WO2019211664A1

WO2019211664A1 - Payment platform for securing payments

Info

Publication number: WO2019211664A1
Application number: PCT/IB2019/000431
Authority: WO
Inventors: Walter CRAIG; Tomasz PAWELEC; David Michael Scanlan
Original assignee: Ids Loans Corp.
Priority date: 2018-05-02
Filing date: 2019-05-01
Publication date: 2019-11-07

Abstract

A computer implemented system and method for improving the security of payments by preventing unauthorized fraudulent returns which makes it easier for a consumer to ensure that loan payments are made in accordance with their loan agreement and which reduces the risk of lending to underprivileged and unbanked customers. It comprises a payment recipient portal which specifies details of a loan received by the consumer which is to be secured, a consumer portal for initiating and/or managing payments, ah unconditional payment instrument which binds the consumer to a payment schedule and a monitoring system which monitors the ability of the consumer to make loan payments during the period for which the loan is outstanding.

Description

Payment Platform for Securing Payments

Introduction The invention relates to a computer implemented system and method for securing receivables repayments and in particular for securing payments against fraudulent returns by payers.

Background to the Invention

A business provides goods and/or services to consumers who, in return pay for the goods and/or services. It will be appreciated that as referred to herein, a consumer may be any type of legal person including but not limited to, an individual, an association, partnership, limited company or corporation who buys goods and/or services. A business is any type of legal person including but not limited to, an individual, an association, partnership, limited company or corporation who provides goods and/or services.

In many cases, the business will have a relationship with a consumer credit provider such that, when purchasing the goods and/or services, the consumer is entering into a consumer credit agreement with the consumer credit provider. Consumer credit comes in many forms including credit cards, lines of credit and loans. Consumer credit is also known as consumer debt. Consumer credit is divided into two classifications: revolving credit and instalment credit.

Revolving credit can be utilized for any purpose. Loans are made on a continuous basis for purchases until the consumer reaches his credit limit. Customers receive bills periodically to make at least a minimum monthly payment. Instalment credit is used for a specific purpose, for a defined amount and for a specific period. Payments are usually the same amount each month. Examples of purchases made on instalment credit include large appliances, automobiles and furniture. These kinds of loans usually offer lower interest rates than revolving credit. For example, a car company holds a lien on the car until the car loan is repaid. The total amount of the principal and interest is repaid within a predefined period. If the customer defaults on the loan payments, the company can repossess the car and charge penalties. Debt can be written off and sold or placed with a collection company. In order to recover the defaulted value, collectors can enter into arrangement with the consumer in a form of a pre-approved repayment plan. Total amount owed is split into regular payments, similar to an instalment loan. These payments are processed automatically and do not require further authorization from the consumer. Collection companies incentivize their debtors to pay by reporting their outstanding accounts to credit bureaus. If consumers pay as per the arrangement, they will benefit from an improved FICO score and - consequently - access to wider range of financial products on the market. In all cases, the consumer has a legally enforceable duty to repay the debt in the amounts and timescales agreed under the consumer credit agreement or the collection repayment agreement.

However, in a significant number of cases, the consumer is unable or unwilling to meet the terms of these agreements, hoping to benefit short-term from provided services or improved credit score. One example of this is known as chargeback or friendly fraud. This occurs when a consumer makes a purchase or repayment with their credit card, and then requests a chargeback from the issuing bank after receiving the purchased goods or services. Once approved, the chargeback cancels the financial transaction, and the consumer receives a refund of the money they spent. When a chargeback occurs, the merchant vendor is accountable, regardless of whatever measures they took to verify the transaction. A 2016 study by LexisNexis stated that chargeback fraud

costs merchant vendors $2.40 for every $1 lost. This is because of product-loss, banking fines, penalties and administrative costs. Similar chargeback procedures are available to consumers paying through an ACH bank transfer.

Summary of the Invention

It is an object of the present invention to provide a computer implemented system and method for improving the security of payments by preventing unauthorized fraudulent returns.

Another object of the invention is to provide a computer implemented system which makes it easier for a consumer to ensure that loan payments are made in

accordance with their loan agreement.

Another object of the invention is to provide a computer implemented system which reduces the risk of lending to underprivileged and unbanked customers.

Another object of the invention is to provide a computer implemented system which may be used with the minimum of system integration into existing merchant or account management systems.

In accordance with a first aspect of the invention there is provided a computer implemented system for securing payment of a loan made to a consumer by a credit provider, the system comprising:

a payment recipient portal which specifies details of a loan received by the consumer which is to be secured;

a consumer portal for initiating and/or managing payments;

an unconditional payment instrument which binds the consumer to a payment schedule; and

a monitoring system which monitors the ability of the consumer to make loan payments during the period for which the loan is outstanding.

In accordance with a second aspect of the invention there is provided a computer implemented method for securing payment of a loan made to a consumer by a credit provider, the system comprising:

specifying details of a loan received by the consumer which is to be secured on a payment recipient portal;

allowing a consumer to initiate and/or manage managing payments;

providing an unconditional payment instrument which binds the consumer to a payment schedule; and

monitoring the ability of the consumer to make loan payments during the period for which the loan is outstanding.

Preferably, the payment recipient portal generates a consumer contract which is automatically populated with details of the loan.

Preferably, at least some of the terms of consumer contract are defined by the credit provider on the payment recipient portal.

Preferably, the consumer contract requires at least one form of consumer verification.

Preferably, submission of the contract is subject to customer providing required payment authorizations.

Preferably, the consumer verification comprises the consumer’s typed full legal name. Preferably, the consumer verification comprises the consumer’s handwritten signature.

Preferably, the consumer verification comprises the authorization of the

unconditional payment instrument by the consumer.

Preferably, the loan details comprise, consumer data

Preferably, the loan details comprise information about the subject of the loan.

Preferably, the subject of the loan may be a product or service.

Preferably, the loan detail comprises settlement information. Preferably, the loan details comprise a payment schedule.

Preferably, the payment schedule specifies the dates upon which payments are due. Preferably, the payment schedule specifies the payment amounts. Preferably, the loan comprises a consumer credit agreement.

Optionally, the consumer credit agreement is a revolving credit agreement.

Optionally, the consumer credit agreement is instalment credit. Preferably, the unconditional payment instrument is one or more check.

Preferably, the one or more check is from an electronic checkbook.

Preferably, the one or more checks are presented on the consumer portal for electronic signature. Preferably, the consumer can place signatures using either a pointer device (mouse) or a touchscreen (with their finger). Preferably, each check is signed separately, thus providing an explicit order and authorization to pay.

Preferably, the computer implemented system for securing payment of a loan made to a consumer by a credit provider further comprises one or more additional payment instrument.

Optionally, the additional payment instrument comprises National Automated Clearing House Association (NACHA) automated clearing house (ACH) financial transactions. Optionally, the additional payment instrument comprises debit and credit cards.

Preferably, the monitoring system comprises a first algorithm which can evaluate a risk associated with a given payment and decide which channel would be the most beneficial for its recipient.

Preferably, the algorithm uses artificial intelligence.

Preferably, the algorithm takes into consideration one or more of the following parameters:

Authorizations on file for a given payment, i.e. channels available, Possible legal limitations of certain payment methods, past history of a given payer and/or due diligence.

Preferably, the monitoring system comprises a second algorithm to check that the consumer has sufficient funds to make a payment.

Preferably the second algorithm acts as a filter that only allows payments with sufficient balance to be processed.

Preferably, the second algorithm dynamically checks the consumer’s bank balance. Preferably, the second algorithm dynamically conducts an on-line card query to monitor debit and credit card activity.

Preferably, the second algorithm dynamically checks the consumer’s bank balance.

Preferably, the consumer portal sends payment notifications to the consumer in advance of their due date.

Preferably, the notifications are sent via one or more of the following

communications means: printed letter, email, SMS, phone calls and/or mobile phone notification streams. Preferably, the consumer portal allows the consumer to manage their payment plan. Preferably, the portal allows a consumer to stop payments, amend their dates, change their bank account details, add new payment methods such as debit or credit cards and request a new plan to be approved by the merchant. Preferably, the portal allows the merchant to review and accept or deny requested changes to consumer payment plans.

Preferably, the consumer is a legal person. Optionally, the legal person is, an individual, an association, partnership, limited company or corporation who buys goods and/or services.

Detailed Description of the Drawings

The present invention is a novel computerised system and method which provides lenders, collectors and other types of merchant vendors with a method of securing payments against fraudulent returns by payers.

Figure 1 is a schematic diagram which shows the basic component parts of a system in accordance with the present invention. As is shown, the system comprises a payment recipient portal 5 which provides a payment recipient interface on a payment recipient’s computing device, a monitoring system 7 a consumer portal 9 which provides a consumer portal interface 13 on a consumer’s computing device and a monitoring system 7. In this example, the system of the present invention is provided on the cloud. It will be appreciated that the system may be provided on a server in a known location and that the payment recipient computing means and consumer computing means may be any suitable computer including but not limited to a desk top computer, laptop, tablet, mobile handheld device, POS terminal, ATM machine or the like.

Operation of the system in accordance with the present invention will be described below. To initiate the process, a vendor (payment recipient) posts payment plan instructions to the payment recipient portal. These instructions contain the following:

Customer data,

Information about product / service / settlement,

Payment schedule: dates and amounts. Upon the receipt of a payment plan, the system generates a copy of consumer contract, based on vendor’s template and provides it to the consumer via the consumer interface 13. The contract is automatically pre-filled with customer’s information and followed by an electronic checkbook. The system can adapt the contract to meet local criteria based on customer’s residency and vendor’s specifications.

To accept the contract, 2 forms of signature are required:

1. Typed full legal name; and

2. Handwritten signature.

In addition, contracts can only be submitted if all payments are authorized by the consumer by means of the unconditional payment instrument, which is an electronic checkbook. This protects both parties’ interests: the contract is not in effect until secured by the unconditional payment instrument.

Once a contract is signed, a digital copy is created and delivered to both parties in a form of a secure and certified PDF file. It contains complete wording as well as both typed and handwritten signatures. PDF files generated by the system of the present invention use secure cryptographic algorithms to prevent tampering with; they cannot be amended without invalidating the certificate.

The present invention delivers a unique functionality by providing payment recipients (merchants) with additional security based on electronic checkbook. Customers must manually sign a check for every future payment in order to submit and enter into the agreement with merchants.

In order to create the legally binding contract, the consumer is presented with individual checks for signature, on the consumer interface, which may be a website. The checks are presented in a familiar format with a designated signature area. Consumers can sign the checks using either a pointer device (mouse) or a touchscreen (with their finger). In either case, signatures are saved in both the original vector format as well as Base , commonly used in the banking industry.

Each check is signed separately, thus providing an explicit order to pay. Once signed and submitted, checks are printed on a secure paper using an MICR toner. The system then either delivers physical copies to the payment recipient or the operator of the system of the present invention process the scheduled payments on their designated dates.

For payments processed via the operator of the system, an X9.37-2003 DSTU image file is generated and transferred to a banking institution electronically for every batch of checks.

By fulfilling the criteria of an unconditional payment instrument, the present invention utilizes full featured checks. In addition to all required elements, extra information is stored for increased protection against fraudulent returns. This includes IP address, GPS coordinates, digital fingerprint, date of birth and driver license state and number of the signing party. These features allow the present invention to mitigate risks and costs associated with traditional electronic check authorizations (RCCs).

In addition to the use of checks as an unconditional payment instrument, the present invention provides a mechanism for accepting payments from consumers via other payment channels, such as ACH (NACHA), debit and credit cards.

In some cases, these methods might prove beneficial because of their lower processing cost and speed of response from the banking institution. In the case of high-risk transactions, fraudulent returns reported by payers leave the merchants defenceless against those threats. In a normal course of business, the cost of addressing credit card chargebacks will be greater than an average payment being processed. Similarly, unauthorized ACH returns will get a merchant bank account closed, even if he produces valid POAs for all the payments in question.

In order to further mitigate this risk, the present invention further comprises an algorithm which can evaluate a risk associated with a given payment and decide which channel would be the most beneficial for its recipient. In this example of the invention, the algorithm uses artificial intelligence and takes into consideration the following parameters:

Authorizations on file for a given payment, i.e. channels available,

Possible legal limitations of certain payment methods,

- Past history of a given payer,

Combination of an extensive due diligence performed behind the scene using third party commercial and government databases.

After a decision is made, the system processes the payment automatically using the chosen method.

In all cases, the unconditional payment instrument exists as security should these additional payment instruments prove unsuccessful as a means for obtaining payment.

In addition to avoiding unauthorized charges, the system and method of the present invention is designed to minimize traditional returns, known as NSF (insufficient funds). After the above risk assessment is complete, a second algorithm known as the Anti- NSF Router comes into effect. Its goal is to prevent NSFs by performing the following steps:

1. Balance check - customer’s bank account is dynamically checked through an ATM network and using a test $1 authorization to test if a payment of a given amount would clear or not. If not, alternative payment sources might be required.

2. Online card query - debit and credit cards can be used to put a temporary lock on funds, similar to a check-in swipe, in order to assess if the balance on customer’s account is sufficient.

3. Payment stop - if there are no funds available and there are no alternative payment methods on file, the system would stop the payment from being sent to a processor.

Effectively, the system of the present invention acts as a filter that only allows payments with sufficient balance to be processed. Since all payment schedules are secured by signed checks, such occurrence does not decrease the total secured balance, but only delays the receipt of a due payment by the merchant.

This benefits merchants in two ways:

1. They will not suffer from NSF fees.

2. They still hold a payment authorization on file and can use it at a later time.

The system of the present invention will automatically retry Anti-NSF procedure multiple times taking into consideration the limitations of payment authorizations between different methods. Once an available balance is confirmed, the payment will be immediately submitted.

As part of the objective of preventing both unauthorized and NSF returns, the system of the present invention puts a lot of emphasis on positive user experience provided by the consumer interface, through automated payment notifications and 24/7 self- service portals.

Notifications are sent to customers a few days before their payment is processed. The system of the present invention can deliver messages via email, SMS, phone calls or mobile phone notification streams. Each message contains the payment’s date, amount, merchant information and optionally a convenient link or SMS code which can be used to stop the payment. Customers can also manage their payment plans using the consumer interface (web portal). The consumer interface may be customized to a vendor’s requirements to deliver a seamless and consistent user experience, improving the value of a merchant’s brand. The consumer interface allows customer to stop payments, amend their dates, change their bank account details, add new payment methods such as debit or credit cards and request a new plan to be approved by the merchant.

Should a new plan be approved, the system can automatically generate a new electronic checkbook and request signatures prior to approving the new

arrangement.

Figure 2 represents a complete life cycle of a payment plan. It shows the layers of a system in accordance with the present invention working together to deliver its ultimate goal of reduced NSF and unauthorized payments. Merchant or payment recipient interaction is limited to initial posting of a payment plan. This simple step, facilitated through API or merchant terminal endpoint, triggers a generation of customer contract, secured by electronic checkbook. Upon submission of all required signatures, a payment schedule is generated. Unless amended through consumer portal, this original schedule is then used to automatically process the instalments. The system of the present invention notifies the payer each time before collecting the money and unless stopped, each payment is subject to a risk assessment process. It consists of Payment Evaluator and Anti- NSF Router and produces a final decision about whether the payment should be processed or not. Stopped or returned payments continue to hold a valid

authorization in a form of check and can be reprocessed automatically for up to 6 months after the original payment date.

The present invention provides a unique and original concept of a layered stack of services based on a single payment plan request. Its minimal implementation qualifies it as a drop-in replacement for existing e-commerce processors. As a fully hosted solution, it can be used to process online sales, telephone settlements as well as POS transactions (Point of Sale). It eliminates the most common risks associated with online payment processing: fraudulent returns. In addition, it minimizes the NSF ratio, thus saving a merchant expenses associated with returned payments.

The present invention protects both sides of a transaction: for sellers it delivers an unquestionable proof of authorization and unconditional secured instruments. For payers it provides a user focused experience, transparency and 24/7 control over pre- approved payments.

Similar qualities are traditionally associated with more elaborate forms of agreements, involving either physical presence of the payer or postal delivery of signed checks. The present invention, delivered through SaaS, requires minimal effort for both initial implementation and subsequent use of its platform.

Advantageously, the present invention provides a comprehensive system and method which requires minimal effort to integrate with an existing merchant/account management system. It requires no privileged access to merchant’s database and is fully hosted and maintained externally.

By securing payment promises with unconditional payment instruments, the present invention provides the following benefit to payment merchants:

^• It stops fraudulent unauthorized returns, which in 2018 can cost merchants $35 per individual transaction, even if the payment was for lower amount.

• It protects the merchant vendor’s banking relationship by reducing return ratios and ensuring that processing accounts do not violate state, federal and regulatory processing terms.

^• It reduces overall cost of running business for all parties involved in the

payment processing chain by stopping transactions which would otherwise result in a returned payment. * It improves access to e-commerce to underprivileged and unbanked consumers by adding extra scrutiny to high risk transactions that would otherwise be rejected. · It improves customer experience by providing extra features such as payment reminders and web- based schedulers.

Improvements and modifications may be incorporated herein without deviating from the scope of the invention.

Claims

1. A computer implemented system for securing payment of a loan made to a consumer by a credit provider, the system comprising:

a consumer portal for initiating and/or managing payments;

2. A computer implemented method for securing payment of a loan made to a consumer by a credit provider, the system comprising:

allowing a consumer to initiate and/or manage managing payments;

3. A system or method as claimed in claim 1 or claim 2 wherein, the payment recipient portal generates a consumer contract which is automatically populated with details of the loan.

4. A system or method as claimed in any preceding claim wherein, at least some of the terms of consumer contract are defined by the credit provider on the payment recipient portal.

5. A system or method as claimed in any preceding claim wherein, the consumer contract requires at least one form of consumer verification.

6. A system or method as claimed in claim 5 wherein, consumer verification comprises the authorization of the unconditional payment instrument by the consumer.

7. A system or method as claimed in any preceding claim wherein, the loan details comprise, consumer data.

8. A system or method as claimed in any preceding claim wherein, the loan details comprise a payment schedule.

9. A system or method as claimed in any preceding claim wherein the loan comprises a consumer credit agreement.

10. A system or method as claimed in any preceding claim wherein, the unconditional payment instrument is one or more check.

11. A system or method as claimed in claim 10 wherein, the one or more check is from an electronic checkbook.

12. A system or method as claimed in claim 10 or 11 wherein, the one or more checks are presented on the consumer portal for electronic signature.

13. A system or method as claimed in claims 10 to 12 wherein, the consumer can place signatures using either a pointer device (mouse) or a touchscreen (with their finger).

14. A system or method as claimed in claims 10 to 13 wherein, each check is signed separately, thus providing an explicit order and authorization to pay.

15. A system or method as claimed in any preceding claim wherein, the computer implemented system for securing payment of a loan made to a consumer by a credit provider further comprises one or more additional payment instrument.

16. A system or method as claimed in claim 15 wherein, the additional payment instrument comprises National Automated Clearing House Association (NACHA) automated clearing house (ACH) financial transactions.

17. A system or method as claimed in claim 15 or 16 wherein, the additional payment instrument comprises debit and credit cards.

18. A system or method as claimed in any preceding claim wherein, the monitoring system comprises a first algorithm which can evaluate a risk associated with a given payment and decide which channel would be the most beneficial for its recipient.

19. A system or method as claimed in claim 18 wherein, the algorithm uses artificial intelligence.

20. A system or method as claimed in any preceding claim wherein, the monitoring system comprises a second algorithm to check that the consumer has sufficient funds to make a payment.

21. A system or method as claimed in claim 20 wherein, the second algorithm acts as a filter that only allows payments with sufficient balance to be processed.

22. A system or method as claimed in claim 20 or claim 21 wherein, the second algorithm dynamically checks the consumer’s bank balance.

23. A system or method as claimed in claims 21 to 23 wherein, the second algorithm dynamically conducts an on-line card query to monitor debit and credit card activity.

24. A system or method as claimed in claims 20 to 22 wherein, the second algorithm dynamically checks the consumer’s bank balance.

25. A system or method as claimed in any preceding claim wherein, the consumer portal sends payment notifications to the consumer in advance of their due date.

26. A system or method as claimed in claim 25 wherein, the notifications are sent via one or more of the following communications means: printed letter, email, SMS, phone calls and/or mobile phone notification streams.

27. A system or method as claimed in any preceding claim wherein, the consumer portal allows the consumer to manage their payment plan.

28. A system or method as claimed in any preceding claim wherein, the consumer portal allows a consumer to stop payments, amend their dates, change their bank account details, add new payment methods such as debit or credit cards and request a new plan to be approved by the merchant.

29. A system or method as claimed in any preceding claim wherein, the consumer portal allows the merchant to review and accept or deny requested changes to consumer payment plans.