Abstract:
The present invention provides a method and system that allows a payment service provider to provide incentives to clients based not only on the level of use of the payment services by the clients themselves, but also based on efforts by clients to promote use by others of the payment service provider. Using the system of the present invention, the payment service provider benefits by acquiring new clients based on the recruitment efforts of its existing clients, and the existing clients benefit by being able to increase the level of benefits received beyond those attributed to the client&#39;s own spending.

Description:
REFERENCE TO RELATED APPLICATION 
       [0001]    This patent application claims the benefit of the filing date of U.S. Provisional Patent Application Ser. No. 60/840,980 entitled “System and Method for Generating and Distributing Financial Service Fees.” 
     
     FIELD OF THE INVENTION 
       [0002]    The invention relates to a method and system for generating and distributing fees for financial transactions and services, including transactions made using credit, debit, and similar payment cards and services. 
         [0003]    A portion of the disclosure of this patent document contains material which is subject to copyright protection. The copyright owner has no objection to the facsimile reproduction by anyone of the patent document or the patent disclosure, as it appears in the Patent and Trademark Office file or records, but otherwise reserves all copyrights associated with this document. 
       BACKGROUND 
       [0004]    Financial transaction services providers such as American Express, Visa or Master Card provide payment facilities and services that facilitate cash payments between merchants and clients. Such payment service providers generate revenues by charging a transaction fee, typically to the merchants, on transactions made using the payment facility provided. The client (also sometimes referred to herein as a “user”) is typically the one who chooses which payment service provider is used for a particular transaction by using a payment card (e.g. a credit, debit, or smart card) issued by that provider. Thus, payment service providers are always looking for ways to increase the number and dollar amount of transactions made using their payment cards. 
         [0005]    One approach used by payment service providers to acquire and keep clients is to offer incentives. For example, a payment service provider may offer insurance on goods purchased using a particular credit card, low interest rates on account balances or transferred balances, or reduced or waived late fees on bill payments. Another approach used by payment service providers to acquire and keep clients is to offer rewards such as cash bonuses in a form of a payment check, airline miles to be converted into travel airline tickets, or saving&#39;s coupons to be used in a given merchant&#39;s stores. Payment service providers may aggregate combinations of those incentives and rewards with a given payment card to acquire clients and promote greater use. 
         [0006]    A limitation of prior art incentive systems is that the amount of incentives a client earns is dependent on and limited by the extent of that person&#39;s own use of the payment services. For example, in a typical airline mile incentive system, a client is awarded one airline mile for each dollar the client spends using an airline mile incentive payment card. Aside from using the card more (i.e. spending more dollars using the card) there is nothing else the client can do to increase the amount of incentives received. Further, once the client reaches his or her spending limit, the benefits to the payment service provider are capped as well. 
       SUMMARY OF THE INVENTION 
       [0007]    The present invention provides a method and system that allows a payment service provider to provide incentives to clients based not only on the level of use of the payment services by the clients themselves, but also based on efforts by clients to promote use by others of the payment service provider. Using the system of the present invention, the payment service provider benefits by acquiring new clients based on the recruitment efforts of its existing clients, and the existing clients benefit by being able to increase the level of benefits received beyond those attributed to the client&#39;s own spending. 
     
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0008]      FIG. 1  is an illustration of a hierarchical structure of a group of clients in an example embodiment of the invention. 
       
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
       [0009]    The invention provides a method, system and a framework in which users of a payment service may receive rewards (e.g. cash) by participating in propagating information about that payment service and encouraging others to use that payment service. The payment service provider rewards the client based on the client&#39;s usage of the service and on the usage by other users whom the client referred to the service. In one or more embodiments, the incentive a client receives comprises a first percentage of the client&#39;s own usage of the payment service and a second percentage of the usage by other clients that have been recruited or referred by the first client. 
         [0010]    In the following description, numerous specific details are set forth to provide a thorough description of the present invention. It will be apparent, however, to one skilled in the art, that the invention may be practiced without these specific details. In other instances, well known features have not been described in detail so as not to obscure the invention. 
         [0011]      FIG. 1  is an illustration depicting a hierarchical structure of a group of clients as they interact with a payment processing system operated by a payment service provider in accordance with an embodiment of the invention. 
         [0012]    In the example of  FIG. 1 , client  100  is the first of the clients depicted in  FIG. 1  to become a client of payment processing system  150 , for example by opening a payment card account with the payment service provider that operates payment processing system  150 . Clients  101 A,  101 B,  101 C and  101 D are clients that have been recruited or referred to payment processing system  150  by client  100  and that have been identified to payment processing system as such. For example, clients  101 A,  101 B,  101 C and  101 D may have indicated on their account applications to payment processing system  150  that they were referred by client  100 , or client  100  may have informed payment processing system  150  of the identities of prospective clients that client  100  has recruited or to whom client  100  has promoted payment processing system  150 . Client  100  and clients  101 A,  101 B,  101 C and  101 D (which may be referred to as “subclients” of client  100 ) may be considered a first group of clients, identified as group  110  in  FIG. 1 . 
         [0013]    Each of clients  101 A,  101 B,  101 C and  101 D may refer or recruit their own subclients in the same manner as they were recruited as subclients by client  100 . In the example of  FIG. 1 , client  101 B has recruited clients  111 A,  111 B,  111 C,  111 D and  111 E. The group consisting of client  101 B and its subclients (clients  111 A,  111 B,  111 C,  111 D and  111 E) is identified in  FIG. 1  as group  120 . Two additional groups  130  and  140  are illustrated in  FIG. 1 . Group  130  consists of client  111 A and clients  121 A,  121 B and  121 C that were recruited or referred by client  111 A. Group  140  consists of client  111 E and clients  125 A and  125 B. Payment processing system  150  stores identity information for each client, including identifying data for the client itself as well as data identifying, if applicable, the client that referred or recruited that client. 
         [0014]    In one or more embodiments of the invention, a client is instantly or periodically (e.g. daily, weekly, bi-weekly, monthly) awarded incentives based upon the client&#39;s own usage of payment processing system  150  and upon the usage by that client&#39;s subclients. In one or more embodiments, the amount of incentives a client receives is the sum of a first proportion or percentage of the client&#39;s own usage and a second proportion or percentage of usage by the client&#39;s subclients. In one or more embodiments, a client may also receive additional incentives based on usage by a subclient&#39;s subclients. In one or more embodiments, the incentives are paid by the payment service provider out of the transaction fees received from merchants. In other embodiments, the incentives are paid out of other sources of money as determined by the payment service provider. In one or more embodiments, the percentage amount of incentives paid to clients may vary over time. For example, the total amount of incentives paid to all clients of a service provider may depend on the amount of money in a pool designated by the service provider. For example, the service provider may designate for a particular month that it will pay 90% of the merchant fees it receives from merchants during that month as incentives to clients. 
         [0015]    In one example embodiment, a payment service provider receives transaction fees equal to 1.3% of a transaction amount from a merchant for a transaction made by a client. The payment service provider pays 0.48% of a client&#39;s own usage, and 0.16% of the client&#39;s subclients, to the client as an incentive. 
         [0016]    Using the example client structure of  FIG. 1 , assume the usage of payment services for each of the clients shown in  FIG. 1  in an example month are as shown in Table I below: 
         [0000]    
       
         
               
               
               
             
           
               
                   
                 TABLE 1 
               
               
                   
                   
               
               
                   
                 Client 
                 Monthly Usage 
               
               
                   
                   
               
             
             
               
                   
                 100 
                 $5000 
               
               
                   
                 101A 
                 $2500 
               
               
                   
                 101B 
                 $3000 
               
               
                   
                 101C 
                 $1500 
               
               
                   
                 101D 
                 $5500 
               
               
                   
                 111A 
                 $3500 
               
               
                   
                 111B 
                 $2000 
               
               
                   
                 111C 
                 $4000 
               
               
                   
                 111D 
                 $6000 
               
               
                   
                 111E 
                 $3000 
               
               
                   
                 121A 
                 $1000 
               
               
                   
                 121B 
                 $5500 
               
               
                   
                 121C 
                 $2500 
               
               
                   
                 125A 
                 $4000 
               
               
                   
                 125B 
                 $3500 
               
               
                   
                   
               
             
          
         
       
     
         [0017]    In the current embodiment, each of the clients will receive an incentive equal to 0.48% of their own monthly usage plus 0.16% of the sum of their subclients&#39; monthly usage. According to  FIG. 1 , four clients, namely clients  100 ,  101 B,  111 A and  111 E have subclients. Client  100  has subclients  101 A,  101 B,  101 C and  101 D. Client  101 B has subclients  111 A,  111 B,  111 C,  111 D and  111 E. Client  111 A has subclients  121 A,  121 B and  121 C. And client  111 E has subclients  125 A and  125 B. Table 2 below shows the resulting incentives to each client using the monthly figures of Table 1: 
         [0000]    
       
         
               
               
               
               
               
               
             
               
               
               
               
               
               
             
           
               
                 TABLE 2 
               
               
                   
               
               
                   
                 Monthly 
                 Own 
                 Subclient 
                 Subclient 
                 Total 
               
               
                 Client 
                 Usage 
                 Incentive 
                 Usage 
                 Incentive 
                 Incentive 
               
               
                   
               
             
             
               
                   
               
             
          
           
               
                 100 
                 $5,000 
                 $24.00 
                 $12,500.00 
                 $20.00 
                 $44.00 
               
               
                 101A 
                 $2,500 
                 $12.00 
               
               
                 101B 
                 $3,000 
                 $14.40 
                 $18,500.00 
                 $29.60 
                 $44.00 
               
               
                 101C 
                 $1,500 
                 $7.20 
               
               
                 101D 
                 $5,500 
                 $26.40 
               
               
                 111A 
                 $3,500 
                 $16.80 
                 $9,000.00 
                 $14.40 
                 $31.20 
               
               
                 111B 
                 $2,000 
                 $9.60 
               
               
                 111C 
                 $4,000 
                 $19.20 
               
               
                 111D 
                 $6,000 
                 $28.80 
               
               
                 111E 
                 $3,000 
                 $14.40 
                 $7,500.00 
                 $12.00 
                 $26.40 
               
               
                 121A 
                 $1,000 
                 $4.80 
               
               
                 121B 
                 $5,500 
                 $26.40 
               
               
                 121C 
                 $2,500 
                 $12.00 
               
               
                 125A 
                 $4,000 
                 $19.20 
               
               
                 125B 
                 $3,500 
                 $16.80 
               
               
                   
               
             
          
         
       
     
         [0018]    As can be seen by comparing the Total Incentives to Own Incentive dollar amounts in Table 2 for clients  100 ,  101 B,  111 A and  111 E, the system of the present invention allows a client to significantly increase the client&#39;s monthly incentive by referring or recruiting subclients. The client thus benefits by receiving greater incentives, and the payment service provider benefits by having its clients refer and recruit additional clients. 
         [0019]    Thus a novel method of generating and distributing financial service fees has been presented. Although the present invention has been described with respect to particular example embodiments, it will be understood by those of skill in the art that the invention is not limited to those particular embodiments, but includes alternative embodiments that will be evident to those skilled in the art. For example, the present invention may be used with smart card on which a client maintains a balance, and the client&#39;s incentives may include receiving interest instantaneously or periodically on that balance. Further, use of a payment service of a payment service provider may include use of services of or purchase of goods from providers affiliated with the payment service provider as well as use of services provided by the payment service provider itself (e.g. use of a payment card issued by the payment service provider).