Abstract:
A system of verifying a purported registrant&#39;s ownership or control of a payment instrument includes a communication device, a memory and a processor coupled to the communication device and to the memory. A payment instrument verification module stored in the memory and executable by the processor is adapted to receive information relating to the payment instrument from a registrant, initiate a financial transaction involving the payment instrument via the communication device, generate a dispute amount for the financial transaction, receive via the communication device a notification from a financial institution of the registrant that the financial transaction has been disputed by a comparison amount and compare the comparison amount with the dispute amount for purposes of verifying the payment instrument.

Description:
CROSS-REFERENCE TO RELATED APPLICATION 
       [0001]    The present application is a continuation-in-part application of commonly owned and assigned U.S. patent application Ser. No. 11/871,870, filed Oct. 12, 2007, which is incorporated herein by reference. 
     
    
     FIELD OF THE INVENTION  
       [0002]    The present invention relates to automated financial services, and in particular relates to a method and system for verifying use of a financial instrument. 
       BACKGROUND OF THE INVENTION  
       [0003]    With ever greater frequency, payment instruments are replacing cash as the medium of exchange in commercial and financial transactions. Additionally, an increasing percentage of transactions are taking place at a distance over computer networks such as the Internet. Since payment instruments are subject to theft and fraudulent use, it is possible for unauthorized persons to make use of a payment instrument before the authorized user or owner of the instrument can become aware that the payment instrument has been compromised. 
         [0004]    One method known to reduce these risks is to require the use of a second verification method, such as a password in personal identification number (PIN) known only to the authorized user, with every transaction. This is inconvenient, however, as a user may need to remember numerous PINs for multiple payment instruments. It may also require payment systems to be redesigned. 
         [0005]    Another method to bolster security is for the desired recipient of funds in a transaction to initiate a ‘test’ transaction using the payment instrument in question, for example, a de minimus deposit or debit of unpredictable amount. Only by contacting the financial or other institution associated with the payment instrument and authenticating one&#39;s identity can one learn the nature and amount of the test transaction, thus only an authorized user can learn the amount. Once the amount of the test transaction is ascertained, the authorized user can then submit the information back to the desired recipient which can determine that the submitted amount is the same as the amount of the test transaction. One drawback with this method is that an actual transfer of value may take place, or multiple transactions may be required. Moreover, this method may require financial institutions to perform systems integration, process changes, and retraining of customer service staff. Another drawback is that, in theory, the test transaction amount may be guessed or otherwise predicted. 
         [0006]    It would be desirable to provide methods and systems for verifying the authority to use a payment instrument that does not suffer from the drawbacks of the methods discussed above. 
       SUMMARY OF THE INVENTION  
       [0007]    In a first aspect, the present invention provides a system of verifying a purported registrant&#39;s ownership or control of a payment instrument that includes a communication device, a memory and a processor coupled to the communication device and to the memory. A payment instrument verification module stored in the memory and executable by the processor is adapted to receive information relating to the payment instrument from a registrant, initiate a financial transaction involving the payment instrument via the communication device, generate a dispute amount for the financial transaction, receive via the communication device a notification from a financial institution of the registrant that the financial transaction has been disputed by a comparison amount and compare the comparison amount with the dispute amount for purposes of verifying the payment instrument. 
         [0008]    In a second aspect, the present invention provides a method by a registering service to verify use of a payment instrument belonging to a registrant that includes receiving information relating to the payment instrument from the registrant, initiating a financial transaction with an issuer of the payment instrument, notifying the registrant of a dispute amount related to the financial transaction, receiving a notification from the issuer that the financial transaction has been disputed by a comparison amount, comparing the comparison amount to the dispute amount and verifying use of the payment instrument based on a result of the comparison. 
         [0009]    In a third aspect, the present invention provides a method by an issuer of a payment instrument belonging to a registrant to facilitate verification of the payment instrument with a registering service. The method includes receiving a request for a financial transaction on the payment instrument from the registering service, receiving a communication from the registrant disputing the financial transaction by a dispute amount, determining whether the registrant is authorized to use the payment instrument and notifying the registering service of a dispute of the financial transaction if it is determined that the registrant is authorized to use the payment instrument, the notification including the dispute amount. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS  
         [0010]      FIG. 1  is a block diagram of a system for verifying use of a payment instrument according to an embodiment of the present invention. 
           [0011]      FIG. 2  is a block diagram of a registering service server according to an embodiment of the present invention. 
           [0012]      FIG. 3  is a flow chart of a method of verifying use of a payment instrument according to an embodiment of the present invention. 
       
    
    
     DETAILED DESCRIPTION  
       [0013]    The term ‘payment instrument’ as used herein denotes a financial instrument or account which can be used in financial transactions. The payment instrument may be a tangible financial presentation device such as a credit or debit card, or it may be embodied intangibly as information (e.g., as a financial account number). 
         [0014]    The term ‘registrant’ as used herein denotes any party claiming to have authority to engage in a financial transaction using a payment instrument. The registrant is typically a user or holder of the payment instrument. 
         [0015]    The term ‘registering service’ as used herein denotes an entity to which the registrant represents that the registrant has authority to use a payment instrument. For example, and without limitation, the registering service may be a payment service provider such as Paypal and Billpoint which provides payments to online merchants either by using the registrant&#39;s payment instrument, or by using the registrant&#39;s own account established with the registering service. The registrant&#39;s own account may hold registrant&#39;s own funds, possibly transferred from the registrant&#39;s verified payment instrument. 
         [0016]    The term ‘financial institution’ as used herein denotes the issuer or verifying authority associated with a particular payment instrument. For example, and without limitation, the financial institution may be a bank. 
         [0017]    Referring to  FIG. 1 , a block diagram of a system for verifying use of a financial instrument according to the present invention is shown. In the system  100 , a registrant  110  is coupled via a communication link  112  to a registering service  120  for the purpose of signing up with the registering service  120 . The registrant  110  is the owner of a payment instrument; the registrant seeks to use the payment instrument in its transactions with the registering service  120 . The registrant  110  is also coupled to a financial institution  130  which is associated with (e.g., is the issuer of) the payment instrument. The registrant  110  may be coupled to the financial institution  120  via another communication link  114 , which may be a secure wired or wireless data communication over a data network or a telecommunication link. The registering service  120  is also coupled to the financial institution  130  via a communication channel  116 . 
         [0018]      FIG. 2  is a block diagram of a computer system that may be implemented by the registering service according to embodiments of the present invention. As shown in  FIG. 2 , the computer system  200  includes a processor  202 , such as a central processing unit (CPU), a communication device  204  which sends/receives information via communication links  112 ,  116  and support circuitry  206 . The processor  202 , communication device  204  and support circuitry  206  are commonly connected to a bus  208  which also connects to a memory  210 . 
         [0019]    The memory  210  may include both volatile (RAM) and non-volatile (ROM) memory units and may also include hard disk and backup storage capacity. The memory  210  stores software programs in a program storage portion  212  and stores data in a data storage portion  214 . The program storage portion  212  includes a payment instrument verification module  216 . The payment instrument verification module  216  includes software instructions for performing the payment instrument verification method according to the present invention discussed below. The data storage portion  214  includes memory units  218  allocated to store information generated by the payment instrument verification module  216 . 
         [0020]    It is to be appreciated that the computer system  200  of the registering service  120  may comprise any computer such as a personal computer, minicomputer, workstation or mainframe, or a combination thereof. While the computer system  200  is shown, for illustration purposes, as a single computer unit, the system may comprise a group/farm of computers which can be scaled depending on the processing load. Also, similar computer systems can be used by the registrant  202  and financial institution  130 . 
         [0021]    The registering service  120  may be an online payment provider such as, for example, paypal™ In some embodiments, the link  112  may comprise a secure local or wide area data network connection (e.g., a connection over the Internet). However, the registrant  110  may also contact the registering service in person, or via telephone. The registrant  110  may elect to use a particular payment instrument in future transactions with the registering service, and for this purpose, the registrant  110  submits information related to the payment instrument to the registering service  120  over link  112  to sign up for the payment service. 
         [0022]    Referring now to  FIG. 3 , which is a flow diagram of a method  300  of verifying a payment instrument according to an embodiment of the present invention, in step  302 , the method begins. In step  304 , the registrant  110  submits payment instrument information to the registering service  120 . The payment instrument information includes at least a user name, an account number, and the identity of the issuer financial institution. In the following step  306 , the payment instrument verification module  216  of the registering service  120  initiates a financial transaction (e.g., a credit or debit) of a certain nominal dollar amount with financial institution  130  through finance services network  116  or using other appropriate means using the payment instrument information it has received from the registrant  110 . If the payment instrument is a debit or credit card, the financial transaction is initiated through the debit or credit card transaction processing network such as an Automated Clearing House (ACH) network for a debit card or Visanet™ for a credit card. Additionally, in step  308 , the payment instrument verification module  216  generates a message including instructions to the registrant  110  to dispute an amount, termed herein the ‘dispute amount’, which may be preset or randomly generated. The dispute amount may comprise the entire nominal amount of the financial transaction or only a specific portion thereof. The registering service  120  then transmits the message to the registrant  110  over link  112  in step  309 . 
         [0023]    Upon receiving the message (including the dispute amount) from the registering service  120 , in step  310  the registrant  110  contacts the financial institution  130  over communication link  114  to dispute the financial transaction, specifically providing the payment instrument details and the dispute amount to the financial institution  130 . 
         [0024]    In step  312 , the financial institution  130  authenticates the registrant  110  by determining whether the registrant  110  is authorized to use the payment instrument. Once the registrant  110  is authenticated, the financial institution  130  processes the dispute in step  314  and may reverse or partially reverse the financial transaction according to the disputed amount. In step  316 , the financial institution  130  notifies the registering service  120  which initiated the financial transaction that the transaction has been disputed by an amount which is denoted as the ‘comparison amount’. Upon receipt of the notification, in step  318  the payment instrument verification module  216  of the registering service  120  confirms whether the comparison amount indicated in the notification is the same as the stored dispute amount which it originally generated. Equality between the comparison amount and the dispute amount indicates that the registrant  110  is authorized to use the payment instrument issued by the financial institution. This is the case because the correct dispute amount can only make the full circle from the registering service  120  to the registrant  110  to the financial institution  130  and then back to the registering service  120  if the registrant has an account with (e.g., is authorized by) the financial institution  130 . 
         [0025]    If it is determined in step  318  that the comparison amount is equal to the dispute amount, in step  320  the registering service  120  authorizes use of the payment instrument for future. If it is determined, in step  318 , that the comparison amount is not equal to the dispute amount, then in step  322 , the registering service notifies the registrant that the payment instrument is not authorized for further transactions. After step  320  or  322 , the method ends in step  324 . 
         [0026]    The system and method described above enables authorization of a payment instrument without a transfer of value since the financial transaction initiated by the registering service  120  may be reversed if the registrant  110  disputes the full amount of the transaction. Additionally, there does not need to be a restriction on the dispute amount (e.g., the dispute amount can exceed regular transfer guidelines) which makes the amount difficult to guess by an unauthorized party. 
         [0027]    The foregoing specific embodiments represent just some of the ways of practicing the present invention. Many other embodiments are possible within the spirit of the invention. Accordingly, the scope of the invention is not limited to the foregoing specification, but instead is given by the appended claims along with their full range of equivalents.