System and method for enhancing financial institution revenues through acceleration of debit processing

• US 20040193537A1
• Filed: 03/31/2003
• Published: 09/30/2004
• Est. Priority Date: 03/31/2003
• Status: Active Grant

• Current Assignee: Knapp/Liu Family Trust
• Original Assignee: William Stephen Knapp
• Inventors: Knapp, William Stephen
• Granted Patent: US 7,062,463 B2
• Time in Patent Office: Days
• US Class Current: 705/39
• CPC Class Codes: G06Q 20/042 characterized in that the payment protocol involves at least one cheque
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 20/102 Bill distribution or payments
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03

Abstract

A system and method for enhancing financial institution revenue through acceleration of debit processing are provided. The method includes modeling the processing of account debit transactions, identifying ways to accelerate the processing of the account debit transactions and accelerating the account debit transactions. In a further embodiment, account debit transaction processing is accelerated from beginning on what has traditionally been referred to as Day 0 to beginning on some day before Day 0. Finally, a method and system are provided to determine the impacts of accelerating the processing of account debit transactions.

Claims

1. A method for increasing revenue of a financial institution through acceleration of debit transaction posting to customer accounts, wherein acceleration is relative to credit activity in the customer accounts, comprising:

(a) selecting a customer account type that will yield increased revenue to the financial institution when debit transaction posting is accelerated;

(b) selecting a debit type, wherein if the posting of debit transactions within the debit type to a customer account within the customer account type identified in step (a) is accelerated, customer account balances within the customer account type will be less for a period of time than if posting of the debit type had not been accelerated;

(c) identifying opportunities to accelerate posting of debit transactions within the debit type; and

(d) determining the revenue impact of accelerating the posting of debit transactions within the debit type to customer accounts within the customer account type.

2. The method of claim 1, further comprising;

(e) implementing an acceleration technique to accelerate the posting of debit transactions in the debit type.

3. The method of claim 1, further comprising;

(e) repeating steps (b) through (d) for all debit types of the financial institution.

4. The method of claim 3, further comprising;

(f) repeating steps (a) through (e) for all customer account types of the financial institution.

5. The method of claim 1, wherein step (c) further comprises;

(i) mapping the processing of the debit type; and

(ii) identifying processing intervals that can be reduced.

6. The method of claim 2, wherein said customer account type is an interest expense account.

7. The method of claim 6, wherein said interest expense account is a savings account.

8. The method of claim 6, wherein said interest expense account is a time deposit account.

9. The method of claim 2, wherein said customer account type is an interest revenue account.

10. The method of claim 9, wherein said interest revenue account is a credit card account.

11. The method of claim 9, wherein said interest revenue account is a line of credit account.

12. The method of claim 2, wherein said customer account type is a fee bearing account.

13. The method of claim 12, wherein said fee bearing account is an overdraft protection account.

14. The method of claim 12, wherein said fee bearing account is an overdraft fee account.

15. The method of claim 2, wherein said debit type is a customer-initiated debit type.

16. The method of claim 15, wherein said customer-initiated debit type is a point of sale offline debit.

17. The method of claim 15, wherein said customer-initiated debit type is a point of sale online debit.

18. The method of claim 15, wherein said customer-initiated debit type is an automated clearing house (ACH) debit.

19. The method of claim 15, wherein said customer-initiated debit type is a paper check.

20. The method of claim 15, wherein said customer-initiated debit type is a wire transfer debit.

21. The method of claim 15, wherein said customer-initiated debit type is a customer-initiated automatic electronic debit.

22. The method of claim 15, wherein said customer-initiated debit type is an Internet debit.

23. The method of claim 15, wherein said customer-initiated debit type is an ATM transaction debit.

24. The method of claim 2, wherein said debit type is a bank-initiated debit.

25. The method of claim 24, wherein said bank-initiated debit type is an overdraft fee debit.

26. The method of claim 24, wherein said bank-initiated debit type is an overdraft protection fee debit.

27. The method of claim 24, wherein said bank-initiated debit type is a returned item fee debit.

28. The method of claim 24, wherein said bank-initiated debit type is an incoming returned item debit.

29. The method of claim 1, wherein when the customer account type is a commercial account subject to overdraft account maintenance fees, step (d) further comprises:

(i) determining a number of accounts driven into an overdraft position as a result of debit acceleration;

(ii) determining a dollar value of a daily account fee imposed on an account for being in an overdraft position;

(iii) determining a total dollar amount of debits accelerated to accounts that were driven into an overdraft position as a result of debit acceleration;

(iv) determining an average number of calendar days that accounts are in an overdraft position;

(v) determining an interest rate for one calendar day; and

(vi) determining an incremental revenue by adding the product of the values determined in steps (i) and (ii) to the product of the values determined in steps (iii), (iv), and (v), and 0.50.

30. The method of claim 1, wherein when the customer account type is an overdraft return item account, step (d) further comprises:

(i) determining an overdraft transaction fee charged when a customer overdraws an overdraft return item account;

(ii) determining a number of debits, of the debit type to be accelerated, which are already found in overdraft return item accounts in overdraft status prior to acceleration; and

(iii) determining the incremental revenue by multiplying the values determined in steps (i) and (ii) and 0.50.

31. The method of claim 1, wherein when the customer account type is an overdraft protection account, step (d) further comprises:

(i) determining an overdraft protection account maintenance fee charged to an account when the overdraft protection feature is applied;

(ii) determining a number of overdraft protection accounts which exercise an overdraft protection feature and contain the debit type to be accelerated;

(iii) determining an incremental amount of monies drawn down because of acceleration;

(iv) determining an interest rate of a linked account to the overdraft protection accounts; and

(v) determining an incremental revenue by adding the product of the values determined in steps (i) and (ii) and 0.35 to the product of the values determined in steps (iii) and (iv).

32. The method of claim 1, wherein when the customer account type is an overdraft protection account, step (d) further comprises:

(i) determining incremental revenue generated from bank-initiated account maintenance fees;

(ii) determining incremental revenue generated from interest revenue resulting from accelerating debits;

(iii) determining a customer behavior predictive factor; and

(iv) multiplying the sum of the incremental revenues determined in steps (i) and (ii) by the customer behavior predictive factor.

33. The method of claim 1, wherein when the customer account type is an overdraft fee account, step (d) further comprises:

(i) determining incremental revenue generated from bank-initiated account maintenance fees;

(ii) determining a customer behavior predictive factor; and

(iii) multiplying the incremental revenue determined in steps (i) by the customer behavior predictive factor.

34. The method of claim 2, wherein the acceleration technique further comprises:

(a) identifying what constitutes Day 0 of the processing of a debit transaction within the debit type, wherein Day 0 is a day when the financial institution determines that a debit has begun processing at the financial institution; and

(b) creating a new method for processing the debit transaction, wherein processing of the debit transaction begins prior to said Day 0.

35. The method of claim 2, wherein the acceleration technique further comprises back valuation of debit transactions within the debit type.

36. The method of claim 2, wherein the acceleration technique further comprises converting the debit type to an alternative debit type.

37. The method of claim 2, wherein the acceleration technique further comprises delaying cut-off times of the financial institution for processing debit transactions of the debit type.

38. A method for increasing financial institution revenue, comprising:

(a) identifying opportunities to accelerate the posting of debit transactions within a debit type; and

(b) accelerating the posting of debit transactions for the debit type.

39. The method of claim 38, wherein said account debit type is a customer-initiated debit type.

40. The method of claim 39, wherein customer-initiated debit type is a point of sale (POS) debit.

41. The method of claim 39, wherein customer-initiated debit type is a paper check.

42. The method of claim 38, wherein said account debit type is a bank-initiated debit type.

43. The method of claim 42, wherein said bank-initiated debit type is an overdraft fee debit.

44. The method of claim 42, wherein said bank-initiated debit type is an overdraft protection fee debit.

45. The method of claim 42, wherein said bank-initiated debit type is an incoming returned item debit.

46. A method to determine the revenue impacts to a financial institution of accelerating the posting of at least one debit type, comprising:

(a) determining a set of study parameters that include at least the types of customer accounts, the number of customer accounts, and the duration of account activity to study;

(b) collecting balance and debit processing data from a sample of customer accounts selected based on said study parameters;

(c) developing at least one debit transaction model of the processing of at least one debit type;

(d) modeling the impacts of modifying said at least one debit transaction model by accelerating the rate at which the debit would post to a customer account; and

(e) determining revenue flows based on said impacts.

47. The method of claim 46, further comprising:

(f) modeling an impact of customer reaction to acceleration of debit processing; and

(g) determining adjustments to the revenue flows determined in step (e) based on modeled customer reactions.

48. The method of claim 46, further comprising:

(f) modeling an impact of regulatory limitations on a financial institution'"'"'s ability to accelerate debit processing; and

(g) determining adjustments to the revenue flows determined in step (e) based on modeled regulatory limitations.

49. The method of claim 46, further comprising:

(f) modeling an impact of prioritizing the implementation of changes to accelerate the processing of debits by the financial institution; and

(g) determining adjustments to the revenue flows determined in step (e) based on the modeled impact of prioritizing the implementation of changes to accelerate the processing of debits.

50. The method of claim 46, further comprising:

(f) modeling the implementation costs associated with accelerating at least one debit transaction method; and

(g) determining adjustments to the revenue flows determined in step (e) based on the modeled implementation costs.

51. A system for evaluation of financial institution debit processing acceleration, comprising:

(a) memory means for storing a set of models, each model defining a method by which a financial institution processes a debit type;

(b) means for gathering balance and debit transaction data from a set of financial institution customer accounts;

(c) means for modifying the set of models to accelerate the processing of debits; and

(d) means for determining the impact to revenues of the financial institution resulting from application of models modified in step (c) to the balance and debit transaction data gathered in step (b).

52. The system of claim 51, further comprising:

(e) memory means for storing a set of customer reaction functions, each customer reaction function defining the probability that a customer will change their banking characteristics to nullify the impact of accelerating a debit processing method and the probability that a customer will close the customer'"'"'s account as a result of the financial institution accelerating a debit processing method; and

(f) means for determining the impact to revenues of the financial institution resulting from application of the set of customer reaction functions to the impact determined in step (d).

53. The system of claim 51, further comprising:

(e) memory means for storing a set of regulatory impact functions, each regulatory impact function defining regulatory limitations that restrict acceleration of a type of account debit; and

(f) means for determining the impact to revenues of the financial institution resulting from application of the set of regulatory impact functions to the impact determined in step (d).

54. The system of claim 51, further comprising:

(e) means to gather priority and schedule information for implementing changes to the processing of at least one debit type; and

(f) means for determining the impact to revenues of the financial institution resulting from application of the priority and schedule information to the impact determined in step (d).

55. The system of claim 51, further comprising:

(e) means to gather cost information for implementing changes to processing of at least one debit type; and

(f) means for determining the impact to revenues and expenses of the financial institution resulting from application of cost information to the impact determined in step (d).