Note: Descriptions are shown in the official language in which they were submitted.
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
PROCESSING SYSTEM AND METHOD FOR A HETEROGENEOUS
ELECTRONIC CASH ENVIRONMENT
FIELD AND BACKGROUND OF THE INVENTION
The present invention relates to a smart card payment system, and in
particular,
to a stored-value payment system, such as for retail sales.
Charge Transactions, Charge Functions, and Payment Cards
A "charge transaction" is a payment by an instrument such as a debit card or
credit card, herein collectively referred to as a "charge card". A merchant
receiving
payment via a charge card transfers the customer's charge for settlement to
the card
issuer, either directly or indirectly via an acquirer or a transaction
processing agency,
The term "charge function" herein denotes any facility, such as a credit or
debit scheme,
by which a customer may initiate a charge transaction. A conventional charge
card, for
example, contains a charge function. The payment cards according to the
present
invention contain at least one charge function. The term "acquirer" herein
denotes a
commercial entity which provides charge card acceptance and settlement for
merchants.
Acquirers include, but are not limited to banks and similar financial
institutions. Charge
transactions are associated with published fees, settlement terms, benefits
and incentives,
involving customers, issuers, acquirers, transaction processors, communication
providers, and other parties participating in the transaction or facilitating
its completion..
The term "issuer" herein denotes any commercial entity which issues charge
functions to
customers, or, in the case where a payment card contains a single charge
function, a
commercial entity which issues payment cards to customers. Issuers include,
but are not
limited to banks and similar financial institutions. A particular bank may
function both
as an issuer and as an acquirer, but different divisions of the bank are
typically involved
with these separate functions. The charge transaction market is highly
competitive, with
a number of issuers offering various and varying fee and incentive schemes to
customers, and a number of acquirers seeking accounts with merchants. The
customer
decides which charge card(s) to carry and use, and the merchant decides which
charge
card(s) to accept.
1
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
Electronic Cash
"Electronic cash" is portable electronic money, stored in stored-value devices
and
transferred among them for payment and settlement. The principal justification
for
electronic cash is in making convenient cost-effective customer payments for
small
purchases, for which charge transactions are too expensive to handle because
of fixed,
per-transaction costs of authorization and settlement. The term "settlement"
herein
denotes the process of redeeming proprietary payment instruments for
conventional
monetary payment. Such proprietary payment instruments include, but are not
limited to,
charge slips and electronic cash. The term "conventional monetary payment"
herein
denotes payment made by monetary instruments not including charge transactions
and
electronic cash. Conventional monetary payment includes, but is not limited
to, checks,
bank drafts, conventional cash, wire transfers (which herein are not
considered electronic
cash). An example of settlement is that of a merchant sending charge slips
from charge
transactions to an acquirer, and then receiving a check which he may deposit
in his bank
account. The term "merchant" herein denotes any business entity which offers
goods
and/or services to the customer and receives payment therefrom.
Brands and Branding
The term "brand" herein denotes the individual proprietary identification of
specific proprietary payment instruments, charge functions, and so on, issued
by a
commercial entity, and the term "branding" herein denotes the applying of a
brand to any
such specific proprietary payment instruments, charge functions, and so on.
Brands are
typically used as means of commercially identifying these respective different
proprietary payment instruments in order that customers may readily
distinguish between
them. In conventional systems as well as in the system according to the
present
invention, charge functions are identified by their respective brands.
Within the scope of the present invention, it is charge functions which have
brands. A single commercial entity may own and administer several different
brands of
charge function. For example, a particular financial institution may offer
customers both
a credit card and a debit card, which are herein considered as two distinct
brands of
charge function, even though they are offered by, and identified with, the
same financial
institution.
2
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
Note that while the charge function is commonly associated by the customer
with
a physical charge card, the charge function itself is actually associated with
an account at
the financial institution. The physical charge card is an instrument whereby
the customer
and a merchant may conveniently access that account. The physical charge card
is not
actually necessary for all accesses, as can be seen when a customer performs a
charge
transaction by verbally giving the account number to a merchant over the
telephone.
Consequently, although the brand is technically an attribute of the charge
function, rather
than the card, customers tend to associate the brand with the card itself.
Accordingly, in
the examples herein, the brand will be treated as belonging to the charge
function, but
brands will sometimes be labeled for exemplary purposes in terms of cards.
As another example of distinct branding, a financial institution may offer
customers two different types of credit card. One such credit card type might
be for
"regular" customers, while the other might be for "preferred" customers and
have
different usage terms. Such two different credit cards are herein also
considered to be
two distinct brands of charge function, even though they are offered by, and
generally
identified with, the same financial institution. Note, however, that the
importance of
brands is in the competitive marketplace, in terms of customer perception and
preference. What constitutes a brand of charge function (what distinguishes
one charge
function brand from another) is therefore determined arbitrarily by the
commercial entity
that creates and/or administers the charge function brand. It is possible for
two distinct
charge function brands to differ only in their names or identification, but
otherwise have
precisely identical features such as fees, loading terms, settlement terms,
and so on.
Consequently, the system according to the present invention does not impose
any
individuality requirements on charge function brands, but rather accepts
whatever charge
function brands are created and administered, and it is a goal of the present
invention to
maintain the distinct identities of all charge function brands. To be
compatible with the
system according to the present invention, however, charge function brands
must
establish loading terms and settlement terms as defined herein.
In the system according to the present invention, every charge function has a
specific brand. A payment card with a single charge function may therefore be
informally associated with that charge function. It is important to keep in
mind, however,
3
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
that it is the charge function, not the payment card, which actually has the
brand. In the
system according to the present invention, a single payment card may have more
than
one charge function and may therefore be associated with more than one brand.
Settlement and Settlement Terms
The term "settlement terms" herein denotes the specific conditions,
provisions,
stipulations, and fees relating to the process by which a merchant completes
the
accounting and monetary reconciliation of a charge transaction. Settlement of
charge
transactions by merchants generally involves settlement fees paid to the
acquirer.
Settlement terms may vary according to the charge function brand associated
with the
charge transaction.
Stored-Value Devices
The tenm "stored-value device" herein denotes any device or apparatus which is
able to receive, store, and transfer electronic cash. A typical electronic
cash payment
system includes a variety of stored-value devices:
= Customer stored-value devices such as smart card-based electronic purses, or
protected stored-value memories in personal computers, cellular telephones,
toll-payment transponders, etc. In the system according to the present
invention, a payment card contains at least one electronic purse, which serves
as a stored-value device.
= Merchant stored-value devices, such as an electronic cash drawer of an
automatic or manual "point of sale" (POS), and are used to collect and
accumulate electronic cash received from customer stored-value devices and
transfer this electronic cash for settlement to issuer stored-value devices.
= Issuer stored-value devices such as an electronic cash pool, maintained at
an
issuer computer to issue, collect, and monitor electronic cash.
Loading Terms and Usage Terms for Electronic Cash
In a conventional electronic cash scheme, electronic cash is purchased at a
loading terminal against cash or debit-card payment. This electronic cash is
loaded into
the customer's stored-value device. When the customer makes a purchase,
payment is
made by transferring electronic cash from the customer's stored-value device
to the
4
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
merchant's stored-value device. The cash accumulated in the merchant's stored-
value
device is transferred back to the issuer stored-value device for settlement.
The term
"loading terms" herein denotes the specific conditions, provisions,
stipulations, and fees
relating to the process by which a customer obtains electronic cash in the
electronic
purse of a payment card. Loading terms are associated with the brand of the
charge
function against which the value of the loaded electronic cash is paid.
Loading of
electronic cash by customers generally involves transaction fees paid to the
card issuer.
The term "usage terms" herein denotes the specific conditions, provisions,
stipulations,
and fees relating to the process by which a customer obtains a specific
payment card and
subsequently obtains goods and services through the use of that payment card,
including
the use of any charge functions and electronic cash on that payment card.
Heterogeneous and Homogeneous Payment Schemes
The term "heterogeneous" herein refers to payment instruments for use in a
commercial environment, for which various payment, fee, and incentive schemes
cooperate or coexist. Charge card payment is generally heterogeneous, since
there are a
variety of different charge cards simultaneously available for use by
customers and
merchants. For example, a merchant may choose to accept three different charge
cards,
and notify customers by appropriate signs that these are accepted by him; a
customer
visiting this merchant and having one or more of the accepted cards, may
choose which
card to use for making payment. In contrast, the term "homogeneous" herein
refers to
payment instruments for use in a commercial environment, for which a single
payment,
fee, and incentive scheme exists. Conventional cash is homogeneous.
As described above, electronic cash also tends to be homogeneous, since the
very
essence of electronic cash is conceived by many as an alternative form of
conventional
cash. Therefore, electronic cash is usually issued only against payment with
either
conventional cash or directly from a bank account via a debit card, and the
merchant fee
is expected to be uniform to all issuers and very small, since for
conventional cash there
is no fee at all. This reality prevents competition and suppresses
entrepreneurial
initiatives, because there is no obvious way for banks and other financial
institutions to
realize a suitable profit solely by offering an electronic cash system to
consumers. That
5
CA 02347460 2007-07-23
is, the business case for electronic cash is unclear, especially in a highly-
competitive,
fragmented business environment such as the United States of America.
An Alternative Electronic Cash System
An alternative electronic cash and charge card system is described in U.S.
patent
5,744,787 by the present inventor (PCT publication WO 96/09562).
In this alternative system, smart
cards bearing both a charge function and an electronic cash purse are used to
pay at
improved automatic or manual points of sale, according to the following method
(for
demonstration, it is assumed that the smart card is allowed to use the charge
function for
transactions above $25, and that the smart card purse currently stores $10 of
electronic
cash):
1. if the payment is for an amount of $25 or more, payment is made via the
charge function (e.g. credit or debit);
2. if the payment is for an amount smaller than $10 (current stored value),
payment is made from the stored value in the smart card purse;
3. if the payment is for any amount smaller than $25 but larger than $10,
then:
= $25 is charged via the charge card, and,
= change of $25 less the payment amount is returned, in the fon~:n of
electronic cash, from the POS stored-value device to the customer
stored-value device.
It is shown in U.S. patent 5,744,787 that statistically, in a POS serving a
large
number of customers, the amount of electronic cash flowing into the POS as a
result of
transactions of type 2. equals in average the amount of electronic cash
flowing out of the
POS as a result of transactions of type 3. Therefore, priming the POS with a
moderate
amount of electronic cash, ensures uninterrupted operation without need for
replenishing
the electronic cash in the POS for the purposes of making change.
Limitations of Prior Art Electronic Cash Schemes
A serious limitation of the prior art schemes for electronic cash is that
electronic
cash as currently defined is not in harmony with the existing banking-oriented
6
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
account-based financial infrastructure, in which charge transactions figure
prominently,
and in which there are a variety of different, competing, charge function
brands.
First of all, electronic cash according to prior art implementations is seen
by
customers and merchants alike principally as a convenient replacement for
conventional
cash and therefore there is considerable resistance to associating electronic
cash with
usage fees of any kind (except perhaps with only minimal usage fees). As a
result,
financial institutions currently have little incentive to offer electronic
cash systems to
merchants and customers. At present, therefore, electronic cash can be
acquired only via
conventional cash or by direct account debit, where overhead is minimal.
Moreover, even if electronic cash could be associated with meaningful fees,
electronic cash must remain generic (i.e., brandless, just like conventional
cash), so a
common pool of prior art electronic cash would not work with different branded
charge
functions and their diverse fee structures. Some prior art payment cards allow
a customer
to reload the electronic purse at a loading device by conducting a debit
charge
transaction using a debit charge function on the payment card. However, as
just noted,
such payment cards cannot work with different brands of charge function, and
are not
available for reloading via a credit charge transaction. Prior art electronic
cash acquired
through different charge functions cannot be allowed to mix, because doing so
would
confuse the fees associated with the electronic cash. Avoiding this problem in
prior art
electronic cash systems would require a variety of different brands of
electronic cash to
match the different brands of the charge functions used by customers to
acquire the
electronic cash. But different brands of electronic cash would lead not only
to confusion
in the minds of customers and merchants, but would also present an
impenetrable barrier
to the interoperability of electronic cash among the different account-based
charge
functions in the marketplace. Without smooth interoperability, it is unlikely
that
electronic cash can achieve commercial success. Because of the low costs and
fees
associated with prior art electronic cash, it would require a huge critical
mass of
customers and merchants to sustain viable performance, and this necessary
critical mass
cannot be attained if the electronic cash infrastructure would be fragmented
by a variety
of incompatible brands of prior art electronic cash.
7
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
In effect then, the problem with prior art electronic cash systems is that in
order
to be practical electronic cash must remain brandless, while it is essential
to preserve the
brand identities of charge functions with which the electronic cash interacts.
This leads
to a major incompatibility of prior art electronic cash with the existing
account-based
charge functions that currently dominate the financial infrastructure.
These limitations of the prior art are overcome by the present invention.
8
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
OBJECT AND BRIEF SUMMARY OF THE INVENTION
The object of the present invention is to provide a heterogeneous electronic
cash
system, wherein electronic cash can be acquired against a variety of charge
function
brands, under a variety of fee and incentive schemes relating to loading and
settlement. It
is aimed at encouraging competition in multi-issuer environments and allowing
the
usage of credit cards, debit cards and cash to purchase electronic cash for
use in a unified
clearance and settlement environment. A key goal of the present invention is
to allow a
common generic electronic cash to function simultaneously across a variety of
distinct
charge function schemes, such that different charge functions can act as
acquisition
instruments for the same electronic cash. These different charge functions
incorporated
into different or shared payment cards can share a common stored value pool
without
conflict, and can make use of a common infrastructure for settlement of the
electronic
cash. That is, the present invention provides diverse charge functions with
interoperability. The present invention, however, permits the electronic cash
to maintain
a connection with the brand of acquisition instrument (the charge function)
used by the
customer to acquire the electronic cash, throughout the complete cycle from
acquisition
through settlement. In this way, the different charge function schemes may
interoperate
with electronic cash in the same commercial arena while preserving their own
individual
identities and fee structures.
In the system according to the present invention, generic (brandless)
electronic
cash can be acquired by a customer through a specific, branded charge
function, such as
with a familiar credit card or debit card. The electronic cash remains
generic, but is
associated for purposes of spending and settlement with the specific brand of
charge
function through which the electronic cash was acquired by the customer,
starting from
the time of loading onto the customer's payment card, through the time of use
to
purchase goods or services at a merchant's point of sale, and through the time
of
presentation for settlement by the merchant to a transaction processing agency
or
financial institution. This offers comrnercial benefits by allowing
independent charge
payment plans ("charge functions") to take advantage of a common electronic
cash while
maintaining separate transaction accounting in order to implement different
fee
structures, settlement terms, customer brand identities, and so forth. The use
of a generic
9
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
electronic cash lowers operating costs by allowing different brands of charge
function to
use a single financial infrastructure, and also simplifies payment transaction
procedures
at a merchant's point of sale, thereby reducing overhead. The present
invention
furthermore pennits these advantages to be realized with minimal change to the
existing
charge payment systems and their infrastructure.
The basis of the present invention is in conceiving each electronic cash
transaction as a fraction of a parent transaction which has been executed to
acquire this
electronic cash. Thus, for example, if a certain credit charge function
identified by the
brand "Brand A" has been used to acquire $25 of electronic cash (the "parent
transaction"), payment of $1 of this electronic cash (a "child transaction")
will be
considered as paying 1/25 of the parent transaction and will therefore be
considered as a
"Brand A" transaction. Furthermore, child transactions relating to the same
parent
transaction brand can optionally be combined to determine the related fees and
incentives ("settlement terms"); for example, a merchant collecting a total of
$200
electronic cash from various customers who have used the "Brand A" charge
function to
purchase electronic cash, would submit this $200 for settlement with an
acquirer under
the settlement terms relating to $200 settlement of the credit charge function
"Brand A",
rather than as a group of the individual transactions. This illustrates the
principle that a
charge transaction used to acquire electronic cash is broken into smaller
pieces of
electronic cash to allow a charge function to be cost-effective in making
small purchases,
and then these small pieces, quantified by the electronic cash, can be
consolidated into
larger units for cost-effective settlement.
Another aspect of the present invention relates to the integrity and
accounting of
the system. In order to avoid uncontrolled intermixing of electronic cash in a
way which
will interfere with the identification of the parent transaction, two
alternative approaches
are presented:
1. isolated flow, wherein the flow of electronic cash is restricted:
Electronic
cash is allowed to flow into electronic purses on payment cards only from
bank computers and only against payment via a charge function.
Electronic cash is allowed to flow out of electronic purses on payment
cards only to points of sale. And electronic cash is allowed to flow from
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
points of sale only to settlement systems. Optionally, card-to-card transfer
may be also allowed among payment cards supporting the same brand of
charge function. The transfer of electronic cash associated with one brand
of charge function is not permitted to flow into to a payment card which
does not support that brand.
2. zero average flow, wherein electronic cash circulates between electronic
purses and points of sale and between points of sale and bank computers,
within the framework of the above-mentioned previous invention of the
present inventor, described in U.S. patent 5,744,787.
Payment Cards, Points Of Sale, Loading Devices, and Settlement Systems
The term "payment card" or "card" will be used hereinafter relating mostly to
any payment instrument personal to a customer and including both at least one
charge
function (identifying and authorizing transactions with a remotely chargeable
account of
a customer, such as a bank account or credit account) and at least one stored-
value
function ("electronic purse"). Each charge function of a payment card is
associated with
a brand identifiable via a machine-readable code (i.e., a charge function
brand can be
read automatically by a device such as a point of sale without the need for
manual input).
A payment card can be implemented in the form of a plastic, credit-card-sized
card; on a
personal computer; in a cellular telephone; in a control box of a TV set; etc.
In addition, a payment card according to the present invention contains at
least
one electronic purse for holding electronic cash. The electronic cash itself
is brandless,
but the electronic purse contains a contents brand ID register which
associates the
electronic cash contained in the electronic purse with a specific charge
function brand. In
one embodiment of the present invention, the contents brand ID register of an
electronic
purse is permanently associated with a predetermined brand (for example, a
simple brand
identifier), so that any electronic cash loaded into the electronic purse will
thereby
become associated with the corresponding charge function brand. In another
embodiment of the present invention, the brand associated with the contents
brand ID
register of an electronic purse may be changed, so that the charge function
brand
associated with the electronic cash contained in the electronic purse can be
altered or
updated as necessary.
11
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
The term "point of sale" here denotes any device that can interface with a
payment card via a contact, contactless or remote communication link. Upon so
interfacing, a point of sale can accept payment from a payment card, activate
a charge
function, transfer electronic cash, and so forth. A point of sale accumulates
received
electronic cash in an included secure storage device ("electronic cash
drawer"), and may
also accumulate charge transactions done off-line in another included storage
device
("electronic safe".)
The term "loading device" herein denotes any device which can add electronic
cash to an electronic purse of a payment card, against a charge function under
"loading
terms" (e.g., loading transaction fees) specific to the charge function brand.
The term "settlement system" herein denotes any device or system operated by
an acquirer, a card issuer, or a transaction processing agency, to
communicate, directly
or indirectly, with points of sale for transferring charge orders and
electronic cash for
settlement. Examples of settlement systems include, but are not limited to
computers,
computer systems, and computer networks, including prior art devices and
systems of
this sort.
Brandless Electronic Cash
In the system according to the present invention, electronic cash itself never
has
any brand. Brands are an attribute of charge functions only. However,
electronic cash,
when stored in an electronic purse of a payment card or in an electronic cash
drawer of a
POS, is associated with the specific brand of charge function by which the
electronic
cash was acquired. This temporary association is maintained for the electronic
cash
throughout all transactions and in all stored-value devices in which the
electronic cash is
stored until the electronic cash ultimately returns to the original issuing
financial
institution. At this point the electronic cash is returned to a common pool
and is
dissociated from the brand. When later reissued by a financial institution,
the electronic
cash becomes again associated with whatever particular brand of charge
function was
used by the customer to make the most recent acquisition.
As noted previously for electronic purses, other stored-value devices which
hold
electronic cash (e.g., electronic cash drawers) may be temporarily or
permanently
12
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
associated with a brand. Embodiments of the present invention illustrate both
permanent
and temporary association of a stored-value device with a brand.
Therefore, according to a preferred embodiment of the present invention, there
is
provided a heterogeneous electronic cash payment system having at least two
different
brands of charge function, each brand having loading terms and settlement
terms, the
heterogeneous electronic cash payment system including: (a) a plurality of
payment
cards, each payment card belonging to a customer, each payment card having at
least one
charge function to a remotely chargeable account of the customer, and at least
one
electronic purse operative to containing electronic cash and having a contents
brand ID
register for associating a charge function brand with the electronic cash; (b)
at least one
loading device operative to interfacing with a specified payment card, adding
electronic
cash to the electronic purse of the specified payment card against payment
from a
selected charge function according to the loading terms of the brand of the
selected
charge function; (c) at least one point of sale having a transaction record
and an
electronic cash drawer for storing electronic cash, the point of sale
operative to
interfacing with a presented payment card of the plurality of payment cards,
receiving an
electronic cash payment from the presented payment card, reading the brand of
a
predetermined charge function of the presented payment card, depositing the
electronic
cash payment in the electronic cash drawer, and recording the electronic cash
payment
along with the brand of a predetermined charge function onto the transaction
record; and
(d) a settlement system operative to settling electronic cash payments
according to the
settlement terms of the brands of charge functions associated with the
electronic cash
payments.
Also, according to another embodiment of the present invention there is
provided
a system as described above, wherein at least one of the loading devices is
contained
within an enhanced point of sale, the enhanced point of sale being operative,
upon
interfacing with a presented payment card chosen for paying a payment sum
according to
a specified charge function selected from the at least one charge function,
the loading
terms stipulating a predetermined reload sum, to automatically determine
whether to: (i)
charge the predetermined reload sum to the specified charge function; (ii)
return to the
electronic purse of the payment card as change an amount of electronic cash
equal to the
13
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
difference between the predetermined reload sum and the payment sum; and (iii)
record
the payment sum and the brand of the specified charge function onto the
transaction
record.
Moreover, according to the present invention there is provided a system as
described above, wherein the settlement system comprises: (i) a merchant
computer
owned by a merchant operative to collecting and submitting charge slips,
transaction
records, and electronic cash; (ii) a settlement network operative to receiving
charge slips
and issuing conventional monetary payment therefor; (iii) an electronic cash
pool
operative to storing electronic cash and exchanging electronic cash for
conventional
monetary payment; and (iv) an acquirer computer operative to receiving charge
slips and
electronic cash; making conventional monetary payment to the merchant;
exchanging
electronic cash with the electronic cash pool for conventional monetary
payment; and
submitting charge slips to the settlement network in exchange for conventional
monetary
payment.
According to the present invention there is also provided a method for
managing
a heterogeneous electronic cash environment, the environment having a
plurality of
charge function brands, each brand having loading terms and settlement terms,
the
environment further having a plurality of payment cards, each payment card
having an
electronic purse and a contents brand ID register, the environment further
having at least
one loading device and at least one point of sale with an electronic cash
drawer and a
transaction record, the environment further having a settlement system, the
method
including the steps of: (a) interfacing a selected payment card to a loading
device,
initiating a charge transaction with a charge function of the selected payment
card,
transferring electronic cash into the electronic purse of the selected payment
card
according to the loading terms for the brand of the charge function, and
setting the
contents brand ID register of the selected payment card to the brand of the
charge
function; (b) interfacing a presented payment card to a specified point of
sale,
transferring an electronic cash payment from the electronic purse of the
presented
payment card to the electronic cash drawer of the specified point of sale, and
recording
the brand set in the contents brand ID register of the presented payment card
onto the
transaction record of the specified point of sale; and (c) settling the
electronic cash
14
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
payment through the settlement system according to the settlement terms of the
brand
recorded onto the transaction record.
Furthermore according to the present invention there is additionally provided
a
method for associating a new charge function brand with electronic cash
returned as
change from a purchase transaction to a multiple charge function payment card
having a
single electronic purse, the purchase transaction having a sum and being made
via the
new charge function brand, the single electronic purse containing a balance of
electronic
cash associated with a previous charge function brand, the single electronic
purse having
a contents brand ID register indicating the charge function associated with
the electronic
cash contained in the single electronic purse, the method including the steps
of: (a)
paying the balance of electronic cash in the single electronic purse toward
the sum of the
purchase transaction, the payment being associated with the previous charge
function
brand; (b) charging a predetermined minimum charge transaction amount to the
new
charge function brand; (c) returning, as change, an amount of electronic cash
to the
electronic purse equal to the predetermined minimum charge transaction amount
plus the
balance less the sum of the purchase transaction; and (d) setting the contents
brand ID
register to indicate the new charge function brand.
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
BRIEF DESCRIPTION OF THE DRAWINGS
The invention is herein described, by way of example only, with reference to
the
accompanying drawings, wherein:
Figure 1 shows several different brands of payment cards in a heterogeneous
environment involving isolated flow.
Figure lA shows a detailed view of a heterogeneous card environment involving
isolated flow.
Figure 2 shows the transaction flow of electronic cash and charges involving
isolated flow.
Figure 3 shows the contents of a log file for transactions in a heterogeneous
environment involving isolated flow.
Figure 4 shows a heterogeneous environment which returns electronic cash as
change and requires no separate reloading terminals, involving zero average
flow.
Figure 4A shows a detailed view of the heterogeneous environment which
returns change and requires no separate reloading terminals, involving - zero
average
flow.
Figure 5 is a flowchart showing the operation of an automatic change manager
for zero average flow.
Figure 6 shows the flow of electronic cash, change, and charges in the
environment of Figure 4 and Figure 5, involving zero average flow.
Figure 7 shows the transactions of a point of sale in the environment of
Figure 4,
Figure 5, and Figure 6, involving zero average flow.
Figure 8 shows a log file corresponding to the transactions shown in Figure 7
in a
heterogeneous environment involving zero average flow.
Figure 9 shows the settlement for the transactions of Figure 7 and Figure 8.
Figure 10 shows the settlement of transactions from issuer to acquirer.
Figure 11 shows the organization of an embodiment of a multiple charge
function
payment card suitable for use in a heterogeneous environment involving
isolated flow.
Figure 12 shows the organization of another embodiment of a multiple charge
function payment card suitable for use in a heterogeneous environment
involving zero
average flow.
16
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
Figure 13 is a flowchart showing the additional operations of an automatic
change manager for a multiple charge function payment card in an environment
of zero
average flow.
Figure 14 shows advanced accounting features of a POS regarding the handling
and settlement of charge transactions in a heterogeneous environment.
Note: for brevity in the drawings and descriptions, electronic cash is
sometimes
denoted as "e-cash", an electronic purse is sometimes denoted as a "purse",
and a
payment card is sometimes denoted as a "card".
17
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
DESCRIPTION OF THE PREFERRED EMBODIMENTS
Figure 1 describes a first preferred embodiment, of the case involving
isolated
flow, with three groups 3, 4, 5 of different payment cards having different
charge
function brands denoted as "Card-1", "Card-2" and "Card-3" (in this
embodiment, a
payment card has a single charge function, so that the charge function brand
can be
associated with the payment card as well as with the charge function). A
payment card
interfaces with a loading device 2 to add value from the respective account in
a financial
institution computer 1. Payment is made with a payment card in a POS 6, and
POS 6
communicates with a transaction processing and a settlement computer 7, which
further
communicates with computer 1, to process and settle the transactions which
have been
made via the charge functions and electronic purses of the payment cards. It
will be
recalled that in isolated flow, electronic cash moves within the system only
from
payment cards 3, 4, and 5 to POS 6 and then to settlement system 7. There is
no local
circulation of the electronic cash, only a global circulation via financial
institution
computer 1. Because of this it is relatively easy to keep the different flows
of electronic
cash corresponding to different charge function brands separate as the
electronic cash
flows.
Figure 1A is a more detailed description of the system of Figure 1. A payment
card 8 corresponds to any of cards 3, 4, or 5 (Figure 1). Payment card 8
contains an
electronic purse 8-1 having an electronic cash balance in a register 8-2, and
also contains
a charge function 8-6 associated with an account ID 8-3. There is a brand
identifier 8-4,
which serves to identify the charge function brand of payment card 8 through
an external
interface 8-5, which also handles all communication of payment card 8 with
points of
sale as well as a loading device 2. In this embodiment, brand identifier 8-4
serves as the
contents brand ID register for electronic purse 8-1. A POS 6 contains a card
interface 6-5
to communicate with payment cards as well as a customer interface 6-7 to
communicate
with a customer 13, and a processor interface 6-11 to communicate with a
settlement
system 7, which in turn communicates with financial institutions 1. Within POS
6, there
is a transaction manager 6-6, which determines the appropriate means of
handling the
current transaction. If the purchase amount exceeds a predetermined minimum
charge
transaction amount (for example, $25), transaction manager 6-6 initiates a
charge
18
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
transaction from charge function 8-6 for account ID 8-3 of payment card 8, and
handles
this charge via a charge transaction unit 6-9. If the purchase is less than
the
predetermined minimum charge transaction amount and there is sufficient
electronic
cash for payment sum 6-2 (input by merchant 12), transaction manager 6-6
receives
payment in electronic cash from electronic purse 8-1 and puts this electronic
cash in an
electronic cash drawer 6-4, handling this transaction by an electronic purse
payment unit
6-3. Otherwise, if the purchase is less than the predetermined minimum charge
transaction amount but there is not sufficient electronic cash for the
purchase amount,
transaction manager 6-6 declines the transaction. Note that POS 6 maintains an
internal
log file 6-1, listing all transactions, and has an electronic safe 6-8 for off-
line charge
transactions. In this example and in further following examples, a log file is
a special
case of a more general transaction record. In the general case, a "transaction
record" is
any record of the transactions maintained by a device (such as a point of
sale), including,
but not limited to a sequential data file such as a log file, or a cumulative
register
containing a net total amount of the applicable transactions. Depending on the
nature of
a transaction record, the recording of a payment onto the transaction record
can involve
operations including, but not limited to, writing data into a sequential data
file, and
updating a cumulative register. Financial institutions 1 has a set of credit
accounts 1-1,
bank accounts 1-2, and electronic cash pools 1-3, which store electronic cash
that is not
in circulation. Electronic cash from electronic cash pools 1-3 flows into
loading device 2
for reloading payment card 8.
When loading payment card 8 at loading device 2, the value of electronic cash
deposited into electronic purse 8-1 is charged to a charge function. Normally,
this charge
function will be the same charge function 8-6 with the same account ID 8-3
that is
contained with payment card 8, but it is also possible to use a different
payment card
with a different account ID, provided that the different payment card has the
same brand
of charge function as the payment card that is being loaded.
In the examples which follow, the predetermined minimum charge transaction
amount is illustrated as being $25. Different amounts are possible.
Figure 2 describes the transaction flow within the system of Figure 1 and
Figure
lA. A charge payment 21 at a financial institution 20 is used at a loading
device 2 to
19
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
load electronic cash 22 into a card 23. Card 23 then pays at a POS 26 with
electronic
cash 24 or charge 25. POS 26 communicates with transaction processing and
settlement
computer 7 to settle with financial institution 20 its electronic cash 27 and
charges 28.
Figure 3 describes the contents of log file 6-1 of Figure 1A, which is
submitted
by POS 26 to financial institution 20 for accounting and fee calculation.
Figure 3 shows
20 out of 500 sale transactions, whose values (column 32) are either <$25 (an
example
of a predetermined minimum charge transaction amount; purchase sums less than
this
are small transactions paid by electronic cash), or _ $25 (larger payments
made by the
charge function). Then, columns 33-38 present the transactions according to
the charge
function brand used and the transaction value (fee-1 relates to transactions
<$25 and
fee-2 relates to higher values). At the bottom of Figure 3, in a Total row 31,
the numbers
(including those from transactions # I 1 through #490 which are not shown) are
added,
thus allowing the merchant to claim reimbursement from three different charge
function
brands, potentially under different fee schemes, and even separating, for each
charge
function brand, between fees for smaller and higher payments.
It would be noticed that, for preserving the integrity of the described
embodiment, electronic cash is not allowed to be transferred between cards
having
charge functions of different brands, and electronic cash is allowed to move
from points
of sale only toward settlement computer 7 of Figure 1 and Figure 1 A.
Figure 4 describes an alternative embodiment of the present invention,
relating to
U.S. patent 5,744,787. Here the three charge function brands 3, 4 and 5 are
communicating with a POS 41 under the procedure of Figure 5, and there is no
need for
separate loading devices, because POS 41 is an enhanced POS which contains a
loading
device.
Figure 4A is a detailed description of the embodiment of Figure 4. In many
regards, the system is similar to that illustrated in Figure lA, except as
noted here. For
example, financial institution 1, settlement system 7, and payment card 8 of
Figure 4A
are identical to those of Figure IA. Loading device 2 of Figure 1 and Figure
lA is absent
from Figure 4 and Figure 4A, because the system of Figure 4 and Figure 4A
requires no
loading device; reloading of payment card 8 is accomplished by the local
circulation of
electronic cash from POS 41 to payment cards 3, 4, and 5 (Figure 4) or payment
card 8
CA 02347460 2001-04-12
WO 00/22556 PCT/[L98/00497
(Figure 4A). POS 41 contains many elements which correspond to POS 6 of Figure
1A,
but there are some differences. In particular, an automatic transaction
manager 41-6
operates according to the procedure of Figure 5 and has an additional function
over that
of Figure IA, an electronic purse loading unit 41-10. It is electronic purse
loading unit
41-10 which performs the function of loading device 2 in Figure lA.
Figure 5 describes the operation of automatic transaction manager 41-6 of
Figure
4A. Upon presentation of a payment card, the automatic transaction manager
checks at a
decision point 5-3 whether to accept or reject the payment card based on the
payment
card's charge function brand. Figure 5 also shows how POS 41 automatically
selects
how payment is to be made by the payment card. In making the selection,
automatic
transaction manager 41-6 compares the payment sum ($SUM) against a
predetermined
minimum charge transaction amount ($MINCT). This predetermined minimum charge
transaction amount is taken as a predetermined reload sum. upon which is based
the
amount of electronic cash that will be returned as change to reload the
payment card. In
the examples which follow, $MINCT and the predetermined reload sum are $25.
Automatic transaction manager 41-6 selects whether to charge the payment sum
to the
charge function of the payment card, take the payment sum from the electronic
cash
stored in electronic purse 8-1, or whether to receive $25 via the charge
function and
return the change ($25 minus the payment sum) to the electronic purse. When
the POS
selects to return change to the payment card, electronic cash is taken from
electronic
cash drawer 41-4 of POS 41 (Figure 4A).
The following statistical aspects are important:
After some time of usage, we can reasonably expect that any payment card will
carry in its electronic purse a random amount of electronic cash, uniformly
distributed in
the range of 0 to $25 (an example of the predetermined minimum charge
transaction
amount). When using such a payment card to pay any small amount of $SUM < $25,
there are two possibilities:
(1) If $SUM is larger than the current on-card electronic change purse
balance (the probability of this situation is $$~ ), then an electronic
change of $25 - $SUM will be drawn from the POS and returned to the
21
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
electronic purse of the card. Thus, Ee,nge, the expected value of electronic
cash returned as change from the POS to the payment card's electronic
purse is:
Echange $SUM - { $25 )* ($25 - $SUM) (1)
(2) If $SUM is equal to or smaller than the current random value
stored in the payment card's electronic purse (the probability of this
1$SUM
situation is $25 ), then the amount $SUM will be deducted from the
payment card's electronic purse and transferred to the POS; thus,
Epayment, the expected value of electronic cash transferred in payment
from a payment card to the POS is:
Epayment = (1- $SUM $25 )*$SUM (2)
Basic algebra shows that the magnitude of Echange in Equation (1) equals the
magnitude of Epay111eõt in Equation (2). This means that for any POS,
electronic cash flow
from electronic purses to this POS during a regular business cycle equals on
average the
amount of electronic cash returned as change from the POS to payment cards.
Thus
secure, flawless, off-line operation is guaranteed.
Figure 6 describes the flow of electronic cash and charges with the embodiment
of Figure 4 and Figure 5. Electronic cash 50 is a one-time initial preload of
a card 23
from financial institution 20. After this preload there are no more direct
transactions
between card 23 and financial institution 20. A charge 61 is made either for
payments
_ $25 (step 5-10 or step 5-7 in Figure 5). An electronic cash payment 62 from
cards to
POS is made in step 5-9 (Figure 5), while electronic cash is returned as
change 63 via
step 5-8 (Figure 5). As explained above in Equation (1) and Equation (2),
electronic cash
amounts flowing via payment 62 and change return 63 are statistically equal,
thus
electronic cash is merely revolving between cards and POS, while the carrier
of payment
value from cards to POS is a charge transaction 61 alone (except for minor
statistical
fluctuations). Charges 67 are transferred from a POS 66 to financial
institutions 20 via
settlement computers, while electronic cash revolves, after initial priming
through 64,
through positive and negative adjustments 64 and 65 at the end of each
business cycle, to
22
CA 02347460 2001-04-12
WO 00/22556 PCT/1L98/00497
refresh a priming amount predetermined for each POS according to the typical
sizes and
number of transactions. It would be appreciated that, in a 1 million card
system, 25
million dollars (12.5 million on average in electronic purses, and 12.5
million in
merchant and bank stored-value devices), revolving in cycles 62 - 63 and 64 -
65, will
enable revenue flow 100 times larger per year (assuming each card is used for
$200
purchases/month,) actually flowing through conventional charge transactions 61
- 67.
Thus the very essence of electronic cash is redefined in this scheme: here
electronic cash
is a means of cost-effectively splitting relatively large conventional charge
transactions
into small pieces for micro-payments, rather than being a new and problematic
monetary
creature.
Figure 7 describes the operation of a POS in the embodiment of Figure 4 to
Figure 6 through 500 random transactions, out of which 20 are shown and 480
(#11
through #490) have been hidden because of the page space. The POS has been
initially
primed with $750, to compensate for statistical fluctuations. Column 71 shows
purchase
prices, selected randomly between 500 and $30, and made via three charge
function
brands shown in column 74. Columns 75 through 77 show charges, sorted out
according
to the respective charge function brand, to those transactions which are
charge
transactions. In sale #1, payment of $23.16 could not be made from a purse
containing
only $17.48, and therefore $25 has been charged to the Card-1 brand charge
function,
and $1.84 has been returned as change to the card's electronic purse. The
change has
been deducted from the value in the POS electronic cash drawer (column 78)
thus
leaving there an amount of $748.16. Sale #2 has been deducted $7.39 (column
71) from
a card's electronic purse and added to the electronic cash drawer of the POS
(column
78), with no charge transactions (columns 75 through 77) being involved. Sale
#8, being
larger than $25, is made directly to the charge function, without the
electronic purse
being involved. At the bottom line we see the summary of the 500 transactions
(including the hidden transactions #11 through #490); the total is $7537.21,
which have
been paid by $1574.55, $2834.19 and $3047.65 via charge function brands Card-
1,
Card-2 and Card-3, respectively, and by $80.83 of excessive electronic cash 79
in the
electronic cash drawer (column 78), which started the business cycle with $750
and
ended up with $830.83.
23
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
Figure 8 shows the log file which the merchant sees as a result of the
transactions
of Figure 7. The same payment sums of column 71 (Figure 7) are shown in column
82.
However, electronic cash transactions and automatic change are not shown at
all. Each
payment is categorized into one of columns 82 through 87, according to the
respective
card brand and the transaction size ("fee 1" for <$25 and "fee 2" for _ $25.)
Thus the
merchant will now claim the bottom-line sums, under six different fee schemes.
It is
noted that the total sum submitted to each charge function brand (e.g.,
$1072.90 + $474.55 = $1547.45, see columns 82, 83) slightly deviate from the
sums
collected via the respective charge function brand ($1574.55, column 75 in
Figure 7).
Figure 9 shows how the settlement computer completes accounting for the
transactions of Figure 7 and Figure 8 (i.e., regarding a single POS). For
example, when
communicating with the computer of Card-1 brand, customer card charges 91 of
$1,574.55 stand against merchant claims of $1072.90 and $474.55 on which
merchant
fees are to be paid according "fee 1" and "fee 2" fee schemes, respectively.
However, as
the total card charges 91 exceeds the total merchant claims 92 and 93 by
$27.10, this
sum is transferred, in electronic cash, from the computer of Card-1 brand to
the
settlement computer. It would be emphasized that commerce of over $1500, using
conventional charge schemes and not explicitly involving any electronic cash,
has been
enabled by $27.10 technical adjustment using electronic cash. In the case of
Card-2 and
Card-3, the electronic cash adjustment is positive (i.e., electronic cash is
transferred from
the settlement system to the respective brand computer). As can be seen, the
three
adjustments of row 94 add-up to $80.83, which is exactly the excessive amount
taken
from the POS (column 78 of Figure 7) to return the POS to the $750 baseline.
It would be appreciated that in the embodiment of Figure 4 through Figure 9,
the
entire notion of electronic cash is actually transparent to both the customer
and the
merchant. None of them is involved in handling electronic cash, and for both
the
electronic cash is merely an enabler to extend existing credit and debit
services. Thus
existing mindsets and fee schemes allow to adopt the operational and
accounting scheme
in a seamless, straightforward manner, to benefit customers, merchants, and
bankers
involved in card payment for small transactions.
A closer look at Figure 6 through Figure 9 shows the following:
24
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
1. The merchant sees on the log file (Figure 8) all his sales, with each sale
against a charge function brand used to make the payment and also
(optionally,) a separation between smaller and larger sales. This list is
submitted for claiming the respective totals, minus the agreed fees, from
the respective card brand issuers. This is the normal way of doing
business with charge cards. Thus, the entire concept of electronic cash
actually becomes invisible to the merchant!
2. The card issuer sees four numbers at the bottom line (Figure 9):
= The total 91 of all charges of $25 or more made to customer
cards. These are conventional charges, processed by the regular
processing means and under standard customer-issuer terms.
(actually, the issuer receives the details of each transaction for
processing.) Optionally, the charges of $25 for reloading the
electronic purse with change can be separated from the charges of
$25 or more for direct payment via the charge card, if different
customer fees are involved.
= The smaller and higher merchant claim totals 92 and 93, to be
paid to the merchant after fee deduction; this is unconventional, new
feature as the actual payment has been made with either electronic
cash or $25 charge and electronic cash returned as change.
However, the concept of electronic cash as a fraction of charge
transaction (see the brief summary) explains and justifies this
approach. There are small differences, negative or positive, between
the customer charges and the merchant claims; these are statistical
fluctuations of the zero average, and they compensate over time and
over a large number of points of sale. Thus, merchant claims
actually equal customer charges, balancing the system integrity as a
whole.
= an electronic cash adjustment 94, which closes the accounting
loop locally and temporarily, to compensate for the statistical
fluctuations from the zero average.
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
3. It can be seen, that the total adjustment 95 made among the various
issuers by the transaction processor ($80.83 in this example) is small
compared to the total revenues involved, and is exactly the same as the
adjustment amount 79 (Figure 7) made at the POS for returning the POS
to the baseline of $750 toward the next business cycle. Thus, the
settlement transaction is perfectly balanced.
4. It should be noted that, while settlement transactions are charge function
brand specific to the penny and are settled under conventional charge fee
schemes with each charge function issuer, the electronic cash stored and
flowing through the system for card preloading, POS priming, payment,
change, POS adjustment and settlement adjustment, is actually brandless.
Thus a common pool of electronic cash, flowing freely among
stored-value devices as needed, enables brand-separated commerce
(possibly under different fee schemes) while the system's integrity and
flawless accounting are maintained. This is a major achievement of the
present invention and its major scope.
Settlement in an Issuer-Acquirer Environment
In many card payment setups, settlement is divided between acquirers, which
handle the merchant side, and issuers, which handle the customer side. In such
a typical
environment, acquirers sign merchants on contracts which specify which charge
function
brands a merchant agrees to accept and under what fee terms, while issuers
sign
customers on their charge function usage terms and fees. On settlement in such
environments, the merchant submits the credit and debit slips to his acquirer,
which pays
the merchant the total slip amount minus a "Merchant Service Charge"
(sometimes
called "the Merchant Discount"), e.g., a percentage of the total, calculated
separately for
each fee scheme which has been accepted by the merchant. The acquirer then
submits
these slips, via a complex and sophisticated settlement network, to the
various issuers.
Each respective issuer then returns to the acquirer the total of the received
slips, minus
an "Interchange Fee", which is substantially smaller than the corresponding
merchant
service charge. Thus, the issuer revenue includes the interchange fee, while
the acquirer
26
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
revenue includes the difference between the merchant service charge and the
interchange
fee.
The present invention, in one of its variations, aims at minimizing the
changes
needed to be made in the acquirer-issuer settlement network and procedures.
This
variation is described herein in reference to Figure 10 in addition to Figure
9.
Figure 10 shows that at the end of the business cycle, a merchant computer 100
communicates with an acquirer computer 102 for settlement. Merchant computer
100
can be a single POS, or a merchant's office computer which collects charge
slips and
electronic cash, and submits them along with transaction records for
settlement.
Merchant computer 100 may also be able to consolidate charge slips, electronic
cash,
and transaction records for a plurality of merchant's POS. The discussion
below focuses
on a single fee scheme F#1 for small purchases, for instance Fee 1 of Card-1
of Figure 9.
Relating to fee scheme F#1, merchant computer 100 presents to acquirer
computer 102 data file 101, which includes: item 1O1C - the consolidated claim
for an
amount $C = $1072.90 (Figure 9) which is based on actual small sales made
according
to fee scheme F# 1; item 101 S- the charge slips collected from change
transactions
(step 5-8 in Figure 5), whose total is $S = $1100.00 = $1574.55 - 474.55
(Figure 9); and
item lOlE - electronic cash adjustment of $E =-27.10 (Figure 9). Note that
data file
101 can be a summary or consolidation of the transaction records from the
merchant's
points of sale. In this context, a "computer" such as merchant computer 100 or
acquirer
computer 102, can be any system, device, or set of devices, including, but not
limited to
a conventional computer or a computer network, which is capable of presenting
and
accepting data files as described herein.
As shown in Figure 10, acquirer computer 102 receives charge slips, electronic
cash, and claims from merchant computer 101, and makes conventional monetary
payments to the merchant based on the amount $C of the claims, less a merchant
service
charge.
According to the rules and mechanisms described herein, the system maintains
$C=$S+$E (3)
That is, merchant claims are paid for by slips and by electronic cash.
Conversely,
the electronic cash involved in the settlement is:
27
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
$E = $C - $S (4)
According to an embodiment of the present invention, the acquirer settlement
107 with the merchant is based exactly on actual sales $C, i.e., the merchant
receives to
his bank account 108 $C minus the appropriate merchant service charge. To
perform
acquirer settlement, acquirer computer 102 initiates transactions, directly or
indirectly
with merchant, optionally via merchant bank account 108, in order to make a
conventional monetary payment to the merchant. For example, acquirer computer
102
could simply send the merchant a check. The acquirer settlement 105 with the
F# l
issuers via settlement network 106 is based on normal processing of F#1 slips,
conforming to exiting networks and procedures, thus yielding for the acquirer
the total
value of slips $S minus the interchange fees on these slips. Also, in an
adjustment flow
103 the acquirer settles with a central electronic cash pool 104 the amount
(positive or
negative) of adjustment $E, which is made by conventional monetary payment.
Electronic cash pool 104 stores electronic cash and exchanges electronic cash
with
acquirer computer 102 for conventional monetary payment.
It can be easily seen that the merchant faces an acceptable fee scheme
according
to his actual sales, while the issuer collects acceptable, "normal" fees based
on the
submitted slips. Also, the settlement process according to the present
invention makes
the most of existing settlement networks 106. Settlement network 106 receives
charge
slips totaling $S from acquirer computer 102 and returns a conventional
monetary
payment for the charge slips, in the amount $S minus the interchange fee, to
acquirer
102. It is the responsibility of settlement network 106 to settle payment of
the charge
slips with the holders of the payment cards. In this regard, settlement
network 106 can be
a current "conventional" charge settlement network according to the prior art.
The main difference is with the acquirer fee. Based on F#1 slips, in the
previous,
conventional system an acquirer would receive from an issuer the amount
$Aconventional
$Aconventional - $S - I($S) (5)
where I($) is the interchange fee on $S.
Furthermore, according to the conventional system, the acquirer pays the
merchant $Mconventional
$Mconventional - $S - D($S) (6)
28
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
where D($S) is the merchant service charge on $S.
According to the embodiment under discussion, the acquirer collects from
issuers
the same amount as before ($Aconventional)~ but pays the merchant $Msettle=
$Mgettle = $C - D($C) (7)
and receives an adjustment amount of $E in electronic cash. Both $C, D($C),
and
$E are as previously defined. The net fee remaining with the acquirer in the
conventional
scheme, denoted herein as $Rconventional~ is:
$Reonventional = D($S) - I($S) (8)
and according to the embodiment of the present invention the net fee remaining
with the acquirer, denoted herein as $Rsettle is:
$kttle = D($S) - I($C) (9)
The difference between the acquirer's conventional net fee and the acquirer's
net
fee according to the present invention is:
$Rconventional - $-settle - I($C) - I($S) (10)
In a fixed percentage-based fee scheme, this is:
$Rconventional - $Rsettle - I($C - $S), (11)
and, using Equation (4), this is:
$Rconventional - $Rsettle - I($E)= (12)
In other words, the difference between the conventional net fee and that
according to the present invention is the interchange fee calculated on $E,
where $E is
the amount presented at electronic cash pool 104 for adjustment. $E (made in a
conventional monetary payment) can be negative or positive, and statistically
averages to
zero.
Thus in the embodiment under discussion, the acquirer collects fees which
deviate slightly from the "normal" fees collected according to slips.
Sometimes this
small deviation will be positive and at other times negative so that the
average is zero.
One approach for handling these deviations is simply to accept them, since
statistically
they have no net effect. An alternative approach is in recording electronic
cash
adjustments with system electronic cash pool 104 along with the respective
merchant
service charges, and creating a mutual inter-acquirer fee adjustment
mechanism, to
compensate for such deviations.
29
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
Multiple Charge functions on a Single Payment Card
In another embodiment of the system according to the present invention, a
payment card known as a "multiple charge function payment card" contains a
plurality
of different brands of charge functions. For example, a single such payment
card might
have both a credit and debit charge function. In such a case, the customer
would select
which of the various charge functions to use for a particular purchase
(provided, of
course, that the merchant honors the chosen charge function). Continuing with
this
example, the customer might wish to make a $50 purchase using the payment
card's
debit charge function, but might wish to make a $500 purchase using the
payment card's
credit charge function, even though there might be a sufficient balance in the
debit
account to cover the purchase.
Multiple charge function payment cards can be used in a system of isolated
flow
(Figure 1A, Figure lA, Figure 2, and Figure 3) or in a system of zero average
flow
(Figure 4, Figure 4A, Figure 5, Figure 6, and Figure 7).
Figure 11 illustrates an embodiment of a multiple charge function payment card
which is suitable for use in a system of isolated flow according to the
present invention.
Multiple charge function payment card 200 contains an external interface 200-
10, and a
plurality of branded charge functions illustrated as 200-1 and 200-5, which
respectively
have account ID 200-2 and account ID 200-6; and which respectively have
electronic
purse 200-3 with electronic cash balance 200-4, and electronic purse 200-7
with
electronic cash balance 200-8. The ellipsis (...) indicates that additional
charge functions
can also be present on payment card 200.
When used in a system of isolated flow, multiple charge function payment card
200 is loaded with electronic cash at loading device 2 (Figure 1 and Figure
1A)
according to the brand of the desired charge transaction selected by customer
13 (Figure
1 A). For example, a customer might usually wish to reload the payment card
with
electronic cash using a debit charge transaction, but may occasionally desire
to reload
the payment card with electronic cash using a credit charge transaction. At
the time of
loading the multiple charge function payment card with electronic cash, the
electronic
cash would be Brand 1 or Brand n (in Figure 11) and would be placed into
electronic
purse 200-3 or electronic purse 200-7, respectively (Figure 11). Thereafter,
the electronic
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
cash in electronic purse 200-3 would be associated with Brand 1, and the
electronic cash
in electronic purse 200-7 would be associated with Brand n. Furthermore, as
the
electronic cash flows (Figure 2) from payment card 23 to POS 26 and to
financial
institution 20, this association of electronic cash with the particular brand
by which the
loading was accomplished is maintained by all devices which perform
transactions with
the electronic cash. Note that in the embodiment of Figure 11, each electronic
purse has
an implicit contents brand ID register in its brand identifier. That is, the
contents brand
ID register of each electronic purse is permanently assigned for the payment
card.
Figure 12 illustrates another embodiment of a multiple charge function payment
card 300 for use in a system of zero average flow according to the present
invention.
Similar to payment card 8 in Figure 4A, payment card 300 contains an external
interface
300-10, and a single electronic purse 300-1 which has an electronic cash
balance 300-2.
In addition, however, electronic purse 300-1 also has an explicit contents
brand ID
register 300-3 which associates the electronic cash in electronic purse 300-1
with a
specific charge function brand. Furthermore, instead of a single charge
function 8-6
(Figure 4A), payment card 300 has multiple charge functions, illustrated as a
Brand 1
charge function 300-4 and a Brand n charge function 300-8. The ellipsis (...)
indicates
that additional charge functions can also be present on payment card 300.
Charge
function 300-4 has an account ID 300-5 and a brand 300-6. Charge function 300-
8
likewise has an account ID 300-7 and a brand 300-9. The specific charge
function which
was most recently used in a charge transaction is identified by having its
brand indicated
in contents brand ID register 300-3. In effect, then, electronic purse 300-1
contains
electronic cash associated with the specific charge function which was most
recently
used in a charge transaction. For example, if contents brand ID register 300-3
indicates
Brand 1 300-6, then this means that electronic cash balance 300-2 was acquired
through
a transaction involving Brand 1 300-6. Note that in the embodiment of Figure
12,
contents brand ID register 300-3 is writeable and its value may be reassigned.
When used in a system of zero average flow, multiple charge function payment
card 300 is automatically reloaded with electronic cash as change at a POS
whenever the
purchase amount exceeds the amount of electronic cash in the electronic purse
of the
payment card (Figure 4 and Figure 4A) according to the brand of the desired
charge
31
CA 02347460 2001-04-12
WO 00/22556 PGT/1L98/00497
function selected by customer 13 for the charge transaction (Figure 4A, with
operation as
detailed in Figure 5). Thus it is necessary to have a way of associating a
charge function
brand with the electronic cash in the single electronic purse 300-1 of
multiple charge
function payment card 300, via contents brand ID register 300-3. Although the
decision
procedures for determining change are basically the same for a multiple charge
function
payment card as that of a regular (single charge function) payment card (as
previously
set forth), the multiple charge function payment card has additional steps to
insure that
all the electronic cash in the electronic purse is associated with a single
charge function
brand (the brand which is indicated by contents brand ID register 300-3). If
the purchase
amount is greater than or equal to the minimum charge transaction, then no
change is
involved, and the processing of a purchase using a multiple charge function
payment
card is handled the same as that using a regular payment card as shown in
Figure 5.
Likewise, if the purchase amount does not exceed the balance of electronic
cash in the
electronic purse of the multiple charge function payment card, then no change
is
involved, and the processing of a purchase using a multiple charge function
payment
card is also handled the same as that using a regular payment card as shown in
Figure 5.
If, however, the purchase amount is less than the minimum charge transaction
but greater
than the balance of electronic cash in the electronic purse, then change is
involved, and
some additional steps are needed to insure that all the electronic cash in the
electronic
purse of the multiple charge function payment card is associated with a single
charge
function brand (the brand which is indicated by contents brand ID register 300-
3). Figure
13, to which reference is now made, shows the steps for a multiple charge
function
payment card that are executed when the purchase amount is less than the
minimum
charge transaction but greater than the balance of electronic cash in the
electronic purse.
In Figure 13, the processing begins at the output of step 5-6 (as in Figure 5)
where the payment sum exceeds the electronic cash balance in the electronic
purse of the
multiple charge function payment card ($SUM <_ $BALANCE is not the case, i.e.,
$SUM > $BALANCE). At this point it will be necessary to conduct a charge
transaction,
and in a multiple charge function payment card, it is the customer who
determines the
brand of this charge transaction. Therefore, in a decision point 13-2, the
customer's
choice of charge function brand for the charge transaction is compared against
the brand
32
CA 02347460 2001-04-12
WO 00/22556 PCT/[L98/00497
associated with electronic cash in the electronic purse as indicated in
contents brand ID
register 300-3. If the customer selects the same charge function brand then
the remainder
of the transaction is handled exactly the same as in a regular charge card,
and processing
resumes at step 5-7 of Figure 5. If, however, the customer selects a different
charge
function brand for the present charge transaction than that which is
associated with the
balance in the electronic purse (according to contents brand ID register 300-
3), then the
existing electronic cash in the electronic purse must be somehow removed and
accounted
for before electronic cash associated with a different charge function brand
can be
loaded into the electronic purse. Otherwise, electronic cash associated with
diverse
charge function brands will be intermixed in the electronic purse, thereby
rendering it
impossible to properly settle and account for. Therefore, in a step 13-4, the
entire balance
($BALANCE) of electronic cash in the electronic purse is paid toward the
purchase
($SUM), thereby emptying the electronic purse. Then, in a step 13-6, the
payment of
$BALANCE is recorded into the log file of the POS for the brand indicated by
the
contents brand ID register 300-3 (Figure 12) of the multiple charge function
payment
card. This is in keeping with the fact that the electronic cash which was just
transferred
out of the electronic purse is associated with the charge function brand
indicated by the
contents brand ID register 300-3, and continues to maintain that association
through
ultimate transfer to the financial institution. Next, in a step 13-8, the
minimum charge
transaction amount $MINCT is charged to the multiple charge function payment
card via
the charge function which was selected by the customer. Now at this point, the
previous
balance of the electronic purse has already been paid against the purchase
amount
$SUM, so the amount due on the purchase is $SUM - $BALANCE, where $BALANCE
is the original amount of electronic cash in the electronic purse at the start
of the
transaction. Thus, the change to be returned to the multiple charge function
payment card
by the POS is $MINCT - $SUM + $BALANCE, and in a step 13-10, the POS transfers
this amount into the electronic purse of the multiple charge function payment
card. Since
the electronic cash representing this amount is associated with the brand of
charge
transaction selected by the customer, in a step 13-12, the contents brand ID
register
300-3 is set to the brand selected by the customer. The remaining amount due
on the
purchase ($SUM - $BALANCE) has been paid via the charge transaction, so in a
step
33
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
13-14 the payment of $SUM - $BALANCE is recorded by the POS in the log file
for the
brand selected by the customer (which is the brand now indicated by contents
brand ID
register 300-3). Finally, in a step 13-16, the value of $BALANCE is updated to
the new
value of $MINCT -$SUM + $BALANCE. The value of $BALANCE is stored in
register 300-2 of the multiple charge function payment card (Figure 12). At
this point,
the processing returns to decision point 5-12 as in Figure 5 for a regular
payment card.
Note that it is also possible to optionally omit decision point 13-2 and
proceed
directly to step 13-4 regardless of the customer's choice of brand for the
charge
transaction. This produces the same overall net effect, but if the customer
selects the
same charge function brand for the charge transaction as is already associated
with
electronic cash in the electronic purse, the purchase transaction will be
needlessly and
artificially broken into two pieces and recorded as such in the log file of
the POS. One
piece will involve the electronic cash in the electronic purse, and the other
piece will
involve the charge transaction. They will, of course, add up to the amount of
the
purchase ($SLTM) and will both be associated with the same brand of charge
transaction.
Additional POS Features
The features of a point of sale (POS) according to the present invention as
described previously and as illustrated in Figure 1A and Figure 4A are
sufficient for
basic operation of a heterogeneous electronic cash system. In a further
embodiment,
however, there are additional features to provide enhanced accounting and ease
of use in
a multiple POS environment. Figure 14, to which reference is now made,
illustrates these
additional features.
An advanced POS 400 contains aggregate features 400-2 as previously described.
In the case of a POS used in an environment of isolated flow (Figure 1A) the
basic POS
is illustrated by POS 6, and aggregate features 400-2 include log file 6-1,
payment sum
6-2, electronic purse payment unit 6-3, electronic cash drawer 6-4, card
interface 6-5,
transaction manager 6-6, customer interface 6-7, electronic safe 6-8, charge
transaction
unit 6-9, and processor interface 6-11. In the case of a POS used in an
environment of
zero average flow (Figure 4A) the basic POS is illustrated by POS 41, and
aggregate
features 400-2 include log file 41-1, payment sum 41-2, electronic purse
payment unit
41-3, electronic cash drawer 41-4, card interface 41-5, transaction manager 41-
6,
34
CA 02347460 2001-04-12
WO 00/22556 PCT/IL98/00497
customer interface 41-7, electronic safe 41-8, charge transaction unit 41-9,
electronic
purse loading unit 41-10, and processor interface 41-11. The additional
features of
advanced POS 400 include brand accounting modules for each brand accepted by
POS
400, illustrated as a Brand 1 brand accounting module 400-10 and a Brand n
brand
accounting module 400-20. These brand accounting modules contain registers
such as
transaction counters 400-12 and 400-22, respectively, and accumulated
transaction
balance registers 400-14 and 400-24, respectively. Such counters and registers
are
additional examples of transaction records, as previously defined. The
ellipsis (...)
indicates that further brands may be represented with brand accounting
modules. For
each transaction performed with a specific brand, the respective transaction
counter is
incremented and the respective accumulated transaction balance register is
updated to
reflect the total transaction amount seen for the specific brand. The
accounting
information contained in the brand accounting module can be used in a variety
of ways.
For example, the settlement terms for a particular brand may be conditioned on
the
number of transactions conducted for that brand. For advanced POS 400, this
number is
contained in the transaction counter (400-14, 400-24) of the brand accounting
module
(400-10, 400-20) of advanced POS 400. As another example, a merchant may have
a
large number of points of sale and may wish to consolidate the transaction
totals for each
brand directly from those points of sale without having to extract and compile
data from
log files 6-1 (Figure lA) or 41-1 (Figure 4A). The transaction totals for the
respective
brands are contained in accumulated transaction balance registers 400-14 and
400-24.
The brand accounting modules 400-10 and 400-20 can be reset to zero as
desired.
While the invention has been described with respect to a limited number of
embodiments, it will be appreciated that many variations, modifications and
other
applications of the invention may be made.
