MasterCard : Pub. No. 2016/0342989
METHOD AND SYTEM FOR PROCESSING BLOCKCHAIN-BASED TRANSACTIONS ON EXISTING PAYMENT NETWORKS
Inventor: Steven Charles Davis
Filed: May 21, 2015
Priority: May 21, 2015
U.S. Patent Pub. No. 2016/0342989 (“the ‘989 App”) seeks to improve or supplement Blockchain-based transactions using established payment rails, such as an existing credit card network. The background notes the time delay problem hinders speedy transactions often associated with credit cards. The time delay requires the seller to balance fraud detection versus speed of the transaction.
The general architecture (100) adds the Blockchain network 106 into the transaction environment. When digital currency is included in the transaction, the payment network 110 includes addition functionality enabling the cryptocurrency transaction.
A transaction begins when a payer requests to initiate a transaction and provide funds to the payee. Presumably, the counterpart to this transaction is a physical exchange of goods or services outside of the system 100, and not a currency conversion transaction. This transaction request by the payer includes accessing a digital wallet and including digital signatures, as necessary, and the currency amount.
Where prior Blockchain transactions are decentralized, the payment network 110 knowingly operates as a trusted intermediary, receiving the transaction request. As the intermediary and harnessing known payment rails, the network 110 integrates the Blockchain request similar to credit transactions.
The payment network 110 includes numerous verification, encryption and addressing functions to seamlessly operate into the Blockchain network, including public information as necessary and “data elements reserved for private use.”
The intermediate location of the payment network 110 opens up Blockchain transactions for being treated similar to credit transactions and a host of attendant benefits.
As the issuer 112 and acquirer 114 are banks, this method and system then allows for fraud or risk assessment of the transaction.
the issuer 112 may assess a risk for the transaction based on an evaluation provided by the processing server 110 or performed by the issuer 112, such as based on the payer’s available funds, credit history, or other fraud, sanction, and/or risk considerations that will be apparent to persons having skill in the relevant art. In some embodiments, the acquirer 114 may assess a risk for the transaction prior to processing by the blockchain network 106. For instance, the acquirer 114 may evaluate the reliability of the payer 102, an expectation of fraud, etc. based on data provided by the issuer 112, processing server 110, or third party entity, as discussed in more detail below. In some instances, the payer 102 may decline the use of chargeback or payment protection in exchange for a discount offered by the payee 104 (e.g., a merchant), which may be beneficial for the merchant 104 as a result of reduced fees. In other instances, the payee 104 may decline the use of risk assessments and other protections for a transaction. (Para. 41)
Similarly, the issuer or acquirer may already have existing “float” of cryptocurrency to offset settlement risks.
the issuer 112 may manage fractional reserves of fiat and blockchain currency, which may include the storage of currencies associated with the payer 102. The issuer 112 may store a transaction account of blockchain currency associated with the payer 102 such that, when a transaction is attempted by the payer 102, the issuer 112 may verify the available funds of the payer 102 prior to initiating the blockchain transaction, which may be before submitting the transaction message to the processing server 110 and/or before submitting a transaction request to the blockchain network 106. (Para. 40)
The method and system allows for these benefits not only based on trusted interactions with the banks (issuer 112 / acquirer 114), but also the inclusion of account profiles stored in the processing server 110.
Therefore, supplementing the payment network 110 relative to a Blockchain network allows for transactional options for people accepting cryptocurrency payments. Where current techniques for 10+ minute settlements are always available and well within the public domain, the ‘989 App offers a cryptocurrency transaction option more akin to well-established credit card transactions.
This method and system allows for:
- Merchant (Payee) to evaluate the risk of the transaction and determine if verification should be first received;
- Allows a financial institution to stand-in as a verifying entity for the Payer (mitigating risk of (1); and
- A financial institution to float fractional reserves so the Payer can conduct multiple transactions in a short period of time.
The Patent Application is being prosecuted by: Buchanan Ingersoll & Rooney.
As of February 1, 2018 – the application remains pending with all claims rejected under multiple grounds.