Abstract:
A method of arranging for payment of a purchase includes receiving, from a supplier, agreement to accept a payment from a buyer via use of a payment card having variable payment terms; after a purchase by the buyer from the supplier, assessing the supplier a standard interchange rate; receiving, from the buyer, approval to pay the invoice; and issuing, to the supplier, a rebate, based upon when the approval to pay the invoice was received. the variable payment terms are calculated by: determining a first early payment date; determining a second standard payment date; assessing against the supplier a first percentage of the standard interchange rate if the invoice is approved by the first early payment date; and assessing against the supplier a second percentage of the standard interchange rate if the invoice is approved on or after the second standard payment date.

Description:
FIELD OF THE INVENTION 
     Embodiments of the invention relate generally to credit and payment cards, and, in particular, to payment arrangements related to credit and payment cards in a business to business environment. 
     BACKGROUND OF THE INVENTION 
     In many business to business scenarios involving buyers (disbursers) and suppliers (merchants), the buyers still pay via check (paper), and suppliers have to wait a full thirty days, or typically, longer, to get paid. Such buyer-merchant relationships can benefit from the use of payment by electronic means, and earlier payments to the sellers. 
     The buyers, however, are reluctant to make use of card payment systems, because payment by check allows for greater control of payments, with less risk of fraud. Due to their risk-averse nature, commercial buyers tend to prefer the additional control, and fraud protection, afforded by check payments. In addition, buyers prefer to be able to control the time at which payment is made, so that cash flow and account balances can be properly maintained. Buyers typically enjoy the ability to maintain a “float” by delaying payment via check payments. In such scenarios, the buyer (disburser) orders goods from a supplier (merchant). The supplier then sends the goods, along with an invoice. The buyer then compares what has been ordered with what has been received, and, upon a satisfactory review, the invoice is approved, and a check can be issued. Such control is not allowed by typical merchant card payment systems. 
     Such buyers suffer, however, from inefficiencies involved with the use of paper payments, and leave cash on the table which could result from earlier payments. 
     Thus, there is a need for an improved systems and methods for providing improved payment arrangements related to credit and payment cards. 
     SUMMARY OF THE INVENTION 
     Embodiments of the invention are directed to these and other needs. Embodiments of the invention can include systems and methods of paying for transactions via a variable rate payment card scheme. 
     Embodiments are directed to systems and methods whereby a variable rebate is given for payment card purchases, based on how quickly payment is authorized. 
     A method of arranging for payment of a purchase includes receiving, from a supplier, agreement to accept a payment from a buyer via use of a payment card having variable payment terms; after a purchase by the buyer from the supplier, assessing the supplier a standard interchange rate; receiving, from the buyer, approval to pay the invoice; and issuing, to the supplier, a rebate, based upon when the approval to pay the invoice was received. The variable payment terms can be calculated by: determining a first early payment date; determining a second standard payment date; assessing against the supplier a first percentage of the standard interchange rate if the invoice is approved by the first early payment date; and assessing against the supplier a second percentage of the standard interchange rate if the invoice is approved on or after the second standard payment date. 
     A benefit to the supplier in this scenario is that electronic payment with cash can be accelerated in time with the amount of the interchange. The interchange can be adjusted by an amount being proportional (or related to) to the number of days the cash is accelerated. 
     Such buyers can benefit from the migration from checks to electronic payments, plus some level of payment card rebate, also proportional to the number of days cash is accelerated to the supplier. The buyer can be motivated to approve and pay invoices as early as possible, to increase the level of rebate captured. This, in turn, benefits suppliers interested in cash accelerated at modest incremental cost. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
       The present invention will be more readily understood from the detailed description of exemplary embodiments presented below considered in conjunction with the attached drawings, of which: 
         FIG. 1  illustrates a payment card scenario in accordance with embodiments of the present invention. 
     
    
    
     It is to be understood that the attached drawings are for purposes of illustrating the concepts of the invention. 
     DETAILED DESCRIPTION OF THE INVENTION 
     Aspects of the invention are directed to systems and methods for providing a payment card whereby a variable rebate is given for payment card, based on how quickly payment is authorized. In the closed loop network of certain embodiments, a full interchange rate is charged up front, as with a traditional interchange, but, in some embodiments, a portion of that interchange may be rebated back to the supplier by the card issuing bank, based on the length of time it takes for the buyer to approve the underlying invoices for payment. As is known to those of skill in the art, an interchange is a fee, typically paid by an acquiring bank/merchant bank to the issuing bank. The fee is meant to compensates the issuer for the time after settlement with the acquiring bank/merchant bank and before it recoups the settlement value from the cardholder. 
     By way of embodiments of the invention, a merchant/supplier is assessed the standard interchange rate if the associated invoice is approved and payment is initiated within a first predetermined number of days, and a reduced interchange rate if payment is not made until a second predetermined number of days, or later. Thus each day delay beyond the first predetermined number of days in initiating payment results in a reduction in net interchange. 
     A benefit to the supplier in this scenario is that electronic payment with cash can be accelerated in time with the amount of the interchange. The interchange is thus adjusted in a manner being somewhat proportional to (or related to) the number of days the cash is accelerated. 
       FIG. 1  illustrates a payment card scenario in accordance with embodiments of the invention. In step S 1 , a Disburser (payer)  10  gets Supplier (merchant)  20  to accept payment via a purchasing card with variable (or dynamic) interchange terms. The Disburser  10  will be able to induce the supplier  20  to accept such payment terms if, for example, the payer is a large account, or otherwise has commercial leverage over the Supplier  20 . In step S 2 , the Supplier  20  enrolls in an Online Payment Processor  30  service to enable such payment with variable (or dynamic) interchange terms. As part of this online enrollment process, the Supplier  20  provides its Merchant Acquiring number, as is known to those of skill in the art, and Bank Demand Deposit Account (DDA) number. (As is known to those of skill in the art, a DDA is an account from which deposited funds can be withdrawn at any time without any notice to the depository institution. Most checking and savings accounts are demand deposits, accessible by the account holder at any time). In step S 3 , The Online Payment Processor  30  contacts the Merchant Acquirer  60  and the Supplier&#39;s Bank  40 , respectively, to verify these numbers. 
     In step S 4 , the Supplier  20  sends an invoice to the Disburser  10  with a stated invoice due date and net terms (e.g., day  30 ). In step S 5 , the Disburser  10  approves payment for the invoice and sends a payment file to the Online Payment Processor  30 , which contains a dummy Merchant Acquiring number. 
     In step S 6 , the Online Payment Processor  30  overlays an actual Merchant Acquiring number and acts as a virtual point of sale (POS) terminal which generates a standard card payment authorization request which gets sent to the Merchant Acquirer  60 . In step S 7 , the Merchant Acquirer  60  sends a payment authorization request to the Issuing Bank  50  via the MasterCard/Visa network  70 . In step S 8 , the Issuing Bank  50  approves the authorization request back to Merchant Acquirer  60  via a MasterCard/Visa network (or other such credit card network)  70  and payment funds get deposited to the Supplier&#39;s Bank  40 . 
     In step S 9 , following successful authorization of the payment, the Online Payment Processor  30  calculates the number of days between the day on which the payment was authorized/settled and the due date on the invoice. If the card settlement date precedes the invoice date, then the Online Payment Processor  30  calculates the interchange rebate due back to the supplier at a “daily interchange rebate rate.” The Online Payment Processor  30  then generates an automatic clearinghouse (ACH) debit file which debits a house demand deposit account (DDA) owned by the Issuing Bank  50  for the calculated rebate amount. 
     In step S 10 , this ACH file gets sent to the Issuing Bank&#39;s  50  ACH department for processing, as is known to those of skill in the art, which results in the Supplier&#39;s Bank  40  being credited with funds equal to the calculated rebate amount and the Issuing Bank&#39;s  50  house DDA being debited for the same. 
     In some embodiments, at the time of enrollment (initiation of the account relationship) the Supplier  20  and Disburser  10  agree on card payment terms inclusive of an interchange rebate. As used herein, the “daily interchange rebate rate” is calculated as the difference between an “earliest payment date” (e.g., day ten after invoice issuance) and the invoice due date (e.g., day thirty, or other mutually agreed upon date). For example, for terms of 2.2% on day ten and 1.0% on day thirty, the “daily interchange rebate rate” would be 1.2% divided by twenty days, or 0.06%. Other daily interchange rates can be used at would be known to those of skill in the art, as informed by the present disclosure. In addition, the terms of the transaction can also be related to the size and/or quantity of the order. 
     In use, in some embodiments, a payment card settlement product can be implemented as follows. 
     Suppliers  20  can enroll in an online closed-loop network involving a merchant acquirer  60  and an online payment processing application  30 . Payments in this closed loop network are uniquely identified, and thus, can be treated differently than other card transactions. The unique identifier can be, for example, a predefined number or pool of numbers or digits related to, or that are a part of, the payment card number. 
     Merchants/suppliers  20  can enroll online and either (1) authorize the network to act as a virtual point of sale (“POS”) terminal to initiate payments from participating buyers/clients in the network; or (2) initiate payments from participating buyers/clients in the network using their own POS terminals. 
     In general, in some embodiments, features of the interchange on the closed loop network more closely align cost and benefit as compared to a traditional interchange. (As is known to those of skill in the art, interchange fees are fees charged between businesses as part of the operation of credit card networks). By way of non-limiting example, a traditional interchange is fixed at a level of approximately 2.20% plus merchant acquiring fees, regardless of when payment is initiated. In contrast, by way of embodiments of the invention, the full 2.20% is charged up front, as with traditional interchange, but a portion of that interchange may be rebated back to the supplier  20  by the card issuing bank  50  based on the length of time it takes for the buyer to approve the underlying invoices for payment. 
     In one example, a supplier  20  agrees to accept payment via payment card with terms of “2.20/10, 1.00/30.” These terms mean that the merchant/supplier  20  would be assessed the standard interchange of 2.20% if the associated invoice is approved and payment is initiated within ten days, and a net interchange of only 1.00% if payment is not made until day thirty or later. Thus, each day delay beyond day ten in initiating payment results in a reduction in net interchange of 0.055%. A ten day delay would result in a net reduction of 0.550% or net interchange of 1.65% versus the standard 2.20%. 
     As the transaction in this example is continued, upon invoice approval, which in this example occurs on day twenty, the online payment processing application  30  automatically initiates settlement via payment card and the supplier is assessed an interchange of 2.20% using standard merchant acquiring processes and rails (i.e., infrastructure). At the same time, a credit equivalent to 0.55% is initiated by the issuing bank back to the merchant/supplier, either directly via the ACH network, or via the merchant acquirer  60 . This 0.55% reflects the ten day delay in approving the invoice and initiating payment resulting in net interchange of 1.65% to the supplier  20 . 
     A benefit to the supplier in this scenario is electronic payment with cash accelerated up to twenty days with the amount of the interchange being somewhat proportional to the number of days of cash is accelerated. The minimum 1.00% interchange for payment at day thirty or later would be required to compensate the issuing bank and card association (e.g. Visa/MasterCard, etc.) for costs incurred by initiating electronic payment via the payment card method described herein. (It is assumed that this 1.00% discount would be acceptable to a significant percentage of suppliers  20 , even with no cash acceleration, to the other above-described benefits). 
     A benefit to the buyer in this scenario is migration from checks to electronic payments, plus some level of payment card rebate, also proportional to the number of days cash is accelerated to the supplier. The buyer is therefore motivated to approve and pay invoices as early as possible, to increase the level of rebate captured. This, in turn, benefits suppliers interested in cash accelerated at modest incremental cost (e.g., 1.00% at day thirty versus. 2.20% at day ten or earlier). In some embodiments, a rebate can also be issued to the buyer, thus providing additional motivation for the buyer to use the system. The rebate to the buyer can also be based on accelerated payment, thus providing additional incentive to pay the supplier quickly. 
     By way of embodiments of the invention, the issuing bank  50  benefits when payments are made via payment cards as opposed to other payment methods due to the capture of some level of net interchange which is pre-determined by the card associations (e.g., Visa/MasterCard, etc.) for payments made via the unique closed-loop network of the invention. The issuing bank  50  could also benefits by having a unique and superior value proposition versus all other payment card providers. 
     In accordance with the invention, other payment schedules and interchange rates can be used, as would be known to one of skill in the art, as informed by the present disclosure. 
     It is to be understood that the exemplary embodiments are merely illustrative of the invention and that many variations of the above-described embodiments can be devised by one skilled in the art without departing from the scope of the invention. It is therefore intended that all such variations be included within the scope of the following claims and their equivalents.