Method and system for facilitating network transaction processing

1 METHOD AND SYSTEM FOR FACILITATING NETWORK TRANSACTION PROCESSING

CROSS-REFERENCE TO RELATED APPLICATIONS

This patent application is a continuation in part of U.S. patent application Ser. No. 10/874,227, entitled “Method and System for Transaction Decision Making”, filed Jun. 24, 2004, which is hereby incorporated by reference herein in its entirety.

FIELD OF THE INVENTION

The present invention relates generally to transaction processing and, more particularly, to a method and system for facilitating transaction processing for a network of banks, financial institutions and/or other participants.

BACKGROUND OF THE INVENTION

Check conversion generally refers to a payment that begins with a paper check and ends as an electronic debit. The paper check may be truncated/converted into an electronic debit entry early in the check handling cycle for subsequent electronic processing. Currently, checks may be converted using Automated Clearing House (ACH) payment system, ATM networks or other mechanisms. Other clearing channels may include Image Replacement Document (IRD), image exchange, and other channels. As a result, the efficiencies of electronic payments are realized while customers still continue to write paper checks.

Currently, various electronic payments, such as automatic payroll deposits and debit card purchases, may be handled and processed. As a result, corporations and consumers can reduce or eliminate the use of paper checks to make routine and other payments. Examples of electronic payments include salaries, consumer and corporate bill payments, interest and dividends, and Social Security and other entitlement programs.

Many entities, including corporations, have been able to realize significant savings by collecting recurring consumer payment obligations by debiting consumers’ bank accounts electronically after obtaining approval of the bill payer to debit his or her bank account periodically for the amount owed. A consumer or a corporation can make an electronic credit payment instead of issuing a paper check.

As more banks and other entities participate in various electronic payment systems, additional requirements may be implemented for each receiving entity. For example, different recipients may implement different mechanisms for identifying, receiving and/or processing electronic payments. Further, different banks may implement different electronic payment requirements. These inconsistencies and specific requirements may lead to errors and inefliciencies in transmitting and receiving electronic payments. Such errors and inefliciencies will inevitably lead to delays and higher costs. Currently, each settlement channel has its own settlement accounting system, resulting in various inefliciencies and duplicative efforts due to the support of multiple accounting systems.

In the credit card industry, the concept of “on-us” items refers to checks drawn on the same bank that is used by the payee to cash the check or deposit the proceeds. Payment is deposited at the same financial institution on which it was drawn or written. Thus, these items are not cleared between institutions. As a result, savings in cost, time and/or other

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efliciencies are realized. After a check is deposited at a local bank, the local bank may transport the check to a processing center where the checks are encoded and sorted.

Typically, a sorter is used to separate on-us documents from transit documents at a first pass. A traditional sorting process may involve a bank sorting paper checks according to individual member banks, and after the sorted checks are passed to individual member banks, the member bank further sorts the checks to support a direct send, which may include a single transmission representing a single bank’s transactions. The sorter may capture MICR data and sort the documents into groups according to individual customer accounts. Thus, on-us documents may be electronically transmitted and quickly posted to a customer’s account. Generally, banks receive their on-us files for posting from many different sources. For example, a bank may receive all their paper checks and/ or other payment items, sort out those items they want to clear, and processes their own in-clearings. In-clearing documents are typically non on-us documents received from other banks or clearing facilities. Documents identified as transit items are generally dispatched and settled through a third party settlement agency. Third party settlement agencies may include Federal Reserve, Clearinghouse Banks, and/or other various entities and organizations that require additional time and fees. Each correspondent bank is responsible for all their own settlement functions, as well as any check image capturing, archiving, etc.

In view of the foregoing, it would be desirable to provide a method and system for settlement processing which overcome the above-described inadequacies and shortcomings.

SUMMARY OF THE INVENTION

According to an exemplary embodiment of the present invention, a computer implemented method for facilitating settlement processing within a network of financial institutions comprises receiving one or more payment items from a plurality of payment entities, at a centralized agent, wherein the one or more payment items comprise one or more electronic images and paper instruments; aggregating the payment items into one or more categories; identifying a payee financial institution and a payor financial institution for each payment items, wherein the payee financial institution and the payor financial institution are different; determining whether the payee financial institution and the payor financial institution are within the network of financial institutions; for the payee and payor within the network, determining at the centralized agent a settlement path within the network of financial institutions for each payment item; and for the payee and payor that are not within the network, forwarding the payment items to a third party settlement entity by the centralized agent for settlement processing.

In accordance with other aspects of the exemplary embodiment of the present invention, the categories comprise one or more of image clearing files and image cash letters; the categories comprise payment entity; the settlement path comprises one or more of IRD, ACH, ARC, ECP, posting to a consumer account, wire transfer and data archive; archiving payment data associated with each payment item; providing access to data specific to payment items through an interface provided by the centralized agent; the interface is customized based on user specific criteria; the network of financial institutions comprises a combination of banks and credit unions; a non-network entity accesses the centralized agent for data exchange with at least one entity within the network; sorting the payment items into on-us items and transit items; and a

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payment entity leverages the centralized agent’s infrastructure for processing payment items.

According to an exemplary embodiment of the present invention, a computer implemented system for facilitating settlement processing Within a network of financial institutions comprises a receive module for receiving one or more payment items from a plurality of payment entities, wherein the one or more payment items comprise one or more electronic images and paper instruments; an aggregate module for aggregating the payment items into one or more categories; a decision module for identifying a payee financial institution and a payor financial institution for each payment items, wherein the payee financial institution and the payor financial institution are different and determining Whether the payee financial institution and the payor financial institution are Within the network of financial institutions; and a settlement module for determining a settlement path Within the network of financial institutions for each payment item for the payee and payor within the network and forwarding the payment items to a third party settlement entity for settlement processing for the payee and payor that are not within the network; wherein the receive module, the aggregate module, the decision module and the settlement module reside at a centralized agent.

BRIEF DESCRIPTION OF THE DRAWINGS

In order to facilitate a fuller understanding of the present invention, reference is now made to the appended drawings. These drawings should not be construed as limiting the present invention, but are intended to be exemplary only.

FIG. 1 is an exemplary system illustrating transaction decision making, in accordance with an embodiment of the present invention.

FIG. 2 is an exemplary flowchart illustrating a method for transaction decision making, in accordance with an embodiment of the present invention.

FIG. 3 is an exemplary system illustrating transaction decision making, in accordance with an embodiment of the present invention.

FIG. 4 is an exemplary system illustrating a settlement network, in accordance with an embodiment of the present invention.

FIG. 5 is an exemplary flowchart illustrating a method for facilitating settlement processing within a network, in accordance with an embodiment of the present invention.

DETAILED DESCRIPTION OF EXEMPLARY EMBODIMENT(S)

A system and process for improving efliciency of processing payment items is described. According to one exemplary aspect, the system and process is directed to facilitating network transaction processing.

FIG. 1 is an exemplary system illustrating transaction decision making, in accordance with an embodiment of the present invention. System 100 illustrates an exemplary environment for processing payment items. A payment item 102, such as a check, may be received at Sorter 110. Payment items may include checks, cash tickets, deposit tickets, commercial paper and other paper instruments. The payment item 102 may contain information, such as a payee, legal amount (e.g., amount written), courtesy amount (e.g., numerical representation of legal amount), signature, memo, other identifiers and/ or other data. Pre-printed information may include payor identification information, such as payor name, payor address, payor telephone, and other information. Depending

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on the type of payment item, different data may be included and/or printed. In the example of a check, the payment item may include a Magnetic Ink Character Recognition (MICR) line, which contains routing number, account number, MICR amount, check number, and/ or other electronically readable numbers and/ or codes. A pre-printed commercial check may include a MICR dollar amount. In addition, payment items may also include serial numbers (or other identifiers). For example, serial numbers may represent a business check, store identifier, check numbers, process codes, transaction codes and/ or other information. Other identifiers may include field numbers, position numbers which may be used to earmark checks as truncated items, expedited returns, IRD or other types of payment items.

Sorter 104 may include various modules for performing functions associated with capturing an image from the payment item, reading electronic information, determining an appropriate route and/ or performing other related functions. Sorter 104 may include Receiving Module 110, Extracting Module 120, Image Module 122, Conversion Module 128, Routing Module 124, Matching Module 140, Transaction Decision Making (TDM) Module 160 and/or other module(s). The modules of Sorter 104 may be further combined, duplicated and/ or separated. The modules may also be provided across multiple sorters and/or other devices. Sorter 104 may communicate with various databases, sources of information, front end devices, and/or other modules. For example, Matching Module 140 may communicate with one or more databases 150. Communication may be established through various modes of electronic communication, including Internet, Intranet, Ethernet, wireless communication and/ or other modes of communication.

Sorter 104 may be included in or connected to an image enabled front-end device (e.g., ATM, teller or other remote device), an image machine for commercial customers, and/or other type of device. For example, at a front counter, a teller or other entity may capture transaction image and data during a customer transaction process. In another example, a banking center personnel may capture transaction image and data subsequent to the customer transaction process. ATM image capture may provide the ability to capture transactions made at anATM (or other similar interface). Image and data from a customer transaction process may be captured via other processes as well.

Sorter 104 may be located at or connected to a regional processing center, lockbox locations and/or other location. Lockbox locations may include a national retail lockbox, wholesale lockbox, regional retail lockbox and/ or other types of lockbox locations. National retail lockbox may include a check collection system in which a bank or third party receives, processes and deposits a company’s mail receipts. Wholesale lockbox may include a moderate number of large dollar remittances, with varied documentation, usually from corporation to corporation. Regional retail lockbox may include a local processing site rather than a national or network processing site. In addition, Sorter 104 may represent an image capture device located at a business location.

Receiving Module 110 may receive the payment item. Receiving Module 110 may receive the actual physical payment item. In another example, Receiving Module 110 may receive an image of the payment item and/ or other electronic data identifying or describing the payment item.

Extracting Module 120 may extract electronic data from the payment item. Electronic data may include data from the MICR line. For example, Extracting Module 120 may read the MICR line of the payment item that contains the routing