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Description  |
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BACKGROUND OF THE INVENTION
1. Field of the Invention
This invention relates to electronic systems for authorizing transactions,
and in particular to authorization systems utilizing a host computer and a
network of remote electronic terminals.
2. Description of the Prior Art
Historically, credit and debit authorization systems have been devised in
an attempt to permit only those transactions that result in proper payment
to the proper parties Typically, credit authorization systems involve the
entity extending the credit (creditor), the entity providing the goods or
services on credit to the customer (merchant), and the one to whom credit
has been extended typically by issuance of a card representing access to
credit (card holder). The creditor and merchant may be different or may be
the same entity, but there is risk to both, namely, the risk of improper
or lack of payment.
Conventional authorization systems seek to balance risk within recognized
limits against the cost of the authorization service to determine under
what conditions the transaction will be allowed. The cost of credit
authorization should not outweigh the costs of potential risk.
In the early days of credit cards, mere possession of the card was
considered sufficient to authorize the transaction. This is still
prevalent in the oil industry. However, as the losses from fraud and bad
credit accounts continued to mount, many companies, including creditors
and merchants, published a periodic listing of credit card account numbers
that would not be honored. This system, unfortunately, was fraught with
errors, and it was difficult to keep the published listing up to date and
distributed in timely fashion to the merchants and their employees. In
addition, even if the proper report was with the merchant's employees or
clerks, there was frequent neglect on the part of the clerk at the point
of sale or transaction to utilize the published reports properly, if at
all.
The next step in the evolution of credit authorization systems was the
floor limit/voice authorization combination whereby smaller dollar
transactions, i.e., below the floor limit would be allowed. However, those
above the floor limit required a telephone call to a representative of the
creditor or merchant who had access to current, or recent information on
the status of a particular credit card account. The representative would
then provide a code number via which they would guarantee the transaction
would be collectable. These typically utilize telephonic voice equipment
for contacting a representative having access to current or recent
information in the host computer. These systems are still in wide use
today, but are quite slow, cumbersome, and also error prone.
With the advent of low-cost electronic terminals, there have recently been
major steps in the direction of virtually 100 percent electronic
authorization. These systems are remote in the sense that they are at the
point of sale or requested transaction, and the systems virtually
guarantee payment for all authorized transactions. They also provide for
electronic transfer of funds usually within 24 hours. Unfortunately, there
are two significant problems associated with these types of systems: (1)
customer waiting time in which the clerk, customer, and those in line
behind the customer must wait an additional 30 seconds to 3 minutes or
more to obtain the authorization; and (2) operating cost of making
connections to the host computer, i.e., telephone calls. In most cases,
each transaction requires a separate telephone call, and for low-value
transactions the cost of the call can become the major expense of the
authorization service.
There are some credit authorization systems which attempt to use the
warning bulletin method by broadcasting via radio waves accounts which are
identified as transactions which require host authorization even though
the transaction request amount is below the floor limit for the terminal.
However, such systems require geographic clusters of terminals and costly
equipment to receive radio waves, and requires additional terminal memory,
since the data is not terminal specific, i.e., based on a larger universe
of required data with more data storage requirements. It's costly to
manufacture and operate.
Another approach has been to use "smart" credit or debit cards wherein
account information is modified and stored on the card itself. The major
drawbacks with this approach are (i) the drastically increased cost to
manufacture "smart" cards, and (ii) drastically increased complexity and
cost of the electronic terminal user to accept and process "smart" card
information.
Thus, conventional prior art authorization systems do not provide a
cost-effective means of authorizing transactions quickly within acceptable
limits of risk.
SUMMARY OF THE INVENTION
It is an object of the present invention to provide an authorization system
and method which is capable of considerably reducing response time for a
transaction to the user's benefit.
It is a further object of the present invention to provide a authorization
system and method which minimizes the operating costs associated with
providing the authorization transaction.
It is yet another object of the present invention to provide an
authorization system and process which is able to achieve an acceptable
level of authorization risk with minimal transaction time and operating
cost.
It is another object of the present invention to provide a authorization
system and process which offers a reliable authorization function with a
minimum amount of error.
It is yet another object of the present invention to provide a distributed
authorization system and method which provides improved security and
accuracy at a fraction of the operating expense of conventional systems,
while drastically reducing the authorization response time.
Further objects of the present invention will become apparent in the full
description of the invention taken in conjunction with the drawings set
forth below.
A distributed authorization system and process for authorizing transactions
utilizes a host computer communicating with a network of electronic
terminals remote from the host computer. It includes storing negative file
data in the electronic terminal containing information used to identify
accounts for which requested transactions are to be denied, and storing
authorization file data in the electronic terminal containing information
used to determine whether to authorize a requested transaction. Upon entry
of a transaction request, the data is checked against the terminal
negative file data and immediately denied if the card account is contained
in the terminal's negative file. If the transaction is not denied,
authorization logic is performed in the electronic terminal resulting in
terminal output denying the request, authorizing the request, or
establishing an electronic connection from the terminal to the host
computer to obtain authorization from the host computer. In establishing
this connection, account data is transmitted from the host back to the
remote electronic terminal resulting in terminal output either denying the
request or authorizing the request. Also, during such connection, the
terminal's authorization file is updated with account data, transmitted
from the host computer to the electronic terminal. The completed
transaction is stored in a terminal transaction queue file residing in the
terminal for subsequent transmission to the host computer, and for use
when a transaction request is subsequently entered at the terminal for the
same account.
The data stored in the completed transaction file are stored in the
terminal in a message queue file for transmission to the host computer
whenever a connection is established. The host computer stores all changes
received in authorization data for a given account in a host authorization
file update queue, storing a message to be sent to each remote electronic
terminal identified in the host message queue file for the given account.
Whenever a connection is made, this authorization file update queue file
message is then sent by the host computer to the connected terminal that
has an authorization on file for that account. The system and process also
includes, in the event the connection has not been caused within a certain
period of time, means for periodically causing the terminal to send queued
information back to the host computer, and means for the host computer to
periodically call terminals to exchange account information between the
terminal queue file and host queue file concerning respective accounts.
The electronic terminal also includes a feature whereby it deletes least
recently used account data when its limited memory is full, and notifies
the host computer of same.
BRIEF DESCRIPTION OF THE DRAWINGS
FIG. 1 is a schematic diagram showing the preferred arrangement of the
component parts used in practice of the present invention.
FIG. 2 is a schematic diagram showing the component parts in the host
computer used in practice of the present invention.
FIG. 3 is a schematic diagram showing the preferred component parts in the
electronic terminal used in practice of the present invention.
FIG. 4 shows a flow diagram of the sequence of operation of components in
the electronic terminal in accordance with the present invention.
FIG. 5 shows a flow diagram of the sequence of operation of components in
the host computer in accordance with the present invention.
DETAILED DESCRIPTION OF THE DRAWINGS
In describing a preferred embodiment of the invention illustrated in the
drawings, specific terminology will be resorted to for the sake of
clarity, however, the invention is not intended to be limited to the
specific terms so selected, and it is to be understood that each specific
term includes all technical equivalents which operate in a similar manner
to accomplish a similar purpose.
Referring now to the drawings, there is shown in FIG. 1 an authorization
system comprising a host computer 100 and terminals 200. While there is
shown at least one terminal 200 in FIG. 1, there can be any number of
electronic terminals up to N comprising a network of electronic terminals
which communicate via electronic communication links 20. This can be in
the form of a dedicated communications line to the host computer, or a
conventional switched telephone line connection or other electronic data
communication link which can be connected and disconnected at will. Also
shown in FIG. 1 is an account 300, typically represented by an authorized
debit or credit card used to access the electronic terminal 200. As used
herein, electronic terminal may include a plurality of electronic
terminals directly connected to a controller in which case the controller
may contain the electronic terminal components described herein.
There is shown in FIGS. 2 and 3 the preferred components of the host
computer 100 and electronic terminal 200, necessary in order to carry out
the preferred embodiments of the present invention. In particular, as
shown in FIG. 2 the components of the host computer 100 including host
authorization file 110 which contains for each card account 300, a list of
the terminals 200 that currently have a valid authorization for that card
account. Also shown in FIG. 2 is a host message queue file 120 which
contains for each terminal a list of messages stored in memory that are
waiting to be sent to appropriate electronic terminals throughout the
network.
The host computer is typically a digital computer such as a Tandem
(Trademark) computer normally used in processing in credit and debit card
authorization networks for on-line transaction processing, but can be any
general purpose computer. The electronic terminal 200 is a typical micro
computer electronic terminal typically utilized in authorization systems.
It usually contains less memory and processing capability than does the
host computer. However, it is typically located geographically remote from
the host computer at strategic locations near the merchant or other
locations convenient to the users thereof who are making transaction
requests.
Further shown in FIG. 2 is host authorization logic 130 contained within
the host computer 100 for processing logic to determine whether or not a
requested transaction will be approved for a given account. The logic
utilized may take any form of authorization logic required for the
particular application as it is not specific to operation of this
distributed authorization system. In a credit application, it typically
involves a credit limit and a running update total of the amount of credit
still available for a given account based on recent information. It may
also involve other parameters as may be set by the designer of the system
including the ability to freeze out accounts for one reason or another, or
to assure the proper personal identification number and other criteria are
met before an authorization is granted.
In FIG. 3 there is shown the preferred components for the system as
presented in the present invention as contained in electronic terminal
200. There is shown terminal authorization file 210 which contains the
card account numbers and other parameters used to authorize the
transaction. There is also shown a negative file memory 220 contained in
the electronic terminal 200 representing card account numbers for
transactions that are to be denied authorization. There is also shown a
transaction file queue 230 which is contained in the electronic terminal
memory for storing completed transactions which have taken place at the
terminal and have not yet been communicated to or reconciled with the host
computer. There is also shown in terminal authorization logic 240
contained in the terminal 200 which contains logic similar to that which
would be contained in the host computer 130 with respect to parameters and
other information for processing authorizations.
Typically, the amount of memory and processing capability of the host
computer 100 is much greater than that found in the remote electronic
terminal 200. Therefore, it normally cannot contain all the information
concerning all card accounts of the entire universe of card accounts
utilized in the authorization system network, as does the host computer.
However, as described hereinafter in the operation of this system, the
limited information available for storage and processing at the terminal
can be utilized in an effective manner to realize the benefits of the
present invention.
Referring now to FIG. 4, there is shown a flow chart of the operation of
the computer program within the electronic terminal 200 in the distributed
authorization system and process described herein. For example, a card or
other transaction request media is presented to the terminal 200 via a
user input program 202 to accept entry of the account number provided
necessary parameters are met with respect to allowing access to the
terminal. The computer program 204 checks whether the card account
previously entered is in the terminal's negative file. If the answer is
yes 206 the system will deny the transaction 208 and return to the ready
state 212 and indicates terminal output to that effect of denying of the
transaction. If the card account is not 214 in the negative file, the
system checks 216 to see whether the card account is contained in the
terminal's authorization file. If it is contained 218 in the terminal's
authorization file, the system will then perform authorization logic 222
having an output result 224 in which the transaction is denied 226,
authorized 228, or an instruction is made to call 232 the host computer.
As used herein, call refers to establishing an electronic connection
between the terminal and the host computer, i.e., a terminal initiated
communication with the host computer. If the credit account information is
not contained in the terminal authorization file 234, the system also
instructs the terminal to establish a connection and make contact 236 with
the host computer. Accordingly, a call or contact is only made to the host
typically in response to the above computer program instructions, and
therefore it can be seen that a call is not necessary every time for every
transaction request, since some transactions may be denied and many may be
authorized locally at the terminal.
Upon call 236 to the host, the host authorization logic 130 is accessed 238
and the decision based on such computer program logic is indicated as to
whether or not the transaction is to be authorized. Connection to the host
can be made via any available communications technology, including switch
telephone network modem, direct leased data communications lines,
microwave, satellites, radio wave transmission and the like. If the
transaction is not authorized 242 upon call of the host, the transaction
is denied 208 and this result is output to the user, and the terminal
operation returns to a ready 212 state. If the transaction is authorized
244 by the host, this is communicated by the host to the terminal.
The terminal authorization file is updated provided there is space
available due to memory limitations within the computer memory contained
in the electronic terminal. In this portion of the system and process, the
computer program inquires as to whether space is available in the terminal
authorization file 246 and if there is space available 248, the
authorization data is saved 250 and the authorization file is updated. If
there is no space 252 available in the authorization file of the terminal,
the computer program is instructed to delete 254 the least recently used
card account information and a record or notification 256 is made of the
deletion, which will be communicated during a subsequent contact to the
host computer. Upon completion of this process 258, then the authorization
data is saved in the space now available due to the recent deletion.
Once the authorization data has been saved 260, the host-authorized
transaction is then completed and stored 262 by the electronic terminal
computer program. The transaction is also completed and stored 262 when it
has been authorized 228 by the terminal authorization 222. Once the
transaction has been stored in the transaction file 230, as shown in FIG.
3, its completion 264 is indicated and the system then returns to the
ready state 212.
Referring now to FIG. 5, there is shown preferred operation of the
components in the host computer. In particular, the host computer receives
changes 102 in the authorization data for a card account and sends the
data 104 to a program 106 within the host computer which builds and queues
a computer record message for each terminal in the host authorization file
for a given card account. These messages are stored in the host computer
memory 106 for subsequent transmission to one or more electronic terminals
in the network whenever a connection is made to the terminals involved.
There is further shown in FIG. 5 a host computer establishing contact 112
with the electronic terminal and once contact is established, all queued
messages for any given terminal are sent 114 to the terminal. Thus, for
each terminal, a queue of stored messages 120 is stored in the host
computer to be sent 114 to a terminal whenever a connection is made. Once
the information has been exchanged between the host computer and the
electronic terminal, the connection is then disconnected 116.
Thus, it can be seen that calls are made to the host computer by the
electronic terminal only as required, and not necessarily upon
presentation of every request for authorization for a transaction. The
host computer also in accordance with the system and process described
herein, only makes contact with the electronic terminal when an event
causes a change in that authorization data requiring such a connection.
Moreover, such messages are either sent immediately, such as a call from
the host computer to the electronic terminal, or more typically during the
next connection that is established in a subsequent transaction with the
electronic terminal. Thus, the completed transactions are stored and only
sent when required by the priorities indicated in the flow diagrams
herein.
For certain classes of transactions, the distributed authorization system
and process as embodied herein realizes benefits not heretofore
recognized. The normal authorization time can be reduced down in practice
to about one second, and the telephone/telecommunications expenses can be
substantially reduced as discussed hereinafter. This is based on
individual usage patterns, but it is found through experience that there
are certain situations where the distributed authorization system can be
of great benefit. The system herein is most applicable to situations where
the customer frequently uses the same merchant location or electronic
terminal. Examples are automated teller machines where the average user
typically returns to the same automated teller machine location several
times a month. Another application is grocery store check authorizations
where most grocery shoppers pay by check and use a single store for their
purchases about five times per month. In addition, gasoline stations
present situations where people habitually purchase gasoline at the same
one or two stations about seven times per month. Similar situations arise
in convenience stores where individuals often stop at the store near their
home or work as many as two to three times per week. Other examples are
hardware and homecenter stores where users will visit their neighborhood
hardware store nearly every weekend. Also, entertainment services such as
movie theaters are typically adopted for this type of authorization
system, as are commuter services. Any service or business in which the
user repeats visits to the same provider of goods or services, and is
desirous of using credit, can obtain extreme benefits from use of the
present invention.
Accordingly, the present invention recognizes this and finds it is only
necessary for the electronic terminal to request an authorization from the
host whenever a new card account customer is presented at that particular
electronic terminal. However, once the authorization information is
granted by the host computer to the electronic terminal for that
particular account, the terminal itself can then make a determination for
as long as the authorization information is valid. Then when some external
event such as a stolen card causes removal of the authorization, the host
computer system merely sends the cancellation message to only those
terminals that currently contain valid authorization for that particular
card account. This is accomplished as described above. Also on a periodic
basis, the completed transactions contained in the queue file at the
electronic terminal may be transmitted from the terminal to the host for
processing.
Moreover, the authorization file list stored in the electronic terminal
computer memory is self regulating in the sense that the least
recently-used credit account authorizations are eliminated when terminal
memory space is needed for a new authorization. Through the periodic
exchange of messages via the establishment of the electronic connection in
the circumstances outlined above, the terminal and the host computer
maintain file synchronization effectively so that the host computer
effectively always knows what card accounts are authorized at which
terminals.
An example of the call reduction as a result of the present invention is
summarized as follows:
The advantage in reducing the number of telephone calls required to support
the authorization and draft capture system is a function of (1) number of
repeated transactions, (2) number of authorization file updates required,
(3) telephone connect time required for a host authorization, and (4) time
required to transmit a completed transaction.
First calculate the required number of calls under the conventional
authorization systems. Assuming that each completed transaction is
transmitted during the next authorization call, then this number is
approximately equal to the number of transactions plus the number of host
denials.
Old # calls=# Transactions+# Denials
Next, calculate the number of completed transactions that can be
transmitted during the normal authorization connect time (rounded up to
the nearest billing increment)
##EQU1##
Finally, calculate the percent reduction in calls, or call reduction as
##EQU2##
For example:
During a sample period, a terminal produced 1,000 transactions and incurred
100 host denials. The 1,100 authorizations were for 120 different cards.
During this period, four of the cards required a file update due to
lost/stolen activity or change in available credit. A normal conventional
host authorization takes 27 seconds and it takes 3 second to transmit a
completed transaction to the host.
##EQU3##
or, rounding up to next increment,
##EQU4##
Finally,
##EQU5##
This indicates that the number of calls, and the associated expense, would
be reduced by 70.5% using the distributed authorization system described
herein.
This example also indicates that only 120 of the 1,100 attempted
transactions will require a call to the host computer. The response time
for the remaining 980 transactions is reduced to essentially zero.
Note that in this example, even if the number of cards is as high as 75%
(indicating very little 23% repeat usage of 23%), there is still a 13%
advantage using the distributed authorization system described herein.
The present invention is able to provide the majority of the security and
accuracy of a host-based authorization system at a fraction of the
operating expense while drastically reducing the authorization response
time.
Although the present invention has been shown and described in terms of
specific preferred embodiments, it will be appreciated by those skilled in
the art that changes or modifications are possible which do not depart
from the inventive concepts described and taught herein. Such changes and
modifications are deemed to fall within the purview of these inventive
concepts. Thus, it should be noted that the accompanying description and
drawings are meant to describe the preferred embodiments of the invention,
but are not intended to limit the spirit and scope thereof.
* * * * *
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Description |
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