WO2001035352A1

WO2001035352A1 - Switchable payment system

Info

Publication number: WO2001035352A1
Application number: PCT/IL2000/000529
Authority: WO
Inventors: Hagit Yosha; Daniel Rom
Original assignee: Transale Ltd.
Priority date: 1999-11-12
Filing date: 2000-09-05
Publication date: 2001-05-17
Also published as: IL134824A0; AU6862400A

Abstract

A system and method for authorizing a sale of goods or services from a seller to a buyer (115). The system comprises a processor (100) configured to switch a credit card from an inactive state to an active state, and from the active state to the inactive state. The processor (100) stores in a database (103) data relating to periods of time when the credit card was in each active state. A first means of communication allows the buyer to instruct the processor (100) to switch the credit card from the inactive state to the active state or from the active state to the inactive state. A second means of communication allows the issuer to determine when the credit card was in the active state and when the credit card was in the inactive state. The sale is authorized only if the credit card is in the active state at the time of the sale.

Description

SWITCHABLE PAYMENT SYSTEM

FIELD OF THE INVENTION

The present invention concerns a method and system for securing non-cash monetary transactions and more particularly to such transactions involving credit cards.

BACKGROUND OF THE INVENTION

Banks and retailers commonly supply buyers with transaction cards, referred to herein as "credit cards", that allow a buyer to execute non-cash payments. These include both tangible as well as electronic credit cards. Various methods have been devised to prevent fraudulent use of a credit card. In the case of tangible cards, for example, a seller in a store might compare the signature on the card to the signature on the transaction receipt. The buyer may be requested to provide a second form of identification such as a driver's license. The seller may verify the validity of a card by telephoning the card issuer's processor. Finally, point-of-sale magnetic strip card readers connected to the issuer's processor have been introduced for card verification.

U.S. Patent No. 5,907,142 to Kelsey discloses a credit card that may exist in an active or inactive state. The card is activated by the buyer just prior to presenting his card to a seller to execute a payment. Activation of the card is achieved when the buyer inputs a personal identification number through a keypad on the card surface.

None of the above methods for preventing fraudulent use of a credit card are applicable in cases where the buyer and the seller are remotely located. This occurs commonly. for example, in cases of transactions carried out between the buyer and seller over a telephone or computer network. In these cases, it is only necessary to provide a credit card number and not a tangible card. Since the credit card number is provided to the seller whenever a transaction is made, the credit card owner has no control over the people who have access to his credit card number. The opportunity for fraudulent use of a credit card number is therefore very great.

Several solutions have been proposed to the problem of authenticating an electronic payment request even when the buyer and seller are remotely located. For example. U.S. Patent No. 5,991,738 to Ogram discloses an automated payment system for transactions over a computer network such as the Internet. The buyer transmits his credit card number and the value of the transaction to a "payment -processing computer ". The payment-processing computer contacts a bank for verification of the credit card and the amount. The bank transmits an authorization to the payment-processing computer that then communicates a password to the buyer^'s computer. The buyer presents the password to the seller^'s computer and then receives the goods or services.

U.S. Patent No. 5.936,219 to Yashida et al. discloses an "electronic check" having associated with it a check identifier and an issue time. The check identifier includes a 'payer identifier^" uniquely identifying the payer and a ^'"payment identifier^" uniquely identifying the payment. An electronic check is refused by the seller when an amount of time exceeding an allowed limit has elapsed since the check was issued.

SUMMARY OF THE INVENTION

In the following description and set of claims, the term "credit card" will be used to include tangible and electronic credit cards, as well as any other type of financial guarantee card such as automatic debit accounts, checking account numbers, savings account numbers, and other financial instruments known in the art. — _• —

The present invention provides a system and method for preventing fraudulent use of a credit card. The method may be used in cases where the payment is for a transaction carried out between a buyer and a seller in close physical proximity to one another, for example in an actual store, as well as in cases when the buyer and supplier are remotely located and communicate over a network such as a telephone system or a computer network.

In accordance with the invention, a credit card alternates between an active state and an inactive state. The credit card is switched from one state to the other by the credit card owner (the buyer). Typically, the credit card is activated by the buyer just prior to initiating a payment and deactivated by him upon completion of the payment process. The payment is effectuated by the credit card issuer only if the credit card was in an active state during the payment process.

When a buyer wishes to make a purchase of goods or services, he first activates his credit card. This is done by contacting a processor. Communication between the buyer and the processor may be. for example, over a computer or telephone network, and is independent of the mode of communication between the buyer and the seller. The buyer identifies himself to the processor and provides the credit card number he wishes to activate. The processor verifies the buyer^'s identification and further verifies the provided credit card number as belonging to the identified buyer. Before providing the goods or services, the seller contacts the credit card issuer for authorization. The mode of communication between the seller and the issuer is independent of the mode of communication between the buyer and the seller and between the buyer and the issuer. The issuer, in turn, contacts the processor and requests verification that the buyer^'s credit card was in an active state when the purchase was made by the buyer. The processor may belong to the issuer, or may be independent of the issuer. Only purchases made when the credit card is active are authorized by the credit card issuer.

The credit card is ideally activated by the buyer just prior to making a purchase and is subsequently deactivated immediately upon completion of the purchase. The credit card will therefore be in the active, and hence usable, state for only a very small fraction of time during the course of a typical day. This makes fraudulent use of the credit card extremely difficult.

The invention thus provides in its first aspect a system for authorizing a sale of goods or services from a seller to a buyer, the system comprising:

(a) a processor configured to:

(aa) switch a credit card from an inactive state to an active state, and from the active state to the inactive state, the credit card having an issuer: and

(ab) store in a database data relating to periods of time when the credit card was in the active state and when the credit card was in the inactive state;

(b) a first means of communication, between the buyer and the processor, the first means of communication being configured to allow the buyer to instruct the processor to switch the credit card from the inactive state to the active state or from the active state to the inactive state; and

(c) a second means of communication, between the issuer and the processor, the second means of communication being configured to allow the issuer to determine when the credit card was in the active state and when the credit card was in the inactive state.

In its second aspect, the invention provides a method for authorizing a sale of goods or services from a seller to a buyer, the method comprising steps of:

(a) switching a credit card from an inactive state to an active state; and

(b) authorizing the sale.

The invention further provides a method for securing monetary transactions over computer networks, comprising:

(a) providing a user with a software capable of providing, when the user perfoπns a purchase over a computer network, a user-specific code, identifying a user and a user-associated account;

(b) upon performing a purchase, activating said software to transmit said user-specific code to a server, said server recording time of receipt of the user-specific code, and defining a time window following such receipt in which a purchase will be considered as being a legitimate user-induced purchase; comparing the purchased time to said time window, a purchase being performed outside said window being an illegitimate purchase: and (c) debiting the user-associated account for the purchase of a legitimate purchase. The invention also provides a system for securing monetary transactions performed over a computer network, comprising:

(i) a client, equipped with a client software providing a user with a software capable of providing, when the user performs a purchase over a computer network, of transmitting over the network a user-specific code, identifying the user, and a user-associated account: (ii) a server for storing client^'s particulars, including the client-specific code: for receiving said client-specific code upon activation of the code by the client; for defining a time window in which a purchase performed using said client-specific code as an account identifier, will be considered as a legitimate purchase: and for issuing a confirmation message permitting the debiting of a client account for all transactions considered legitimate transactions.

BRIEF DESCRIPTION OF THE DRAWINGS

In order to understand the invention and to see how it may be carried out in practice, preferred embodiments will now be described, by way of non-limiting example only, with reference to the accompanying drawings, in which:

Fig. 1 shows a switchable payment system using a computer network according to one embodiment of the invention: and

Fig. 2 shows a switchable payment system using a telephone network accordins to another embodiment of the invention. DETA1LED DESCRIPTION OF PREFERRED EMBODIMENTS

First Embodiment

Fig. 1 shows a first embodiment of the invention wherein communication between a buyer 115 and a processor 100 occurs over a computer network indicated by the cloud 120. The computer network 120 may be. for example, the Internet an intranet or an extranet. The processor 100 includes a database 103 containing a plurality of buyer entries 105.

A buyer 115 contacts a seller (not shown) and decides to purchase goods or services from the seller. The mode of communication between the buyer and seller (not shown) may be of any means, for example, over a computer or telephone network. Alternatively, the buyer 115 may decide to make a purchase in a real store and communicate with the seller face to face. The buyer 115 must then switch a credit card to the active state. In accordance with this embodiment of the invention, in order to switch the credit card to the active state, the buyer contacts the processor 100 over the computer network 120, using a computer terminal 110. In order to communicate with the processor 100, the buyer may, but not necessarily, require special software that was previously loaded onto his computer 110. The processor 100 prompts the buyer 115 for a previously obtained identification such as a password and the credit card number the buyer 115 wishes to activate. The requested information is provided by the buyer using any computer input device such as a keyboard or computer mouse. The processor verifies that the credit card number is stored in the buyer^'s entry 105 in the database 103. If so the credit card is switched to the active state. When the buyer 115 decides that he wishes to switch his credit card to the inactive state, he inputs this into his computer 110 which that transmits the information to the processor 100 over the computer network 120. The processor 100 stores in the buyer's 115 entry 105 in the database 103 the times that the credit card was in the active state.

A seller may contact the credit card issuer (not shown) by any means and at anv time for authorization of a transaction. The mode of communication between the seller and issuer (not shown) is independent of the mode of communication between the buyer 115 and the processor 100, and may or may not involve the computer network 120. The seller may. for example, contact the issuer over a telephone network. The mode of communication between the seller and issuer is also independent of the mode of communication between the buyer 115 and the seller. The credit card issuer verifies that the credit card was in the active state when the purchase was made by contacting the processor 100. The mode of communication between the seller and issuer is independent of the modes of communication between the buyer 115 and the seller, the buyer and the processor 100, and the seller and the issuer. If the issuer determines that the credit card was in the active state when the purchase was made and that the amount of the purchase is within the buyer's 115 credit line, the issuer authorizes the sale to the seller.

Second Embodiment

Fig. 2 shows a second embodiment of the invention wherein communication between a buyer 225 and a processor 200 occurs over a telephone network indicated by the cloud 220. The telephone network 220 may be. for example,a public switched telephone network (PSTN). The processor 200 includes a database 203 containing a plurality of buyer entries 205.

A buyer 225 contacts a seller (not shown) and decides to purchase goods or services from the seller. The mode of communication between the buyer and seller may be of any means, for example, over a computer or telephone network. Alternatively, the buyer 225 may decide to make a purchase in a real store and communicate with the seller face to face. The buyer 225 must then switch a credit card to the active state. In accordance with this embodiment of the invention, he contacts the processor 200 over the telephone network 220. The buyer may use, for example, a telephone 210, as shown in Fig. 2. or any other known means for sending and receiving data over a telephone network, such as a facsimile machine (not shown). The telephone 210 may be for example, a touch tone telephone or a cellular telephone. The processor 200 may identify the buyer by the telephone 220 that he is calling from, for example by means of the ESN of a cellular phone. Alternatively, the processor 200 may prompt the buyer 225 for a previously obtained identification such as an alphanumeric password. The processor 200 will prompt the buyer for the credit card number the buyer 225 wishes to activate. When data are inputted to the telephone network by the buyer using a telephone 210, any requested information is provided by the buyer by depressing keys on the telephone^'s 220 keypad 230. The processor verifies that the credit card number is stored in the buyer^'s entry 205 in the database 203. If so the credit card is switched to the active state. When the buyer 225 decides that he wishes to switch his credit card to the inactive state, he inputs this by depressing keys on the telephone keypad 230. The information is transmitted to the processor 200 over the telephone network 220. The processor 200 stores in the buyer's 225 entry 205 in the database 203 the times that the credit card was in the active state.

As in the case of the first embodiment, a seller may contact the credit card issuer (not shown) by any means and at any time for authorization of a transaction. The mode of communication between the seller and issuer is independent of the mode of communication between the buyer and the processor 200, and may or may not involve the telephone network 220. The mode of communication between the seller and issuer is also independent of the mode of communication between the buver 225 and the seller. The credit card issuer verifies that the credit card was in the active state when the purchase was made by contacting the processor 200. The mode of communication between the seller and issuer is independent of the mode of communication between the buyer 225 and the seller, the buyer and the processor 200, and the seller and the issuer. If the issuer determines that the credit card was in the active state when the purchase was made and that the amount of the purchase is within the buyer's 225 credit line, the issuer seller authorizes the purchase to the seller.

Claims

CLAIMS:

1. A system for authorizing a sale of goods or services from a seller to a buyer, the system comprising:

(a) a processor configured to:

(aa) switch a credit card from an inactive state to an active state, and from the active state to the inactive state, the credit card having an issuer; and

(c) a second means of communication, between the issuer and the processor, the second means of communication being configured to allow the issuer to deteπnine when the credit card was in the active state and when the credit card was in the inactive state.

2. The system of Claim 1 wherein the first communication means between the buyer and the processor comprises a computer network.

3. The system according to Claim 2 wherein the computer network is the Internet.

4. The system according to Claim 3 wherein the first communication means between the buyer and the processor comprises a telephone network.

5. The system of Claim 1 wherein the second communication means between the issuer and the processor comprises a computer network.

6. The system according to Claim 5 wherein the computer network is the Internet.

7. The system according to Claim 1 wherein the second communication means between the issuer and the processor comprises a telephone network.

8. The system according to any one of the previous claims further comprising a third means of communication between the issuer and the seller, the third means of communication being configured to allow the seller to request authorization for the sale from the issuer.

9. The system according to Claim 1 further comprising a fourth means of communication between the issuer and the seller, the fourth means of communication being configured to allow the issuer to authorize the sale in response to a request from the seller when the credit card was in the active state when the sale was proposed.

10. The system according to Claim 8 wherein the third or fourth communication means comprises a computer network.

11. The system according to Claim 10 wherein the computer network is the Internet.

12. The system according to Claim 8 wherein the third or fourth communication means comprises a telephone network.

13. A method for authorizing a sale of goods or services from a seller to a buyer, the method comprising steps of:

(a) switching a credit card from an inactive state to an active state; and

(b) authorizing the sale.

14. The method of Claim 13 further comprising one or more steps selected from the group of:

(a) storing in a database data relating to the times that the credit card was in the inactive state and when the credit card was in the active state;

(b) determining that the credit card was in the active state at the time of the sale;

(c) requesting authorization for the sale; and

(d) switching the credit card from the active state to the inactive state.

15. A method for securing monetary transactions over computer networks, comprising: (a) providing a user with a software capable of providing, when the user performs a purchase over a computer network, a user-specific code, identifying a user and a user-associated account:

(b) upon perfoπning a purchase, activating said software to transmit said user-specific code to a server, said server recording time of receipt of the user-specific code, and defining a time window following such receipt in which a purchase will be considered as being a legitimate user-induced purchase; comparing the purchased time to said time window, a purchase being performed outside said window being an illegitimate purchase; and

(c) debiting the user-associated account for the purchase of a legitimate purchase.

16. A method according to Claim 15. wherein said computer network is the Internet.

17. A system for securing monetary transactions performed over a computer network, comprising:

(ii) a client, equipped with a client software providing a user with a software capable of providing, when the user performs a purchase over a computer network, of transmitting over the network a user-specific code, identifying the user, and a user-associated account;

(iii) a server for storing client^'s particulars, including the client-specific code; for receiving said client-specific code upon activation of the code by the client; for defining a time window in which a purchase performed using said client-specific code as an account identifier, will be considered as a legitimate purchase: and for issuing a confirmation message permitting the debiting of a client account for all transactions considered legitimate transactions.

18. A system according to Claim 17, wherein the computer network is the Internet.