A SYSTEM AND METHOD FOR PROVIDING FINANCING AND ADVERTISING FOR COMMERCE TRANSACTIONS

Abstract: The present invention relates to a method for allowing a customer to purchase a product using a payment instrument, whereby a price for the product purchased is paid over time without interest charged to the customer, comprising the steps of applying, by the customer, for the payment instrument; authorizing the customer to use the payment instrument during commerce; registering, by the payment instrument, a merchant as a participating merchant; purchasing a product with the payment instrument, by the customer, from the participating merchant; charging, by the payment instrument, a promotional fee to the participating merchant; determining, by the payment instrument, a number of installment payments over a time limit in which the customer may pay for the purchased product without incurring interest; and paying, by the customer, the number of installment payments over the time limit to the payment instrument.

Description: A SYSTEM AND METHOD FOR PROVIDING FINANCING AND ADVERTISING FOR COMMERCE TRANSACTIONS Inventor: Kirk atkins RELATED APPLICATIONS This application is related to U.S. Utility Application Serial Number 09/670,016, filed September 26, 2000 which is herein incorporated by reference in its entirety. BACKGROUND OF THE INVENTION Field of the Invention The present invention relates to the sale of commodities, such as products and services, and more particularly, to a system and method providing advertising and financing schema from a payment instrument to a participating merchant and to the ultimate customer. Background of the Invention A number of different methods of financing for customers exist today. The typical financing method has been the credit card wherein the customer pays a financial institution interest for the convenience of extending payments for products purchased. Unfortunately, the interest rates charged by most financial institutions are extremely high. A customer easily can pay over twice the amount of the price of the product if payment for the product stretches over months or years. Moreover, a number of different advertising methods are used by merchants to entice shoppers into stores. For example, one store may offer six months interest free payments for a product costing more that $500, if the shopper buys that product on a particular day. Stores pay a large amount, sometimes 10%, of their gross sales in advertising, to promote such a deal in order to get the shoppers into the store. In order to offer such a deal to the shopper, the store must pay its finance company a certain percentage of the sale to buy down the interest rate that has been given to the shopper for free for six months. If the shopper does not pay the entire $500 in the six months, however, the finance company will charge the shopper all of the interest that would have been due, retroactively. Furtliermore, the process that the shopper must go through to receive this interest-free six months can be extremely tedious. The shopper must apply for the store's credit, the store personnel must input the shopper's information into a database to determine the credit approval, and the shopper must stay at the store and wait for approval. If approval is denied for whatever reason, many different people have wasted valuable time. Furthermore, these types of interest-free deals promoted by the stores are for particular products, are offered only at particular times, or are limited to purchases over a certain dollar amount. A system and method are needed to make financing for a customer easier, less expensive, and broadbased. At the same time, a system and method are needed for stores to attract customers without paying exorbitant amounts in advertising and to offer special arrangements to customers without the necessity of time consuming in-store credit checks. SUMMARY OF THE INVENTION Accordingly, the present invention is directed to a method and system for providing financing to customers and advertising designs for businesses that substantially obviates one or more of the problems due to limitations and disadvantages of the related art. An object of the present invention is to provide a method and system that allows customers to pay for products over a certain period of time without incurring any interest payments. Another object of the present invention is to provide a method and system that allows customers a broad base of products to purchase without incurring any interest, and that allows customers to be able to make recurring purchases without incurring interest payments. Another object of the invention is to provide a method and system that allows businesses to offer special payment plans to customers without having to advertise such plans. Another object of the invention is to provide a method and system that allows businesses to offer special payment plans to customers without having to perform lengthy in-store credit checks. Additional features and advantages of the invention will be set forth in the description that follows, and in part will be apparent from the description, or may be learned by practice of the invention. The objectives and other advantages of the invention will be realized and attained by the structure particularly pointed out in the written description and claims hereof as well as the appended drawings. To achieve these and other advantages and in accordance with the purpose of the invention, as embodied and broadly described, the present invention provides a method for allowing a customer to purchase a product using a payment instrument, whereby a price for the product purchased is paid over time without interest charged to the customer, comprising the steps of applying, by the customer, for the payment instrument; authorizing the customer to use the payment instrument during commerce; registering, by the payment instrument, a merchant as a participating merchant; purchasing a product with the payment instrument, by the customer, from tl e participating merchant; charging, by the payment instrument, a promotional fee to the participating merchant; determining, by the payment instrument, a number of installment payments over a time limit in which the customer may pay for the purchased product without incurring interest; and paying, by the customer, the number of installment payments over the time limit to the payment instrument. In another aspect the present invention provides a method for allowing a customer to purchase a product using a payment instrument, whereby a price for the product purchased is paid over time without interest charged to the customer, comprising the steps of applying, by the customer, for the payment instrument; authorizing the customer to use the payment instrument during commerce; purchasing a product with the payment instrument, by the customer; determining, by the payment instrument, a number of installment payments over a time limit in which the customer may pay for the purchased product without incurring interest; and paying, by the customer, the number of installment payments over the time limit to the payment instrument. It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory and are intended to provide further explanation of the invention as claimed. BRIEF DESCRIPTION OF THE DRAWINGS The accompanying drawings, which are included to provide a further understanding of the invention and are incorporated in and constitute a part of this specification, illustrate embodiments of the invention and together with the description serve to explain the principles of the invention. In the drawings : Fig. 1 illustrates the steps implemented according to a preferred embodiment of the inventive method; and Fig. 2 illustrates the steps implemented according to another embodiment of the invention method. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS Reference will now be made in detail to the preferred embodiments of the present invention, examples of which are illustrated in the accompanying drawings. Wherever possible, the same reference numbers will be used throughout the drawings to refer to the same or like parts. Fig. 1 illustrates the steps implemented in a preferred embodiment of the inventive business commerce method. In step 101 a customer applies for a payment instrument. A payment instrument is, for example, a credit card issued from a financial institution, such as Visa® or American Express®. Another payment instrument may be an employer payroll deduction system. Other types of payment instruments will be known to those skilled in the art and are within the scope of this invention. The customer applies for a payment instrument by filling out a written application that includes questions such as name, address, social security number, bank account numbers, employment status, salary, and length of employment. Other methods of acquiring the customer information include filling out an application on-line, at a payment instrument web site, over a telephone, etc. Other customer information that is needed for a payment instrument will be known to those skilled in the art and are within the scope of this invention. Moreover, the customer is not limited to an individual, but may be any entity that purchases goods and services. In step 102, the payment instrument authorizes the customer to use the payment instrument during commerce. The authorization includes verification of tlie information entered by the customer. The authorization also may include a determination of a credit limit for the customer. The inventive system is not limited to new customers. For example, a customer may already have a Visa® card that is linked to the inventive system at a later date. Thus, the application and authorization occurred when the customer originally applied for the payment instrument. Thus, participation in the inventive system appears seamless to the customer. Step 103 illustrates registering, by the payment instrument, a merchant as a participating merchant. The merchant may be web site, a brick and mortar store, a catalog, a seller of services, or any other type of business known to those skilled in the art. The participating merchant and payment instrument agree to certain terms and conditions during the registration process. For example, the participating merchant may agree to accept the payment instrument for purchases made at its business, the payment of a discount fee to the payment instrument, and the payment to the payment instrument of a promotional fee, which will be discussed later. The discount fee is a typical fee that the payment instrument and the merchant may negotiate. Of course, a third party also may negotiate the promotional fee as well. Other terms and conditions will be known to those skilled in the art and are within the scope of the present invention. In step 104, the customer purchases a product from the participating merchant, and uses the payment instrument to pay for the product. A customer may actually purchase a product directly from a brick and mortar participating merchant, may purchase a product from an on-line participating merchant site, or may purchase a product over the telephone. Other methods of purchasing will be known to those skilled in the art and are within the scope of the invention. In step 105, the payment instrument charges the participating merchant a promotional fee. The promotional fee may be a percentage of the product price. For example, a participating merchant may agree to pay the payment instrument 5% of the price of anything purchased using the payment instrument. The promotional fee also may vary depending on what is purchased, the length of time being offered to the customer for interest free payments, or other schemes known to those skilled in the art. Generally, this promotional fee is charged automatically upon purchase. The timing of the promotional fee payment also may be negotiated between the payment instrument and the participating merchant. For example the promotional fee may be charged on a daily, weekly, or monthly basis. In return for the promotional fee, the payment instrument may agree to promote the participating merchant to all the customers authorized to use the payment instrument. For example, with the invoice that is sent to the authorized customer, the payment instrument may include a leaflet introducing the participating merchant, its products, and locations. Moreover, the payment instrument may advertise that any user of the payment instrument will enjoy a certain amount of time to re-pay the invoice, interest free, if purchases are made from a participating merchant. Thus, the merchant does not have to disseminate its own advertising for this type of promotional special. The payment instrument, instead, will advertise to all of its existing authorized users, and the participating merchant will only have to pay when a purchase is made. This will save the participating merchant untold amounts of money. In step 106, the payment instrument determines a number of installment payment periods over which the customer may pay for the purchased product without incurring interest. For example, the payment instrument may allow a customer to make payments for six months, interest free. The period of time in which to make the payments may vary, depending upon the customer, the authorized credit limit, and the purchase price of the product. Other factors will be known to those skilled in the art and are within the scope of the present invention. The determining step also may include a determination that the purchase actually is within the credit limit established for the particular authorized customer. If the purchase is less than available credit, the payment instrument approves the transaction. Thus, no time is wasted at the participating merchant for a customer to apply for credit, etc. This determination simply cannot be performed by the private label payment instruments since the customer must apply and the merchant must wait for approval of a certain credit limit. The determination step may be performed using the payment instrument's network infrastructure. This infrastructure may include a credit card reader, for example, that is connected to any type of network, such as a local area network (LAN), Wide Area Network (WAN), the Internet, or any other known to those skilled in the art. For example, the payment instrument may be represented by a credit card having a magnetic stripe on which is stored the authorized customer name and/or account number. When the credit card is swiped into the network infrastructure at the participating merchant location during a purchase, the account number and customer name are transmitted to a network processor via the network infrastructure. Another embodiment includes having a customer input its account number into the payment instrument's web site, wherein the network infrastructure transmits the information over the Internet. The network processor may be a computer or any other device known to those skilled in the art. The network processor uses that information to verify the customer's authorization to use the payment instrument, the credit limit, and that the merchant is a participating merchant. Other methods of determining customer's authorization will be known to those skilled in the art and are within the scope of this invention. The network processor also may determine the payment schedule for the customer, and may initiate the payment of the merchant discount fee and the payment of the promotional fee, as discussed above. The network processor also may automatically update and determine any changes in the customer's payment schedule as the customer purchases further products. U.S. Patent Application No. , by the present inventor, is a detailed description of an updating process that may be used in the present invention, and is incorporated by reference herein. It is important to note that the inventive system allows the customer unlimited use (within any credit limit that may be in place) of the payment instrument . Thus, the system is not limited to certain products, certain times in which to make purchases, or certain purchase prices. The payment instrument allows a much broader base of use than the prior art methods. Moreover, the use of the payment instrument is recurring, exactly like a standard credit or debit card. Step 107 shows the customer paying the number of installment payments to the payment instrument. The payment may be made by having the customer write a check payable to the payment instrument for each installment. Alternatively, the payment instrument may automatically deduct, from the customer's bank account, the payment for each installment. Another embodiment would have each installment payment be automatically deducted from the customer's paycheck. U.S. Patent Application No. 09/429,616, by the present inventor, is a description of a payroll deduction system and method that may be used in the present invention, and is incorporated by reference herein. In another embodiment of the present invention shown in Fig. 2, the customer applies for a payment instrument at 201, and the payment instrument authorizes the customer to use the payment instrument during commerce at 202. The customer then purchases a product using the payment instrument at a non-participating merchant, i.e., a merchant who does not have any type of agreement with the payment instrument at 203. In this scenario, the number of installment payment periods over which a customer may pay for the purchased product without incurring interest is determined by the payment instrument; and preferably the installment period is set at two months, regardless of the purchase amount or merchant. The typical credit card has an average receivables cycle of 45 to 55 days. If the payment instrument allows the customer a two-month window in which to repay a purchase, this cycle is not greatly affected, if at all. Of course the set time period can be varied, depending upon the payment installment's business strategy. While the invention has been described in detail and with reference to specific embodiments thereof, it will be apparent to one skilled in the art that various changes and modifications can be made therein without departing from the spirit or scope thereof. Thus, it is intended that the present invention covers the modifications and variations of this invention provided they come within the scope of the appended claims and their equivalents.

Claims: WHAT IS CLAIMED IS: 1. A method for allowing a customer to purchase a product using a payment instrument, whereby a price for the product purchased is paid over time without interest charged to the customer, comprising the steps of: applying, by the customer, for the payment instrument; authorizing the customer to use the payment instrument during commerce; registering, by the payment instrument, a merchant as a participating merchant; purchasing a product with the payment instrument, by the customer, from the participating merchant; charging, by the payment instrument, a promotional fee to the participating merchant; determining, by the payment instrument, a number of installment payments over a time limit in which the customer may pay for the purchased product without incurring interest; and paying, by the customer, the number of installment payments over the time limit to the payment instrument. 2. The method of claim 1 wherein the step of applying is performed on-line. 3. The method of claim 1 wherein the step of applying is performed by telephone. 4. The method of claim 1 wherein the step of applying is performed at the payment instrument website. 5. The method of claim 1 wherein the step of applying comprises supplying customer information of at least one of name, address, social security number, bank account number, employment status, and salary. 6. The method of claim 5 wherein the step of authorizing comprises: verifying customer information; and determining a credit limit for the customer based upon the customer information. 7. The method of claim 1 wherein the step of registering further comprises determining a promotional fee to be paid from the participating merchant to the payment instrument. 8. The method of claim 1 wherein the participating merchant is one of at least a brick and mortar store, a catalog, an on-line website, and a seller of services. 9. The method of claim 1 wherein the step of purchasing comprises at least on e of purchasing from a brick and mortar store, purchasing on-line, and purchasing over a telephone. 0. The method of claim 1 wherein the promotional fee is a percentage of a price of the product purchased. 1. The method of claim 1 wherein the promotional fee is based upon the product purchased. 2. The method of claim 1 wherein the promotional fee is based upon the number of installment payments in which the customer may pay for the purchase product. 3. The method of claim 5 wherein the step of determining is based upon the customer information. 4. The method of claim 1 wherein the step of determining is based upon a price of the product purchased. 5. The method of claim 1 wherein the payment instrument automatically updates the installment payments after the customer purchases a product. 6. The method of claim 1 further comprising the step of promoting a participating merchant to a customer by the payment instrument. 7. The method of claim 1 wherein the step of paying includes one of at least paying by a bank check and automatic deduction from the customer bank account. 8. The method of claim 1 wherein the step of paying includes automatically deducting the payment from the customer's paycheck. 9. A method for allowing a customer to purchase a product using a payment instrument, whereby a price for the product purchased is paid over time without interest charged to the customer, comprising the steps of: applying, by the customer, for the payment instrument; authorizing the customer to use the payment instrument during commerce; purchasing a product with the payment instrument, by the customer; determining, by the payment instrument, a number of installment payments over a time limit in which the customer may pay for the purchased product without incurring interest; and paying, by the customer, the number of installment payments over the time limit to the payment instrument. 20. The method of claim 19 wherein the step of applying is performed at the payment instrument website. 21. The method of claim 19 wherein the step of applying comprises supplying customer information of at least one of name, address, social security number, bank account number, employment status, and salary. 22. The method of claim 21 wherein the step of authorizing comprises: verifying customer information; and determining a credit limit for the customer based upon the customer information. 23. The method of claim 19 wherein the step of purchasing comprises at least on e of purchasing from a brick and mortar store, purchasing on-line, and purchasing over a telephone. 24. The method of claim 21 wherein the step of determining is based upon the customer information. 25. The method of claim 19 wherein the step of determining is based upon a price of the product purchased. 26. The method of claim 19 wherein the number of installment payments is two. 27. The method of claim 19 wherein the step of paying includes one of at least paying by a bank check and automatic deduction from the customer bank account. 28. The method of claim 19 wherein the step of paying includes automatically deducting the payment from the customer's paycheck.

Inventors: WATKINS KIRK, WATKINS, KIRK
Applicants: DUCTION INC E, E-DUCTION, INC.
Application year: 2001
Main classification: G07F19
IPC codes: G06Q20, G07F19