News Column

"Aggregate Merchant Monitoring" in Patent Application Approval Process

May 6, 2014



By a News Reporter-Staff News Editor at Information Technology Newsweekly -- A patent application by the inventor Lo Faro, Walter F. (Chesterfield, MO), filed on October 16, 2012, was made available online on April 24, 2014, according to news reporting originating from Washington, D.C., by VerticalNews correspondents.

This patent application is assigned to Mastercard International, Inc.

The following quote was obtained by the news editors from the background information supplied by the inventors: "The present disclosure relates to electronic transaction processing. More specifically, the present disclosure is directed to method and system for monitoring the transactional volume of aggregate merchants in order to detect data anomalies.

"The use of payment devices for a broad spectrum of cashless transactions has become ubiquitous in the current economy, accounting for hundreds of billions of dollars in transactions. The process and parties involved can be visualized for example as presented in FIG. 1, and can be thought of as a cycle, as indicated by arrow 10. A cardholder 12 may present a payment device 14, for example a payment card, transponder device, NFC-enabled smart phone, among others and without limitation, to a merchant 16 as payment for goods and/or services. The payment device 14 here is emblematic of any transaction device, real or virtual, by which the cardholder and/or the source of funds for the payment may be identified.

"In cases where the merchant 16 has an established merchant account with an acquiring bank (also called the acquirer) 20, the merchant communicates with the acquirer to secure payment on the transaction. An acquirer 20 is a party or entity, typically a bank, which is authorized by the network operator 22 to acquire network transactions on behalf of customers of the acquirer 20 (e.g., merchant 16). Occasionally, the merchant 16 does not have an established merchant account with an acquirer 20, but may secure payment on a transaction thought a third-party payment provider 18. The third party payment provider 18 does have a merchant account with an acquirer 20, and is further authorized by the acquirer 20 and the network operator 22 to acquire payments on network transactions on behalf of sub-merchants. In this way, the merchant 16 can be authorized and able to accept the payment device 14 from a cardholder 12, despite not having a merchant account with an acquirer 20.

"The acquirer 20 routes the transaction request to the network operator 22. The data included in the transaction request will identify the source of funds for the transaction. With this information, the network operator routes the transaction to the issuer 24. An issuer 24 is a party or entity, typically a bank, which is authorized by the network operator 22 to issue payment devices 14 on behalf of its customers (e.g., cardholder 12) for use in transactions to be completed on the network. The issuer 24 also provides the funding of the transaction to the network provider 22 for transactions that it approves in the process described.

"The issuer 24 decision to authorize or decline the transaction is routed through the network operator 22 and acquirer 20, ultimately to the merchant 16 at the point of sale. This entire process is typically carried out by electronic communication, and under routine circumstances (i.e., valid card, adequate funds, etc.) can be completed in a matter of seconds. It permits the merchant 16 to engage in transactions with a cardholder 12, and the cardholder 12 to partake of the benefits of cashless payment, while the merchant 16 can be assured that payment is secured. This is enabled without the need for a preexisting one-to-one relationship between the merchant 16 and every cardholder 12 with whom they may engage in a transaction.

"The issuer 24 may then look to its customer, e.g., cardholder 12 or other party having financial ownership or responsibility for the account(s) funding the payment device, for payment on approved transactions, for example through an existing line of credit where the payment device 14 is a credit card, or from funds on deposit where the payment device 14 is a debit card. Generally, a statement document 26 providing information on the cardholder's account is issued in this regard.

"The network operator 20 can further build and maintains a data warehouse which stores and augments transaction data, for use in marketing, macroeconomic reporting, etc. To this end, transaction data from multiple transactions is aggregated for reporting purposes according to a location of the merchant 16. Additionally, one merchant 16 may operate plural card acceptance locations. Consider, for example, a chain or franchise having multiple business locations. These merchant locations are beneficially aggregated and assigned an aggregate merchant identifier for reporting purposes.

"Of the actors in the transaction process, the merchant's data tends to be the least stable and most difficult to deal with. One of the challenges with merchant data is the fact that there is no universal merchant identifier. Rather, the network operator 22 must build and maintain the data warehouse on its own, derived from merchant data included in the transaction data delivered via the acquirer 20. Similarly, there is no reliable identifier on the data received that indicates if a merchant location belongs to a chain or not, for example for aggregation purposes. Again, the network operator 22 augments transactions with this information, based on the merchant name received, the acquiring bank, and several other fields. The process of grouping merchant locations into sets of chain merchants is called 'merchant aggregation' and maintaining the integrity of these aggregations is a challenge.

"If the merchants 16 and acquirers 20 never changed the way in which they submit their data, there would be no need for a monitoring system; but of course they do. Merchants 16 can change acquirers 20; they open and close locations; they rebrand themselves--just to name a few of the challenges. When any of these or other changes to merchant data happen, the rules used to assign an identifier to a merchant location and/or associate that merchant location with an aggregate merchant id often fail. Even cursory human oversight of each and every merchant location would be prohibitively expensive considering the total number of merchants 16 accepting authorized payment devices 14, or even that subset of aggregate merchants whom the network operator 22 wishes to monitor.

"A solution to this aggregate merchant data quality deficit problem remains wanting."

In addition to the background information obtained for this patent application, VerticalNews journalists also obtained the inventor's summary information for this patent application: "MasterCard International, the assignee of the instant application, in its capacity as network operator 22 in the above-described process, has developed a solution to the problem of aggregate merchant data quality deficit. An automated system monitors transaction data. The system will alert a merchant analyst to investigate particular merchants when their data becomes suspect, making vastly more efficiency use of the merchant analyst's time. Dubbed the Merchant Monitoring System (MMS), there are distinct monitoring techniques. What follows herein is a description of these techniques.

"Provided according to the present disclosure are a method of monitoring cashless transaction data. The method includes extracting transaction history data for a merchant within a first predetermined time period from a transaction data storage. A first plurality of forecast models that forecast transaction patterns for the merchant over the first predetermined time period are provided, each forecast model of the first plurality having a different forecast period. In some more particular embodiments, the forecast models may be constructed according to a Holt-Winters time-series forecast for each forecast period. The forecast model which most accurately forecasts periodic fluctuations in the transaction history data is selected.

"Using the selected forecast model, a first forecast of transactions for the merchant for a first forecast period outside the first predetermined time period is provided. A score comparing the provided forecast with actual transaction data from the merchant for the first forecast period is further provided. An alert is generated in response to the score exceeding a predetermined first threshold. In some more particular embodiments, the score is a standard score, scaled to a calculated standard deviation of the transaction history data.

"The method can further include extracting transaction history data for a merchant within a second predetermined time period from the transaction data storage, and providing a second plurality of forecast models that forecast transaction patterns for the merchant over the second predetermined time period. Here again, each forecast model of the first plurality has a different forecast period. In these embodiments, selecting the forecast model comprises selecting from the first plurality of forecast models and the second plurality of forecast models.

"In certain embodiments, selecting the forecast model which most accurately forecasts periodic fluctuations in the transaction history data comprises selecting the forecast model having a greatest coefficient of determination with respect to the transaction history data.

"To account for certain foreseeable exception criteria, the score value may be forced to an arbitrary value greater than the first threshold responsive to the existence of such predetermines exception criteria.

"In further embodiments of the present disclosure, a second forecast of transactions for the merchant in a second forecast period is provided using the selected forecast model. Further, an extended forecast models of transaction patterns for the merchant in the second forecast period, reflecting the actual transaction data from the first forecast period, is used to provide a third forecast of transactions for the merchant for the second forecast period. The second an third forecasts are compared with one another, and an alert is generated in response to the second and third forecasts for the second forecast period differing by more than a predetermined second threshold.

"Also disclosed herein is a computer operative to carry out a described method. Also disclosed herein is a machine-readable storage medium having a program of instruction thereon. That program of instruction, when executed by a computer, will cause the computer to carry out a described method.

"These and other purposes, goals and advantages of the present disclosure will become apparent from the following detailed description of example embodiments read in connection with the accompanying drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

"Some embodiments are illustrated by way of example and not limitation in the figures of the accompanying drawings, in which like reference numerals refer to like structures across the several views, and wherein:

"FIG. 1 illustrates a typical cycle for cashless transaction processing;

"FIG. 2 illustrates a flowchart for revenue forecast and forecast scoring according to an exemplary embodiment of the present disclosure; and

"FIG. 3 illustrates schematically a representative computer according to the present disclosure, operative to implement the disclosed methods."

URL and more information on this patent application, see: Lo Faro, Walter F. Aggregate Merchant Monitoring. Filed October 16, 2012 and posted April 24, 2014. Patent URL: http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.html&r=1071&p=22&f=G&l=50&d=PG01&S1=20140417.PD.&OS=PD/20140417&RS=PD/20140417

Keywords for this news article include: Information Technology, Information and Data Storage, Mastercard International Inc.

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Source: Information Technology Newsweekly