WO2002039368A1

WO2002039368A1 - Method for processing credit card payments made by customers to merchants

Info

Publication number: WO2002039368A1
Application number: PCT/US2001/049899
Authority: WO
Inventors: James B. Kargman
Original assignee: Kargman James B
Priority date: 2000-11-10
Filing date: 2001-11-09
Publication date: 2002-05-16
Also published as: AU2002232748A1

Abstract

A method is disclosed which permits a merchant to consolidate (250) credit card transactions generated from purchases made on the merchant's internet web site (210) with credit card transactions generated from purchases made by customers in person at the merchant's physical store (240) to, in turn, permit the merchant to submit all its credit card transactions in bulk to a credit card company for processing (260). The present method permits the merchant to take maximum advantage of the volume discounts offered by credit card payment processing facilities.

Description

Method for Processing Credit Card Payments Made by Customers to Merchants

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to a method of processing commercial transactions wherein customers purchase goods or services from merchants using credit cards as the form of payment. In particular, the present invention relates to a method for processing and handling both credit card purchases made by customers via an internet web site operated by a merchant and credit card purchases made by customers when physically present at a merchant's place of business.

2. The Prior Art

It is common for consumers purchasing goods and services to use a credit card to pay the merchant for cost of the goods and services purchased. In the case of a customer purchasing goods or services when physically present at the merchant's place of business, the customer typically presents his or her credit card to a cashier at the time of "checkout". To process the credit card transaction the cashier typically passes the credit card through a card reader which is either a stand alone terminal or integral to the cash register or store computer system. The card reader reads data recorded on a magnetic stripe on the reverse side of the credit card. The card reader is typically connected to the credit card company's processing facility, its computer system or bank operated system via a telephone line or other communication link. The card data includes at a minimum the credit card number, the card's expiration date and typically the name of the card holder.

Upon swiping the card, the merchant's "merchant number", having been pre- programmed into the reader, is transmitted to the processing facility together with the card data and the dollar amount of the purchase which is typically manually entered by the cashier. The foregoing may also be performed manually by the cashier by telephoning the credit card processing facility, as is required in the case of communication link failures or other computer outages. Additionally, modern cash registers or terminals typically incorporate a card reader which serves to further automate this process by automatically connecting to the credit card processing facility and transmitting the card data together with the amount of the purchase.

An authorization code is generated by the credit card processing facility in response to the merchant transmitting the credit card transaction. This authorization code is, in turn, transmitted back to the merchant. In the case of a credit card reader having an associated printer, a receipt and signature form is generated and printed for the customer to sign. This printed form typically includes the authorization code and a copy is typically retained by both the merchant and the customer.

Upon completion of the foregoing authorization process, the merchant can be assured of receiving payment for the goods or services and accordingly can deliver the goods or services to the customer at that time knowing that the appropriate funds will be transferred into the merchant's bank account. However, at that point in time, the merchant has not actually received the funds from the credit card issuer who will collect the purchase amount owed from the customer in the form of a monthly credit card payment. Instead, the merchant knows only that the purchase amount has been authorized by the credit card processor and that an appropriate reservation of funds has been made against the customer's credit limit assuring ultimate payment to the merchant, if the "charge" is actually submitted by the merchant to the credit card processor.

To actually submit a charge, the merchant may simply gather manually completed credit card slips and deposit them to the merchant's banking institution along with the merchant's cash and check deposits. The bank will in turn ultimately transmit these credit card slips, which for the most part were treated as cash.

However, with the advent of computer driven point of sale and store wide systems, the actual charges are submitted to the processor electronically. In the case of purchases made by customers purchasing goods via an internet web site operated by a merchant, a very similar series of steps occurs with the exception of course that no physical signature is actually obtained by the merchant from the customer. In practice, a customer browses a web site viewing pictures and/or descriptions of goods available for purchase. After the customer has designated the various goods to be purchased from a merchant via an internet web site, the customer typically enters a "checkout" mode. A typical first step the customer confirms the identity of various goods previously selected for purchase. Upon confirming the accuracy of the order the customer typically next provides the merchant's web site with appropriate payment information. When paying by credit card the customer provides the card number, the card's expiration date as well as certain personal identifying information. Typically, the customer is asked to provide a name and shipping address together with the billing address for the credit card. Upon receipt of the foregoing information, the order taking process is concluded with the actual order processing taking place "off line".

The merchant operating the internet web site must then proceed to verify the credit card number and obtain authorizing information towards insuring payment or at least deterring blatant fraud. This is typically handled by transmitting the credit card number, card expiration date, purchase amount and billing address to a credit card processing facility who verifies that the card is valid, that a proper billing address has been provided (to deter use of stolen credit cards and rejecting the transaction if an inconsistency is identified) and that the customer has the necessary credit available to make the desired purchase. If affirmed an authorization occurs and funds equal to the purchase amount are reserved for the merchant from the customer's available credit limit. The merchant can "defer" authorizing the purchase transaction since the merchant is at little risk given that no goods are delivered to the customer at the time the customer completes the order process and shipped to the customer only when the valid authorization process is completed. One aspect of conducting commerce using credit cards which may be unknown to the customer or otherwise ignored is the fact that a merchant who accepts payment from a customer using the credit is required to pay a small percentage of the overall total purchase amount to the credit card company which issued and/or processed the credit card as a service charge to compensate for processing or otherwise handling or making payment to the merchant. Credit card processing companies frequently offer incentives to merchants reducing the overall expense associated with the merchant's accepting credit card payments. In some cases promotions may be offered. Most commonly however, discounts are offered to merchants when credit card transactions are submitted to the credit card processing facility in bulk rather than in small batches or even one at a time. Obviously the step of authorizing a credit card charge prior to physically delivering merchandise to a customer is critical and must be maintained. The associated costs and time required to accept a request for authorization and to verify the critical data and generate an authorization code confirming that the customer has an acceptable credit line consistent with the value of the transaction being processed is one which can be highly automated and incurs a relatively low per transaction expense. It is when the actual charge must be processed and funds transferred to each of the thousands if not millions of individual merchants with whom a typical credit card company deals that significant expense is incurred. Accordingly, as an incentive to merchants, credit card companies will typically offer a discount in the service fee charged to the merchant if the merchant will submit its credit card charges and or requests for payment in large batches. A discount may be offered based upon the frequency in time in which orders are submitted or, as is most common, based upon the overall total number of transactions submitted in a single batch. The greater the number of transactions which can be processed by the credit card company at a single time the lower the overall costs incurred by the credit card company.

One difficulty in conducting commerce and, in particular, in accepting credit cards as a form of payment is the fact that currently there is no easy way for businesses to handle credit card purchases where such businesses operate both a physical store presence (a "brick and mortar" business) and an internet or web site presence. This difficulty arises because credit card companies often have different mechanisms for handling charges originating from internet or web businesses versus charges which originate in-store.

It is moreover a disadvantage for businesses operating both a physical store presence as well as web site presence to accept credit card orders as the credit card processing is typically handled in separate batches thereby causing the merchant to be unable to obtain the highest level of discounts offered by credit card companies, thus incurring larger overall transaction costs.

Accordingly it is an object of the present invention to permit a merchant to accept credit cards for purchases made by customers via its web site as well as to separately accept credit card payment for purchases made by customers at its physical store presence and still take advantage of the highest level of discounts offered by credit card processing companies.

These and other desirable characteristics of the present invention will become apparent in view of the present specification and drawings.

SUMMARY OF THE INVENTION

The present invention comprises a method for processing credit card payments made by customers purchasing goods from merchants from both merchant operated Internet web sites as well as a merchant operated physical store locations. In one embodiment, the method comprises the steps of: capturing e- commerce credit card transaction data related to orders placed by customers purchasing goods and/or services from a merchant's Internet web site using credit cards as a manner of payment; transmitting captured e-commerce credit card transaction data to a computer system associated with one or more of the merchant's physical store location; inputting the e-commerce credit card transaction data into the computer system; processing the e-commerce credit card transaction data to obtain authorization for the credit card charge; consolidating the e- commerce credit card transaction data with credit card transaction data generated by customers making purchases as the merchant's physical store location; and transmitting the consolidated credit card transaction data to a credit card processing facility, whereby the merchant is able to take maximum advantage of the volume discounts offered by credit card payment processing facilities.

In a further embodiment the method includes the storing e-commerce credit card transaction data on a computer system associated with the merchant's internet web site and thereafter transmitting the captured e-commerce credit card transaction data to the computer system associated with one or more of the merchant's physical stores in near real time on a transaction-by-transaction basis. Alternatively, the captured e-commerce credit card transaction data may be transmitted to the computer system associated with one or more of the merchant's physical stores at one or more predetermine times of day or when a predetermined number of credit card transactions have been stored on the computer system associated with the merchant's internet web site.

In an alternative embodiment of the invention the step of processing the e- commerce transaction data toward obtaining authorization for the credit card charge precedes the step of transmitting the transaction data to the computer system associated with one or more of the merchant's physical stores. BRIEF DESCRIPTION OF THE DRAWINGS

Fig. 1 is a flow chart illustrating the various steps of one embodiment of the present method for processing credit card payments made by customers to merchants.

Fig. 2 is a flow chart illustrating the various steps of another embodiment of the present method for processing credit card payments made by customers to merchants.

DESCRIPTION OF THE INVENTION

While this invention is susceptible to embodiment in different forms, there are shown in the drawings and will be described in detail herein several specific embodiments. The present disclosure is to be considered as an exemplification of the principle of the invention intended merely to explain and illustrate the invention, and is not intended to limit the invention in any way to embodiments illustrated.

In order to permit a business/merchant to take advantage of the highest level of discounts offered by credit card processing entities the present invention permits a business, within the constraints of its agreements with the credit card processing facilities, to consolidate all of its credit card charges placed by customers into a single batch of charges which may be transmitted in bulk to a credit card company for processing, regardless of whether placed over the merchant's internet web site or at the merchant's store facilities.

Figure 1 illustrates one embodiment of the invention capable of processing credit card transactions made by customers purchasing goods from both a merchant's web site as well as a merchant's physical store location.

In step 210, the internet web site operated by the merchant accepts orders from customers making purchases for goods and/or services using credit cards in the conventional manner, commonly referred to as "e-commerce". The goods and/or services ordered and credit card payment information is collected from the purchaser on-line at the time the order is placed and stored on one or more computer web servers operated by or for the merchant. Specifically, the internet web site servers are configured and operate to accept from the customer at the time the order is placed various data including the purchaser's credit card number, card expiration date and personal identifying information. The programming for such on-line "e-commerce" computer based transaction activities is well known in the industry.

The data for orders and the associated data from credit card payments made via the web site are collected together and transmitted to a computer system maintained at a physical store location operated by or for the merchant, step 220, instead of being transmitted to a credit card processing facility. The merchant "in- store" computer system can, for purposes of the present invention comprise a dedicated order processing system located in the merchant's physical store location, off-site from the location, such as at a company headquarters, or may comprise a point of sale (POS) system, such a computerized "cash register" system. Depending upon the volume of transactions, the capacity of the computer system and other operational factors, the present invention can be operated wherein the data for each credit card transaction initiated by a customer on an internet web site is transmitted to and passed into the merchant's in-store computer system in near real time on a transaction by transaction basis or, alternatively, transactions may be held on a web site server and transmitted to the in-store computer system in bulk at pre-arranged times or when a pre-determined volume of transactions have been captured by the web server.

The "web site transaction data" is then input into the store's computer system where the purchase transactions are processed "in-store" as if each of the purchases were made at the merchant's physical store instead of from the merchant's web site, step 230. When received by the processing entity all of the credit card transactions are recognized as emanating from a single entity and are treated the same. In the present embodiment, the authorization for the credit card purchases made at the merchant's internet web site is obtained by the merchant not during the on-line order taking session but, rather, after the transaction is transmitted to the in- store computer system, step 240. It is presumed that the merchant will not deliver merchandise to the customer until the appropriate credit card authorization is obtained and the merchant is assured that the credit card transaction is valid and that payment for the goods will be received. The merchant is still able to meet to the demands of the consumer since deferring credit card authorization until after the transaction data has been transmitted to the store system does not unduly delay processing the order, picking the goods, packing the merchandise, and ultimately dispatching the goods for delivery to the customer where deliveries are dispatched well after an order is first placed. The captured e-commerce credit card transaction data is then consolidated with the in-person credit card transaction data within the in-store data processing or point-of-sale system(s), step 250. Thereafter, the consolidated credit card charges representing both e-commerce internet web site credit card purchases and credit card purchases made by customers at company physical stores are transmitted to a credit card processor in a single batch thereby enabling the merchant to obtain the highest level of discounts available, step 260.

However, in the case of a business which is dealing in goods which the consumers expect to receive in very short order, delaying delivery until after the credit card transaction data is transmitted to an in-store system and further until after it is then authorized may in certain situations prevent the business from meeting its delivery obligation to its consumers. For example, a pizza parlor which operates an internet web site for accepting orders for pizza deliveries accepts orders from customers who expect the pizzas to be delivered in minutes not days. In this example, the merchant would certainly desire and thus require authorization of a purchaser's credit card in order to guarantee payment before dispatching a pizza which will be consumed. In other examples, consumers purchasing hard goods may elect to pay an additional shipping fee to be able receive their merchandise the next day via an overnight delivery service. The time a merchant has for processing an expedited order may be limited given that most overnight delivery services have a cut-off time after which they cannot guarantee next day delivery. Delaying shipment until after the transaction data is transmitted and then authorized may cause the merchant to miss the delivery service's last pick-up time and would thus preclude meeting the customer's expectations. Accordingly, in another embodiment of the present invention, illustrated in

Fig. 2, it is envisioned that the step of obtaining an authorization code for a credit card purchase, step 320, will be performed by the web site computer system prior to that data being transmitted to the in-store system for ultimate processing, step 330. In the case of the present invention according to this alternative embodiment, the transaction data which is transmitted to the in-store system, would comprise, at a minimum, the user's credit card number, the expiration date, the dollar value of the transaction, the authorization code received, as well as the merchant number. In addition, in the case of a business operating multiple web sites and/or multiple physical stores, it is conceived and deemed within the scope of the present invention that different merchant numbers may be used and/or different store identifiers be included amongst the data which is received by the single in-store computer facility which is ultimately transmitting the credit card charges to the credit card transaction processing entity. In this manner, data can be matched up when it is transmitted between and amongst the various businesses for purposes of accounting, verification, report generation and other operational needs. The foregoing description and drawings merely explain and illustrate the invention and the invention is not limited thereto except insofar as the appended claims are so limited, inasmuch as those skilled in the art, having the present disclosure before them will be able to make modifications and variations therein without departing from the scope of the invention.

Claims

CLAIM:

1. A method for processing credit card payments made by customers purchasing goods from merchants via both a merchant operated Internet web site as well as a merchant operated physical store location which accepts credit cards as payment for goods purchased by customers from the merchant operated physical store location;, the method comprising:

- capturing e-commerce credit card transaction data related to orders placed by customers purchasing goods and/or services from a merchant's Internet web site using credit cards as a manner of payment;

- transmitting captured e-commerce credit card transaction data from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location;

- inputting the e-commerce credit card transaction data into the computer system associated with one or more of the merchant's physical store location;

- processing the e-commerce credit card transaction data to obtain authorization for the credit card charge accepted as payment for goods and/or services ordered from the merchant operated Internet web site;

- consolidating the e-commerce credit card transaction data with credit card transaction data generated by customers making purchases as the merchant's physical store location; - transmitting the consolidated credit card transaction data to a credit card processing facility, whereby the merchant is able to take maximum advantage of the volume discounts offered by credit card payment processing facilities.

2. The invention according to Claim 1 wherein the step of capturing e- commerce credit card transaction data related to orders placed by customers purchasing goods and/or services from a merchant's Internet web site using credit cards as a manner of payment is followed by the step of: - storing e-commerce credit card transaction data on a computer system associated with the merchant's internet web site.

3. The invention according to Claim '2 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location on a transaction-by-transaction basis.

4. The invention according to Claim 2 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location at a predetermined time of day.

5. The invention according to Claim 2 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location when a predetermined number of credit card transactions have been stored.

6. A method for processing credit card payments made by customers purchasing goods from merchants via both a merchant operated Internet web site as well as a merchant operated physical store location which accepts credit cards as payment for goods purchased by customers from the merchant operated physical store location;, the method comprising:

- transmitting captured e-commerce credit card transaction data from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location; - inputting the e-commerce credit card transaction data into the computer system associated with one or more of the merchant's physical store location; - consolidating the e-commerce credit card transaction data with credit card transaction data generated by customers making purchases as the merchant's physical store location; - transmitting the consolidated credit card transaction data to a credit card processing facility, whereby the merchant is able to take maximum advantage of the volume discounts offered by credit card payment processing facilities.

7. The invention according to Claim 6 wherein the step of processing the e- commerce credit card transaction data to obtain authorization for credit card charges is followed by the step of:

- storing e-commerce credit card transaction data on a computer system associated with the merchant's internet web site.

8. The invention according to Claim 7 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location on a transaction-by-transaction basis.

9. The invention according to Claim 7 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location at a predetermined time of day.

10. The invention according to Claim 7 wherein the captured e-commerce credit card transaction data is transmitted from the Internet web site computer system to a computer system associated with one or more of the merchant's physical store location when a predetermined number of credit card transactions have been stored.