System and method for point-of-sale check authorization

• US 6,647,376 B1
• Filed: 08/15/2000
• Issued: 11/11/2003
• Est. Priority Date: 10/09/1998
• Status: Active Grant

• Current Assignee: The Clearing House Payments Company LLC (The Clearing House LLC)
• Original Assignee: Small Value Payments Company LLC (The Clearing House LLC)
• Inventors: Farrar, Henry C., Hicks, John H.
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): Kyle, Charles R.
• Application Number:
  US09/637,357
• Time in Patent Office: 1,183 Days
• Field of Search: 705/39, 705/44, 705/45, 235/379
• US Class Current: 705/45
• CPC Class Codes: G06Q 20/04 Payment circuits
• 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 20/40 Authorisation, e.g. identification of payer or payee, verification of customer or shop credentials; Review and approval of payers, e.g. check credit lines or negative lists
• CPC Class Codes: G06Q 20/403 Solvency checks

Abstract

A point-of-sale check authorization method inputs transaction and financial institution information from a check to be authorized. This information is communicated to a merchant processor operable to make a check authorization determination. The merchant processor discriminating whether or not the financial institution upon which the check was written is a participating financial institution. If not, the check authorization determination is based upon experiential databases accessible by the merchant processor. If it is discriminated that the financial institution information is a participating financial institution, the merchant processor transmits an information request to the financial institution upon which the check was written, and the financial institution, if sufficient funds are available and other predetermined criteria are met, debits the account in the amount of the transaction.

Claims

1. A point-of-sale check transaction authorization method, comprising:

inputting into a point-of-sale terminal transaction information, including a transaction amount, and financial institution information from a check to be authorized;

communicating the input transaction information and financial institution information to a merchant processor having logic means for making a check authorization determination;

discriminating, from the financial institution information, whether or not the financial institution upon which the check was written is a participating financial institution;

if it is discriminated that the financial institution is not a participating financial institution, making a check transaction authorization determination based upon experiential databases accessible by the merchant processor;

if it is discriminated that the financial institution is a participating financial institution, performing the following steps;

transmitting, by the merchant processor, an information request based upon the input transaction information and financial institution information to the financial institution upon which the check was written;

verifying, by the financial institution upon which the check was written, whether an account associated with the financial institution information contains sufficient funds to cover the transaction, if sufficient funds are present and if other predetermined criteria are met, debiting, in real-time the account associated with the financial institution in the amount of the transaction, and transmitting information relating to the whether the account has been debited to the merchant processor;

if the financial institution has performed the real-time debit of the account, the merchant processor communicating a transaction authorization to the merchant, and the merchant voiding the check and returning the check to the customer; and

if the financial institution has not performed the real-time debit of the account, the merchant processor making a transaction authorization determination based upon information other than the account information transmitted from the financial institution,

wherein for real-time debits said method utilizes a message format compatible with ATM transactions.

2. A method according to claim 1, wherein the financial institution transmits the information relating to whether the account has been real-time debited via an intermediary Electronic Funds Transfer (EFT) switch, which in turn forwards the information to the merchant processor.

3. A method according to claim 1, wherein the merchant processor transmits the information request via an intermediary Electronic Funds Transfer (EFT) switch, which in turn forwards the information request to the financial institution.

4. A method according to claim 1, wherein the sufficiency of funds in the account is determined taking into account overdraft protection.

5. A method according to claim 1, wherein the inputting step comprises scanning the check with a MICR scanner.

6. A method according to claim 1, wherein the merchant processor is located at the point of sale.

7. A method according to claim 1, wherein the merchant processor is located remotely from the point of sale.

8. A method according to claim 1, wherein, if the merchant processor makes a determination to authorize the transaction even in the event that the financial institution has not real-time debited the account, the merchant processor communicates a transaction authorization to the merchant, and wherein:

if an ACH mode is in effect, the merchant voids the check and returns the check to the customer, and receives payment directly to his or her financial institution account via an ACH transaction; and

if the ACH mode is not in effect, the merchant deposits the check for collection.

9. A method according to claim 8, wherein in the case that the ACH mode is not in effect, the check deposited by the merchant is presented for payment either by electronic check presentment, if the financial institution to which the check is deposited supports electronic check presentment, or by physical check exchange, if the financial institution to which the check is deposited does not support electronic check presentment.

10. A point-of-sale check transaction authorization system for authorizing a check that is presented to a merchant at the point of sale in payment for goods or services, the system comprising:

an input unit operable to input information comprising;

data from the check, including information as to a financial institution upon which the check was written, and transaction information, including an amount of the transaction; and

a merchant processor operable to make an authorization decision, said merchant processor having;

a communication unit operable to communicate with the financial institution;

means for accessing information relating to a writer of the check from all experiential database; and

logic means for making the authorization determination on the basis of;

(a) the input information and information from the accessed experiential database, in a case that the data from the check is not indicative that the financial institution upon which the check was written is a participating financial institution;

or

(b) the information received in a communication with the financial institution, in a case that the data from check is indicative that the financial institution upon which the check was written is a participating financial institution;

said merchant processor being operable, by means of the communication unit, to;

transmit to the participating financial institution upon which the check was written an information request based upon the input financial institution data from the check and the input transaction information; and

receive account information from the participating financial institution, the account information relating to whether the account has sufficient finds to cover the transaction amount and whether the account has been debited in real-time by the participating financial institution,

the merchant processor further being operable to;

if the financial institution has real-time debited the account;

communicate a transaction authorization to the merchant, the merchant voiding the check and returning the check to the customer in response to the communication; and

if the financial institution has not real-time debited the account, making a transaction authorization determination based upon information other than the account information transmitted from the financial institution,

wherein for real-time debits said system utilizes a message format compatible with ATM transactions.

11. A system according to claim 10, further comprising a financial institution processor, located at the participating financial institution, the financial institution processor comprising:

a financial institution communication units operable to communicate with the merchant processor; and

account verification means for determining whether the account has sufficient fund to cover the transaction and, if the account is determined to have sufficient funds and the other predetermined criteria are met, debiting, in real-time the account in the amount of the transaction;

said financial institution processor transmitting to the merchant processor the account information in response to receipt of the information request.

12. A system according to claim 11, further comprising an Electronic Funds Transfer (EFT) switch intermediate between the merchant processor and the financial institution processor, the EFT switch being operable to relay the information request from the merchant processor to the financial institution processor and to relay the account information from the financial institution processor to the merchant processor.

13. A system according to claim 10, wherein the merchant processor is located at the point of sale.

14. A system according to claim 10, wherein the merchant processor is located remotely from the point of sale.

15. A system according to claim 10, wherein if the

merchant processor makes a determination to authorize the transaction even in the event that the financial institution has not real-time debited the account, the merchant processor communicates a transaction authorization to the merchant, wherein:

if an ACH mode is in effect, the merchant voids the check and returns the check to the customer; and

if the ACH mode is not in effect, the merchant deposits the check.

16. A system according to claim 15, wherein in the case that the ACH mode is not in effect, the check deposited by the merchant is presented for payment either by electronic check presentment, if the financial institution to which the check is deposited supports electronic check presentment, or by physical check exchange, if the financial institution to which the check is deposited does not support electronic check presentment.

17. A point-of-sale check transaction authorization apparatus for authorizing a check that is presented to a merchant at the point of sale in payment for goods or services, the apparatus comprising:

an input unit operable to input information comprising;

data front the check, including information as to a financial institution upon which the check was written, and transaction information, including an amount of the transaction;

a merchant processor operable to make an authorization decision, said merchant processor including;

a communication unit operable to communicate with the financial institution;

means for accessing information relating to a writer of the check from an experiential database; and

logic means for making the authorization determination on the basis of;

(a) the input information and information from the accessed experiential database, in a case that the data from the check is not indicative that the financial institution upon which the check was written is a participating financial institution;

or

(b) on the basis of the information received in the communication with the participating financial institution, in a case that the data from check is indicative that the financial institution upon which the check was written is a participating financial institution;

said merchant processor being operable, by means of the communication unit, to;

transmit to the participating financial institution upon which the check was written an information request based upon the input financial institution data from the check and the input transaction information; and

receive account information from the participating financial institution, the account information relating to whether the account has sufficient funds to cover the transaction amount and whether the account has been debited in real-time by the participating financial institution,

the merchant processor further being operable to;

if the financial institution has real-time debited the account;

communicate a transaction authorization to the merchant, the merchant voiding the check and returning the check to the customer in response to the communication; and

if the financial institution has not real-time debited the account, making a transaction authorization determination based upon information other than the account information transmitted from the financial institution,

wherein for real-time debits said apparatus utilizes a message format compatible with ATM transactions.