JPH0448273B2 - - Google Patents

Description

DETAILED DESCRIPTION OF THE INVENTION The present invention relates to a transaction system that allows an issuer of a transaction card to adjust the cost of transmitting an authentication request.
In particular, the present invention relates to an apparatus and method that allows an issuer to specify for each cardholder the types of transactions that will be remotely authorized. This deployment reduces the number of authentication requests that must be transmitted to a remote authorization site, thereby reducing communication costs.

In recent years, the use of transaction cards has increased significantly. In many cases, transaction cards are used in place of cash when purchasing goods or services. These transaction cards can take the form of credit cards, where a record of transactions is maintained and a bill is later sent to the cardholder. In one recent scheme, the cardholder deposits money into an account and then has the transaction amount directly deducted from it. These latter types of accounts are referred to as "debit cards." The banking industry has also begun using transaction cards that allow common banking functions to be performed without a teller using automatic terminals. Lost or stolen cards are often used to purchase goods or services without the authorized holder's authorization. Additionally, many counterfeit cards were created for fraudulent purchases. The industry is responding in a number of ways designed to reduce losses associated with such fraudulent transactions.

An early approach in the transaction card industry was to periodically print and distribute lost or stolen card risk information. When a card is presented for a transaction, the card number is checked against this list before the transaction is approved. Unfortunately, this approach is time consuming and error prone. Most importantly, this information will be distributed on a regular basis.
The scheme does not detect fraudulent use of a card after it is reported as lost, stolen, or counterfeit, but before the time it is listed on the bulletin board.

Recently, various automatic online verification schemes have been developed. In these schemes, information about the cardholder and the transaction is transmitted via a communications link to a central control center for approval or further processing. In some cases, a central control center may be provided with information about the cardholder to make an approval decision. In smaller transaction schemes, the central department equals the card issuer. For schemes that are larger and include many card issuers,
Transaction information is forwarded from the central department to one of the remote issuers for final approval.

When the first automatic systems were developed, typically
Transaction information is entered into the network of authorizations by the merchant calling the local recipient who populates the terminal. In relatively recent times, a number of electronic terminals have been designed that automate processes. These terminals located at merchant locations are designed to directly accept transaction information.

The terminal is equipped with a device for reading transaction cards. For example, many transaction cards are provided with a magnetic stripe that encodes information such as the cardholder's account number and the name of the institution that issued the card. These terminals have magnetic transducers to read this information.
The terminal transmits the data on the magnetic stripe along with other details of the transaction, such as the transaction amount, to the authentication method. The approval procedure is then followed as described above.

As can be seen, if the issuer of the transaction card is located far from the point of transaction, each authorization can incur significant communication costs. Additionally, approvals take time, slowing down the sales process. Although electronic authorization processes are appropriate from a fraud reduction standpoint, it would be desirable to balance the risk of fraud with the cost of authorizing each transaction.

One approach to reducing communications costs in authorized networks is disclosed in U.S. Pat. No. 4,485,300, dated November 27, 1984. The invention is directed to large transaction card systems that include multiple card issuers and one central communications center. Prior to that invention, each transaction was routed by a management center to the respective issuer for approval. To reduce the need for this step, a method was provided in which various parameters were supplied to the management center. These parameters will define the types of transactions that can be approved by the management center directly instead of sending an approval request to the issuer.

These parameters are based on the overall typology of the issuer's cardholder accounts. For example, transaction parameters may be set relatively high if the issuing institution has a small group of high credit worthy customers. In this case, only transactions with higher amounts are referred to the issuer for approval. Conversely, if the issuer has a large number of customers representing a high degree of risk, the parameters will be set relatively low to minimize the potential for bad debts and fraud losses. In the latter case, communication costs would be higher, but would probably be offset by lower losses. Obviously issuers can make decisions based on their own needs.

The above scheme has been found to be very successful in helping issuers balance communication costs with bad debt and fraud losses. However, the latter path still remains from the merchant to the central management department that carries out the decision-making process.
Requires communication of trading parameters. Moreover, the parameters supplied to the data management center are based on the issuer's general evaluation of the cardholder. In other words, these parameters are not directly linked to the credit worthiness of each individual cardholder, but only represent a general rating.

Based on the above, it would be desirable to provide a method by which various transactions could be approved at the transaction site without incurring any communication costs. The decision is within the control of the issuer and should preferably be based on the creditworthiness of the individual cardholder.

Accordingly, it is an object of the present invention to provide a new and improved scheme by which an issuer can adjust the type of authentication requests sent from a transaction site.

It is another object of the present invention to provide a new and improved method by which transaction authorization can be generated off-line at a remote terminal based on criteria provided by a transaction card issuer. .

It is a further object of the present invention to provide a new and improved method by which a card issuer can encode information onto a transaction card so that each transaction can be evaluated at a remote terminal. be.

It is another object of the present invention to provide an authorization scheme that significantly reduces communication costs.

In accordance with the above and other objectives, the present invention provides a transaction scheme that allows a transaction card issuer to adjust the type of authentication request sent from the transaction site. In this scheme, a file device containing the cardholder's information is generated. This file is maintained at a location remote from the trading site, such as at the issuer's location. A set of copies of this information may also be provided at the data management center in the manner described in the aforementioned US Pat. No. 4,485,300.

According to the invention, each transaction card is provided with data identifying the cardholder as well as data representing risk assessment information associated with the particular cardholder. Risk assessment information is intended to provide an assessment of the potential creditworthiness, or, more generally, of the potential liability-bearing capacity associated with the cardholder. For example, if the cardholder has a history of card loss, the account may be at greater risk. Similarly, a history of exceeding credit limits will be taken into account when calculating risk assessment information. Conversely, if the cardholder has a high credit limit and no past history of problems, the risk assessment information will be created to reflect that situation.

This risk assessment information can be encoded on the magnetic stripe of the transaction card. This information can be encoded using cryptography so that unauthorized users cannot read it. As can be seen, transaction cards have been developed that do not use a magnetic stripe to store cardholder information. For example, various "smart cards" in which information is held in computer storage within the card.
was developed. The invention is intended to include this type of transaction card and any other card in which risk assessment information provided by the issuer is placed on the card in such a way that it can be read by the transaction terminal.

The invention further includes a terminal at the transaction site and a device for reading the data on the transaction card as described above. The terminal includes a processing unit to evaluate the transaction based on the risk assessment information carried on the card. The terminal itself can issue an approval if the particular transaction falls within the parameters set by the issuer. However, if the transaction falls outside the boundaries established by the issuer, an authentication request is then sent to the communications network for approval by a department remote from the transaction site. As mentioned above, this authorization is determined at the administrative center or issuer of the transaction card.

In a preferred embodiment of the invention, each transaction terminal is provided with a transaction amount limit. In this embodiment, the risk rating information placed on the card takes the form of a multiplier used to rate transactions. Specifically, the multiplier on the card is used to change within the terminal the limit on the amount of money that will be transmitted for approval once a transaction exceeds that value.

Other objects and advantages of the invention will become apparent from the following detailed description, taken in conjunction with the accompanying drawings.

Referring to FIG. 1, the basic elements of the trading scheme 10 of the present invention are illustrated in block diagram form. In this scheme, an institution named "issuer" 20 distributes transaction cards 30 to a number of customers. Issuer 20 can be a bank or other financial institution. Often, issuers collect information from cardholders to evaluate and assign credit limits to cardholders. This credit limit is stored in storage at the issuer along with the associated cardholder identification number. This information is used to determine whether a particular transaction should be approved.

Although there are many different types of transaction cards in use today, by far the most distributed in the United States are plastic cards with embossed markings. Additionally, the card is provided with a magnetic stripe that can encode various accounting information. Parameters for these cards are standardized. For example, card dimensions are determined by ISO document
Specified in ISO/TC97/SC17/WG4-N95.
The format of the encoded magnetic stripe has also been standardized and is shown in ISO standards 3554 and 4909.

The type of card and the method of data application are not important to the invention. For example, newer types of smart cards may be used in which information about the cardholder is stored in internal storage rather than on the magnetic stripe. In the present invention, the transaction card need only be capable of carrying data representative of the risks associated with the cardholder.

In the basic embodiment of the invention, the issuer is connected to a plurality of transaction terminals 40 via communication lines 24. Terminal 40 is located at the point of transaction. These transaction terminals are typically located at merchant locations where sales or services are required. However, it can also be used at banks or airports where cash or traveler's checks are handed out.

The transaction terminal 40 of the present invention has many elements similar to automatic transaction terminals available today. More specifically, today's point-of-sale terminals have equipment for reading information encoded on cards. Typically, the device includes a transducer for reading information encoded on the magnetic stripe. Alternatively, the terminal may have contacts for interfacing with the mechanical contacts of the smart card. The terminal also has a processing unit for controlling operations such as formatting procedures, dialing, and sending information to the issuer. Typically, the terminal also has a keypad input that accepts supplemental information about the transaction, such as the transaction amount.

According to the invention, a processing unit within the terminal is programmed to provide a comparison function for evaluating transactions based on risk assessment information placed on the card. A preferred embodiment of this comparison function is described below. Terminals with electronic systems suitable to perform all of the functions disclosed in this document are manufactured by International Verifact.
Inc.) Terminus Model
It is. Used with an Intel 80c31 microprocessor, this terminal is designed to perform numerous trading functions. This terminal could be easily modified to perform the functions disclosed herein by adding software instructions. The terminal can also be adapted to read information encoded in different tracks of the magnetic stripe, which can contain risk assessment information. If other security characteristics are desired, supplemental hardware, such as Watermark Magnetics, can be provided to enable detection of various card security characteristics.

When operating the conventional technology system as described above,
The cardholder provides his card 30 to the merchant. The merchant swipes the card through a terminal that reads the information on the card. Next, the merchant enters the transaction amount,
This information is then transmitted over communication line 24 to the issuer. The issuer compares the information sent by the terminal with the cardholder's information stored in the storage device 22. If the evaluation is positive, an authorization code is sent back to the merchant, who completes the transaction. If this evaluation is bad, the transaction will be rejected.
Obviously, this route is time consuming and expensive.

In the prior art, some of the communication costs are reduced by providing a minimum value or floor limit to the terminal. More specifically, the terminal can be easily programmed to automatically approve transactions within certain monetary limits. This way of getting there is directly connected to the merchant's evaluation. Specifically, if the merchant is popular, the types of transactions that are automatically approved can be set to a relatively high level.

Unfortunately, this route is not controllable based on cardholder ratings. Additionally, in larger schemes, as described below, amounts are controlled by "merchant members" rather than issuers. Therefore, it is desirable for card issuers to be able to control communication costs and manage the risk of loss.

To meet these objectives, each transaction card is provided with data representing risk assessment information 32. This risk assessment data can be encoded onto the magnetic stripe on the card. As mentioned above, this information may also be stored in the card's storage, or provided in any other manner.

Risk assessment data 32 is generated to clarify the cardholder's potential liability capacity. Thus, customers with good credit qualifications are given significantly higher reputation values. Conversely, cardholders with bad credit history are given lower reputation values. Each issuer can make decisions based on the history of individual cardholders.

According to the invention, a processing unit within the terminal would have the ability to read the risk assessment information on the card and compare this information to the transaction amount. This information is compared to determine whether approval can be issued without communicating with the issuer. If the evaluation is good, the terminal will generate an approval "offline". If the rating exceeds the limit recorded on the card, communication line 2
4 will send an authentication request to issuer 20.

In the preferred embodiment, the terminal is provided with a transaction amount limit 42. This numerical value is stored in a storage device in the processing unit of the terminal. The amount of the transaction amount limit may be a function in part of the merchant's potential liability capacity or the particular location where the terminal is located. In this case, the risk rating data on the card is determined by the multiplier used to increase or decrease the transaction amount limit stored in the terminal.

For example, assume that the issuer has assigned a risk evaluation value of "2" to the cardholder. After reading the card, terminal 40 multiplies the transaction amount limit stored in the terminal by this value. Therefore, if the transaction amount limit is $50, the result of the multiplication is $100. If the transaction amount in progress is less than $100,
An automatic approval is issued. If the transaction amount exceeds $100, the authorization request will be forwarded to the issuer. By choosing the number of multiplications to be less than 1, the value stored in the terminal can be reduced. The multiplier value can also be set to 0 to send all transactions for that cardholder to the issuer for authentication.

As can be seen, the scheme of the invention allows the issuer to manage the requests that are transmitted. An arrangement in which the issuer bears the cost of such communication requests allows the costs to be balanced against the potential for bad debt and fraud losses.

To further increase security, it is desirable to provide each card with a secret code or identification number (PIN). Cardholders are required to enter their PIN to obtain approval for the transaction. Such secret code systems are known in the prior art. Typically, the issuer stores a list of secret numbers in storage 32 for use when verifying the PIN.

As is clear, since the present invention provides remote offline authentication, one must choose a PIN destination that allows for authentication of the PIN within the terminal. This requirement is met by placing a portion of the identification number (partial PIN) on the card. this part
The PIN can then be compared with the overall PIN entered into the terminal. Of course, if the authentication request is sent back to the issuer, the overall PIN input by the user can be checked against the overall PIN stored by the issuer. Details for implementing one type of partial PIN verification system are set out in the Interbank Card Association's PIN Manual. If the PIN is encrypted, an offline encryption key management method may be required. One such scheme is described in U.S. patent application filed September 2, 1983, incorporated herein by reference.
Described in No.529161. In a preferred embodiment of the invention, both the risk assessment information and the partial PIN are encoded on the card.

Referring now to FIG. 2, a full-fledged transaction card system is illustrated. Although the scheme of the present invention also finds application in the simplified scheme shown in FIG. 1, the savings are most significant in larger schemes where communication costs are significantly increased. For example, the full-scale system shown in Figure 2 has been implemented all over the world, and today it is rapidly spreading to overseas markets.

As illustrated in FIG. 2, a large scheme includes multiple issuers (120a, b and c). Each issuer distributes cards to its cardholders. Therefore, in this example, each issuer has a file (122) to store cardholder information.
A, B and C) are maintained. Each issuer's card includes data identifying the cardholder, issuing institution, and risk assessment data.

In the scheme shown in Figure 2, there are generally a large number of "merchant members." For clarity, only one merchant member 50 is shown. Typically, merchant members 5
0 is another financial institution responsible for contracting with various merchants. Many publishers play a dual role with merchant members. The diagram shows that the issuer and most cardholders may be located in New York, and the merchant member and its associated merchants may be located in California.

Each merchant member 50 contracts with, or enlists, a number of merchants (60A, B and C).
Each merchant 60 has one of the types described with reference to FIG.
More than one terminal can be provided. Once merchant 60 signs up, merchant member 50 determines the likelihood of a fraudulent transaction. Based on this assessment, terminals supplied to merchants are provided with transaction amount limits designed to be a compromise between communication costs and potential loss. This transaction amount limit can be updated periodically based on merchant 60's performance.

In the illustrated embodiment, the data management center 7
0 is shown. The data management center acts as a network switch that forwards transaction information. In a typical conventional transaction, cardholder data and transaction amount would be entered by the merchant at the merchant's location. This information is for merchant members 50
will be forwarded to. If the merchant member and card issuer were the same, the transaction could be authorized at that location. However, typically the issuer and merchant member are not the same, so the transaction information is then provided to data management center 70. In this situation, the data management center determines the card issuer. The transaction information is then provided to the authorized issuer 120 for comparison with cardholder information 122 held by the issuer. As described above, the issuer responds to the merchant by deciding whether to approve the transaction.

As is obvious, the above route involves very high communication costs. One method of reducing this cost is disclosed in US Pat. No. 4,485,300. In that patent, each publisher provides publisher parameters 72 to data management center 70 . These parameters are based on general cardholder performance for that issuer. Thus, if this issuer has relatively high credit value customers, the parameters can be set to a high level so that the data management center can provide automatic approvals. Although this approach helps save money, it is clear that the present invention has additional advantages. Specifically, many transactions are approved immediately at the merchant's site without communicating with a data management center. Additionally, risk assessment information can be tailored directly to individual cardholders.

The operation of the invention shown in FIG. 2 is substantially equivalent to that of FIG. More specifically, when the customer presents the card to the merchant, the data on it is read by the terminal. Merchants also input the transaction amount. In a preferred embodiment, the processing device is operative to multiply the transaction amount stored on the terminal by the risk rating value on the card. The transaction amounts are then compared to determine whether the transaction can be approved without any communication outside the terminal. If the transaction is approved, the terminal issues the approval directly. If the transaction is rejected, it will be sent according to the procedure for further evaluation.

In a preferred embodiment, the terminal can be programmed to add additional security features. For example, a random selector within the processing device may be used to automatically designate transmission of certain transactions regardless of the outcome of the evaluation. In this way, we regularly check for fraudsters who carefully select transactions that fall below the estimated level.

Another feature is the inclusion of geographical evaluation. More specifically, if the terminal determines that the issuer is located in a geographically proximate area, a higher percentage of these transactions can be automatically forwarded because communication costs are lower. However, if the terminal determines that the issuer is in a remote location, a different amount may be used to reduce long-distance communications.

In conclusion, a new and improved way of trading method is given. In this approach, transaction card issuers can manage communication costs based on their assessment of cardholders. In this method,
Each transaction card is given risk rating information provided by the issuer. The terminal is equipped with a device for comparing and evaluating this information with current transactions. If the evaluation is positive, the transaction can be approved at the terminal. If the transaction is not possible, the terminal sends the transaction information to the issuer for approval.

Although the invention has been described with reference to preferred embodiments, it will be apparent to those skilled in the art that various other changes and modifications can be made without departing from the scope and spirit of the invention as defined by the claims. it is obvious.

[Brief explanation of drawings]

FIG. 1 is a block diagram illustrating the transaction system of the present invention, and FIG. 2 is a block diagram illustrating the arrangement typically found in large-scale transaction card systems.

Claims (1)

[Scope of Claims] 1. A device by which a transaction card issuer can influence the types of transactions that can be approved at a transaction site, the device having a file device containing cardholder information provided by the issuer. , a first processing device for evaluating a transaction; and carrying data identifying the cardholder;
a transaction card containing non-monetary data provided by said issuer representing risk assessment information associated with said cardholder; The transaction amount is calculated based on the monetary data stored, a device for reading the data carried on the card, a device for writing the transaction amount, and the risk evaluation information carried on the card and the monetary data stored internally. and a remote processing device for obtaining limits and for further evaluating whether the transaction can be locally approved at the terminal.
and a remote terminal for comparing the transaction amount with the transaction limit in order to determine by the remote processing device whether to forward the transaction to a processing device. 2. The apparatus of claim 1, wherein the transaction card includes a magnetic stripe. 3. The apparatus of claim 2, wherein the risk assessment information is encoded on the magnetic stripe. 4. The device according to claim 1, further comprising a data management center connected between the terminal device and the first processing device. 5. If said data management center does not fall within said parameters maintained in said data management center, said data management center includes a network processing device and evaluation parameters provided by said issuer. 5. The device of claim 4, wherein the transaction information is only transferred to the first processing device by a data management center. 6. Claim 1, wherein the non-monetary data on the card is determined based on numerical information, and the transaction amount limit is obtained by multiplying the numerical information by the monetary information in the terminal device. Apparatus described in section. 7. The device according to claim 1, wherein the monetary information stored in the terminal device is based on the location of the terminal device. 8 a first processing device for evaluating transactions, a plurality of transaction cards each carrying data identifying a cardholder and non-monetary data based on a risk assessment of said cardholder; A method of operating a transaction device having a terminal internally storing monetary data unrelated to a risk assessment of a cardholder, and data entry capability, the method comprising: enter into said terminal the transaction amount from said terminal, and enter non-monetary data from said card corresponding to said cardholder's risk assessment and monetary data from said terminal unrelated to said cardholder's risk assessment; the transaction amount and the transaction data to derive a transaction amount limit based on the transaction amount and to determine whether the transaction can be approved locally at the terminal or should be forwarded to the first processing device for further evaluation. A method that involves comparing against monetary limits. 9. Claim 8, wherein the non-monetary data on the card is determined by numerical information, and the transaction amount limit is obtained by multiplying the numerical information by the monetary information from the terminal. Method described.