paid directly by
an entity receiving
the product and/or service to the provider of the product and/or service.
Summary of the Invention
It is an object of the invention to provide for automated payment by a
business entity
based on fees levied on customer payment transactions between the business
entity and its
customers. The payment can be for a product, service, and/or cash advance
provided to the
business entity (e.g., a merchant such as a restaurant) by an organization
that supplies various
businesses with products, services, and/or cash advances. The organization
can, for example,
provide discounted business tools and resources such as payroll services,
discounted offtce
equipment and supplies, travel discounts, various employee benefit programs
such as discount
dental services, various professional services such as legal services, and
marketing services. The
business entity pays for the services, products, and/or cash advances supplied
by the organization
via a fee levied on card payments made by the business entity's customers.
These card
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transactions involve unique identifying account numbers (e.g., credit, debit,
charge, payment,
smart, etc. card numbers) provided to the entity by its customers. It also is
an object of the
invention for the organization to advance money to the business entity for the
purpose of allowing
the business to buy the goods and/or services that are offered or supplied by
the organization (or
S any other goods and/or services), and then the business entity repays the
advance via a fee levied
on card payments made by the business entity's customers.
As an example of this aspect of the invention, the organization makes
available to small
businesses and similar merchants various products and/or services, including
cash advances, for a
fee, and the fee is paid to the organization based on customer payment
transactions between the
merchant and its customers. The organization could also advance money to the
merchant for the
purpose of, for example, allowing the merchant to buy the various products
and/or services from
the organization (or products and/or services offered by any other entity),
and the advance is
repaid by the merchant based on the merchant's customer payment transactions.
The merchant
can be, for example, a personal service beauty salon or a restaurant, and the
providing
organization can provide to the merchant certain tools and resources such as
discounted
advertising rates through a large advertiser. Whether or not the merchant
takes advantage of the
discounted advertising or any of the other products and/or services offered by
the organization,
the merchant, once signed up with the organization, owes the organization a
fee for being
provided with access to the array of products and/or services offered by the
organization. This
fee, and any other feels) connected with the merchant getting access to or
actually using the
offered products and/or services, is paid by the merchant to the organization
(or to a
representative of the organization or, generally, to a "fee receiver") via a
fee levied on card
payment transactions between the merchant and its customers. For example, the
transaction may
involve the purchase of a haircut from the beauty salon by a customer using a
credit card as the
means of payment to the salon for the haircut. During processing of the card
transaction by a
merchant processor, a portion of the purchase price of the haircut is diverted
to the organization
as (partial) payment for the fee owed to the organization by the salon. In the
same manner, the
salon can make payments on any outstanding cash advance, whether the advance
originated form
the organization or a third party.
It is a further object of the invention to provide an automated cash advance
(e.g., loan)
repayment system and process based on fees levied on payment transactions such
as those
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involving unique identifying account numbers {e.g., credit, debit, charge,
payment, smart, ere.
card numbers).
In accordance with the invention, a merchant processor is utilized whether the
payment is
to cover all or a portion of a fee due for a product andlor service or to
cover all or a portion of an
S outstanding cash advance amount. The merchant processor tray be, for
example, a third panty .
entity (i.e., an entity other than the merchant or the organization). As an
example, with some
credit cards, the merchant processor can be a third party. As another example,
with some cards
such as the American Express charge card, the merchant processor can be the
same as (or at least
closely affiliated with) the card issuer. In general, a "merchant procc~sor"
is any entity that
1Q acquires merchant transactions such as a bank or other financial
institution, or that is dedicated to
acquiring and processing merchant transactions. Acquitvng merchant
transactions generally
means receiving payment information from a merchant or on behalf of a
merchant, obtaining
authorization for the payment from the card issuer, sending that
authorization. to the merchant,
and then completing the transaction by paying the merchant, submitting the
payment, and getting
15 paid by the issuer. For tras sen~ice, the merchant processor typically
levies a fee on the merchant
that is a percentage of the a'-nount of the payment transaction. In general,
the payment
irAfcrmation fonvarde~3 to the merchant processor relates to a customer
identifier submitted to the
merchant as payment for some goods) and/or service(s), and that identifier can
be the account
number Lzsscciated with, for example, a debit card, a smart card, a credit
card (e.g., a 'Visa or
20 Mast~rCard card}, a charge card (e.g., an American Express card), etc.
The invention rhss relates to systems and processes for automated payment for
a service,
product, andlor cash advance provided to a merchant by the organization. The
systems and
processes of the invention utilize consumer payment transactions with the
merchant to allow the
merchant to pay off the service, product, andlor cash advance provided by the
organization.
25 Typically, a percentage of G consumer's payment io the merchant (e.g., by
credit card) is used to
pay what the merchant owes to the orgattizat!on. In one embodiment of the
present invention, a
merchant, that h~ received a cash advance from the organization and/ar that
has been provided
with certain services andlor products by the organization, accepts a customer-
identifying account
number {e.g., a credit, charge, payment, or debit card number} as payment from
the customer and
3Q , information related to the payment is forwarded to a merchant processor.
Acceptance of this
type of payment from the customer can be done, for example, at a merchant
location (e.g., a retail
t~OED SH'~E't
A~
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establishment}, over the telephone, or electronically via, for example, the
World Wide Web by the
merchant or on behalf of the merchant. The merchant processor then acquires
the information
related to the payment transaction, processes that information, and forwards
at least a portion of
the transaction amount to the organization as repayment of at least a portion
of the amount owed
S by the merchant for the goods, services, and/or cash advance provided to the
merchant.
Alternatively, the payments may be accumulated until a predetermined amount is
reached, and
then at least a portion of the accumulated payments is forwarded to the
organization (or its
designee). In another embodiment, the merchant processor may periodically
forward at least a
portion of the payments) to the organization or designee. For example, the
merchant processor
may forward payment amounts every month, or based on an amount such as after
each one
thousand dollars ($1000) worth of transactions. The organization or designee
(e.g., a bank or
other institution, or an entity collecting payments on behalf of the
organization) receives the
portion of the payment forwarded by the merchant processor and applies that
amount to the
amount owed by the merchant to reduce the outstanding amount whether it be
owed by the
1 S merchant because of a product, service, and/or cash advance provided to
the merchant.
A system according to the invention includes means for accepting a customer-
identifying
account number as payment from the customer and for forwarding information
related to the
payment to a merchant processor. In one embodiment, the merchant may use
equipment provided
by VeriFone Inc. of Redwood City, California, such as an electronic card swipe
machine, to
facilitate card transactions by customers. The merchant processor includes
means for receiving
the information related to the payment and means for forwarding a payment to
an organization.
The invention thus provides an automated, easy, and efficient mechanism by
which
merchants that accept customer-identifying account numbers (e.g., credit
cards) as payment for
goods) and/or services) can pay off amounts owed by the merchants for
services, products,
2S and/or cash advances provided to the merchants. The merchants use one or
more already-familiar
payment transaction processing systems to make the payments required by the
provider of the
services, products, and/or cash advances. The invention makes payment for
advances, goods,
and/or services simple and efficient for both the merchant and the
organization.
The foregoing and other objects, aspects, features, and advantages of the
invention will
become more apparent from the following drawings, description, and claims.
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Brief Description of the Drawings
In the drawings, Like reference characters generally refer to the same parts
throughout the
different views. Also, the drawings are not necessarily to scale, emphasis
instead generally being
placed upon illustrating the principles of the invention.
FIGS. lA and 1B are schematic illustrations of a payment transaction from
authorization
(FIG. 1 A) to settlement (FIG. 1 B).
FIG. 2 is a block diagram of a merchant processor making payment to both a
merchant
and an organization, in accordance with the invention.
FIG. 3A is a diagram of a merchant processor system according to the
invention.
FIG. 3B is a diagram of a merchant location.
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Attartzey's Docket No.: 3IjT1-001 CPC
-6-
Description
Referting to fIGS. lA and 1B, a purchase transaction (e.g., a credit card n-
ansaction)
generally begins v~ith a cardholder 10 providing a customer identifier
(typically, a unique
identifying account number such as that on a credit card such as a Visa or
MasterCard card, a
debit card, a smart card, a charge card such as an A.mericart Express card,
etc.) to a merchant 20,
as indicated by an arrow I2, for payment of goods andlor services purchased by
the customer.
The merchant can be any business that accepts such fornn of payment for the
goods andlor
services provided to customers by the business. The cardholder 10 txuight
present the card to the
merchant 20 in person, or the cardholder I O might provide the card number to
the mcrchaat over
the telephone or electronically by computer (e.g., via the World Wide Web,
WW1. Also, the
cardholder 10 might provide the card number to an entity acting on behalf of
the merchant such
as a ~'W~,V provider that sets up and maintains the merchant's Web page(s).
However the
customer identi$ex (e.g., card number) gets to the merchant er the merchant's
agent,
autherizat:on Tn~at be obtained before the payment can be accepted and the
purchase transaction
i5 completed.
Authorization, a~ shown in FIG. 1 A, involves an authorization request going
t4 a
merchant processor 30, as indicated by an arrow 22. The request generally gets
to the merchant
processor 30 electronically by, for example, transmission through the
telephone system andlor
same other network (e.g,, the Internet and/or an intrartet). 'fhe merchant
processor 30 (also
tcnow!i as an acquirer because it acquires merchant transactions} then routes
thr authorization
request to a ,;ard issuer ~0 via a network 40, as indicated by arrows 32
arid.,42. In some:
embodiments, the merchant proe~ssor 30 {300 in FIGS. 2 and 3A) is the bank of
the merchant
20, and the card issuer 50 is the cardhal~3er's bank. The routing generally is
performed
electronis,311y in a manner mentioned above (i.e., via one or more public
and/or private
2S networks). 'The tzetwork 40 may be, for example, the VisaNet system. Gth.er
examples of Lhe
7etwork 40 inciui!e debit card processing network systems (e.g., Cirrus), the
American Express
card network, and the Discover (Novus) card network. It rnay be possible to
bypass the network
40 and send the authorization rewuest directly from the merchant processor 30
to the Card issuer
SG. In some instances, the card issuer 50 also performs the function of
acquiring merchant
uansactions (An=erican Express is an example). Also, the merchant processor 30
and the :ard
issuer 50 can be metged, and the authorization request will then go only to
the merch.at'it
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Attorney's Dockct No.: JHN-U01 CPC
processor 30 which itself then can approve or disapprove the request because
the mer'rhant
processor 30 and the card issuer 50 are now the same entity. In the case where
the network 40 is
used and the card issuer 50 and the merchant processor 30 are separate
(organizationally andJor
physically) entities, the card issuer 50 receives the authorization request
via the network 40 and
either approves or disapproves the request. An example of when the card issuer
50 may
disapprove the authorization request is when the cardholder 10 kras reached
the maximum limit
on the card or if the card number has been fraudulently obtained. assuming the
request is
approved, the card issuer 50 sends approval ofthe authorization to the
merchant processo: 30 va
the network 40, as indicated by arrows 44 and 34. The merchant processor sC
then passes on the
authorization approval to the merchant, as indicated by an arrow 24. With the
approval, the
second part of the card transaction can now occur. This return path (i.e.,
arrows 44, 34, and 24)
also can be accomplished by electronic transmission through one or more
private andlor public
network systems. In general, all of the arrows in FIGS. lA. 1B, and 2
represent electronic
transmissions, except possibly for arrows i2, 22, 24, 2b, 32, aad 5~t which
may involve other
types of transmission such as physical delivery (e.g., a card handed oven by
the
catdl~olderlcustotntr 10) or post (e.g., a bill sent to the cardholder 10 via
the L3.S. Postal Service
or other carrier) or by telephone.
Referring to F1G. 113, to complete the purchase transaction, the dollar
aruount of the
customer's purchase is forwarded to the merchane processor 30 by the
rnercharrt 20, as indicated
by an arrow 2b. The merchant processor 3G pays the merchant 20 some amount
less than the
amount submitted to the merchant pcocessor 30. The rnarchant processor 3.0
typically charges a
fee, often referred to as a discount rate, for processing the purchase
transaction. For example, the
customer's purchase may have been ~1U0, and with a discount rate of
1.9°,'0, the m°rchant 20 is
paid $98.10 (i.e., $I00 less the 1.9°/a discount rate) by the merchant
processor 30. Tne merchant
processor 30 submits the entire amount of thz customer's purchase to the card
issuer 50 via the
network 40, as indicated by arrows 36 and 46. Again, tl~e network 40 m:~y be
eliminated, and the
merchant processor and card issuer functions may be contained in one entity.
In tk:e case where
the net<vork 40 is included and the mcrchent processor and card issuer
functions are separate, the
card issuer 50, via the network 40, pays the merchant pmcesor 30 some amount
less than the
amount submitted to the card issuer 50 by the merchant processor 30, as
indicated by arrows 48
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and 38. This reduced amount rcflects another fee levied on the transaction by
the card issuer S0,
often refezred tv as an interchangc fee. The interchange fee is often part of
the discount rate.
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_g_
having an account maintained by the merchant 20) some amount less than the
customer's original
purchase amount, as indicated by an arrow 28. For example, with an original
customer purchase
of $100, and with an interchange fee of 1.4%, the merchant processor 30 is
paid $98.60 (i. e.,
$100 less the 1.4% interchange fee) by the card issuer 50. This amount is
further reduced by the
merchant processor's fee. Thus, in this $100 original customer purchase
example, the merchant
20 is paid $98.10 by the merchant processor 30, the merchant processor 30
makes $0.50, and the
card issuer makes $1.40. Stated another way, the merchant 20 pays 1.9% for the
ability to oiler
customers the convenience of paying by card, and that 1.9% fee or surcharge is
allocated to the
merchant processor 30 (0.5%) and the card issuer (1.4%) for providing the
merchant 20 with that
ability.
The card issuer SO bills the customer or cardholder 10 for the full amount of
the original
purchase (e.g., $100), and the cardholder 10 is responsible for paying that
amount, plus any
interest and other fees, in full or in installment payments. Also, when the
network 40 is used,
both the merchant processor 30 and the card issuer 50 generally pay a fee to
the provider of the
network 40. For example, in the case of VisaNet, the merchant processor might
pay $0.069 to
VisaNet as a card service fee, and the card issuer 50 might pay VisaNet $0.059
as a card service
and transaction fee. These payments by the merchant processor 30 and the card
issuer 50 to the
provider of the network 40 reduce the amount made off of the surcharge (e.g.,
1.9%) imposed on
the merchant 20.
Having described the environment in which the invention operates with
reference to FIGS.
1 A and 1 B, the automated payment system and process according to the
invention will now be
described with reference to FIGS. 2, 3A, and 3B.
Referring to FIG. 2, an organization 60 provides an advance (e.g., a loan) to
the merchant
20, as indicated by an arrow 62, and/or the organization 60 provides to the
merchant 20 various
products, services, and/or business tools and resources such as, for example,
payroll services,
discounted office equipment and supplies, travel discounts, various employee
benefit programs
such as discount dental services, various professional services such as legal
services, and
marketing services, as also indicated by the arrow 62. The advance can be for
the purpose of
allowing the merchant 20 to buy, and/or have access to, the various products,
services, and/or
business tools and resources supplied by the organization 60, or the merchant
20 can use the
advance for another purpose. The various products, services, and/or business
tools and resources
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supplied by the organization 60 to the merchant 20 do not include the card
processing services
normally performed by a merchant processor.
If the cash advance is made, the merchant 20 then is required to pay back at
least the
advanced amount and usually additional amounts such as fees associated with
the advance.
Currently, the merchant 20 typically pays the advance back in periodic
installments (e.g., equal
monthly payments over five years). The merchant 20 may make these payments to
the
organization 60 or to some other payment receiver. In FIG. 2, the payment
receiver is identified
as the organization 60. In accordance with the invention, a purchase
transaction occurs as
indicated in FIG. 1B except that the final step where the merchant processor
pays the merchant is
altered. That is, the payment indicated by the arrow 28 is altered. The
invention involves a
merchant processor 300 designed to pay a portion of what would normally go to
the merchant 20
to the organization 60 as payment of at least a portion of the amount owed by
the merchant 20 for
the service, product, and/or cash advance that was provided to the merchant
20, as indicated by
an arrow 29. The organization 60 then receives that portion of the payment
forwarded by the
I S merchant processor 300 and applies it to the outstanding amount owed by
the merchant to reduce
that amount. The merchant processor 300 thus pays the merchant 20 some amount
less than what
the merchant 20 would receive in the arrangement of FIG. I B, as indicated by
an arrow 27 in
FIG. 2. For example, carrying on with the example introduced above with
reference to FIGS. lA
and 1B, instead of paying $98.10 to the merchant 20 on a $100 original card
purchase, the
merchant processor 300 might send $88.10 to the merchant 20 and the other
$10.00 to the
organization 60.
Whether or not a cash advance is provided to the merchant 20, if the
organization 60
provides to the merchant 20 the various products, services, and/or business
tools and resources,
the merchant 20 then is required to pay a fee to the organization 60. In
general, whether or not
the merchant 20 takes advantage of the various products, services, and/or
business tools and
resources offered by the organization 60, the merchant 20, once signed up with
the organization
60, owes the organization 60 a fee for being provided with access to the array
of products and/or
services offered by the organization 60. Currently, the merchant 20 typically
pays the fee in one
lump sum to the organization 60 or to some other fee receiver. In accordance
with the invention,
a purchase transaction occurs as indicated in FIG. 1B except that the final
step where the
merchant processor pays the merchant is altered. That is, the payment
indicated by the arrow 28
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is altered. The invention involves a merchant processor 300 designed to pay a
portion of what
would normally go to the merchant 20 to the organization 60 {or a fee
receiver) as payment of at
least a portion of the fee owed by the merchant, as indicated by the arrow 29.
The organization
60 then receives that portion of the payment forwarded by the merchant
processor 300 and
applies it to the fee owed to the organization 60 by the merchant to reduce or
eliminate that
outstanding amount. The merchant processor 300 thus pays the merchant 20 some
amount less
than what the merchant 20 would receive in the arrangement of FIG. 1B, as
indicated by an arrow
27 in FIG. 2. For example, carrying on with the example introduced above with
reference to
FIGS. lA and 1B, instead of paying $98.10 to the merchant 20 on a $100
original card purchase,
the merchant processor 300 might send $88.10 to the merchant 20 and the other
$10.00 to the
organization 60.
In accordance with the invention, there can be a number of variations on how
and when
the merchant processor 300 pays the organization 60. For example, the merchant
processor 300
can accumulate the payments received from the card issuer 50 (via arrows 48
and 38) until a
1 S predetermined dollar amount is reached, and then the merchant processor
300 can forward at least
a portion of the accumulated payments to the organization 60. Also, as another
example, the
merchant processor 300 can periodically forward payment to the organization
60, such as upon
every other payment received from the card issuer 50.
Referring to FIG. 3A, the merchant processor 300 according to the invention
typically
includes at least a processor 302, memory 304, an input/output (I/O) device
306, a merchant
accounts database 308, and a bus 310 or other means for allowing these
components to
communicate. The I/O module 306 allows the merchant processor 300 to
communicate
electronically with the other components (e.g., the merchant 20, the network
40, the card issuer
50 , and the organization 60) in the card transaction processing system shown
in the drawings.
The processor 302 and the memory 304 cooperate with each other and with the
other
components of the merchant processor 300 to perform all of the functionality
described herein. In
one embodiment, the merchant processor 300 executes appropriate software to
perform all of the
functionality described herein. In an alternative embodiment, some or all of
the functionality
described herein can be accomplished with dedicated electronics hard-wired to
perform the
described functions. The merchant accounts database 308 can include
information identifying all
merchants 20 with which the merchant processor 300 is authorized to do
business (e.g., at least a
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plurality of unique merchant code numbers), and it also can include
information about which
organization 60 is associated with each authorized merchant 20 and how (e.g.,
dollar amounts and
frequency) payments are to be made to the organizations 60 by the merchant
processor 300. The
merchant processor 300 according to the invention can be an appropriately
programmed
computer such as a mainframe, minicomputer, PC, or Macintosh computer, or it
can include a
plurality of such computers cooperating to perform the functionality described
herein. Similarly,
the other components of the card transaction system (e.g., the merchant 20,
the network 40, the
card issuer 50, and the organization 60) according to the invention typically
include one or more
appropriately programmed computers for implementing the functionality
described herein.
Referring to FIG. 3B, the merchant 20 typically includes at least one computer
unit 312,
such as a microprocessor and associated peripherals, that communicates over a
bus 314 with a
consumer data input device 316, a transaction data input device 3 I 8, memory
320, and an
input/output (I/O) device 322. The consumer data input device 316 is located
at the point-of sale
to a consumer of merchandise or services from the merchant. The device 3 I 6
can include a
1 S keyboard for use to enter a consumer's account number/identif er, or
alternatively it can include a
magnetic card reader for reading a magnetic stripe on a plastic card inserted
into the reader. With
such a magnetic stripe card, the stripe is encoded with the identifier (e.g.,
the customer's Visa
credit card account number). When such a plastic card is used, the device 316
also may include a
keyboard for entry of a personal identification number (PIN) for verifying
against a code stored in
or on the card. The transaction data input device 318 also is located at the
point-of sale, and it
typically includes a keyboard or the like for use by, for example, a sales
clerk to enter the dollar
amount of the merchandise or service purchased by the customer and possibly
other related
information. The device 318 could include a cash register. In some
embodiments, the devices
316 and 318 can share a single keyboard. The consumer and transaction data
entered through the
devices 316 and 318 may be temporarily stored in the memory 320. The memory
320 also may
include merchant data along with software to direct operation of the computer
312. The
merchant data typically will include at least a merchant code number to
identify the merchant, and
merchant data also may include information indicating the time or Location of
the sale and/or the
sales clerk involved in the purchase transaction, for example. The merchant 20
may have more
than one point-of sale locations and each such location can be equipped with
consumer and
transaction data input devices 316 and 318. Similarly, memory 320 and I/O
devices 322 can be
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replicated at each point-of sale location at the merchant 20. In one
embodiment, only the devices
316 and 318 are replicated at the merchant 20 such that only one computer 312
is needed by each
single merchant location. VeriFone Inc. of Redwood City, California, for
example, provides such
merchant-location equipment.
Referring now to both FIG. 3A and FIG. 3B, the merchant processor 300 and the
merchant 20 can communicate through the I/O devices 306 and 322. These devices
306 and 322
can be modems, for example.
While only one merchant 20 and one organization 60 are shown in the drawings,
it should
be understood that in general a plurality of merchants 20 will interact with
the merchant processor
300, and the merchant processor 300 could interact with one or more
organizations 60, in
accordance with the invention. The different merchants 20 generally will have
varying
outstanding amounts owed to one or more of the various organizations 60. The
invention has
been shown and described with reference to one merchant 20 and one
organization 60 for
simplicity and ease of understanding. Also, as stated previously, the merchant
processor 300 and
the card issuer 50 can be separate entities (as is generally the case with
Visa card processing) or
the same entity, or at least affiliated entities, (as is generally the case
with American Express card
processing).
Variations, modifications, and other implementations of what is described
herein will
occur to those of ordinary skill in the art without departing from the spirit
and the scope of the
invention as claimed. Accordingly, the invention is to be defined not by the
preceding illustrative
description but instead by the spirit and scope of the following claims.
What is claimed is:
