WO2004015601A2

WO2004015601A2 - Purchase transaction service

Info

Publication number: WO2004015601A2
Application number: PCT/IB2003/003711
Authority: WO
Inventors: Brian Connolly; Hubert O'donoghue
Original assignee: Omnipay Limited
Priority date: 2002-08-02
Filing date: 2003-07-25
Publication date: 2004-02-19
Also published as: AU2003255955A1; WO2004015601A3; GB0218020D0; AU2003255955A8

Abstract

A process for managing commercial transactions comprising: receiving a first message from a merchant, said first message defining the amount of a card holder's transaction in a first currency defined by the card, receiving or generating a second message defining the amount of the card holder's transaction in a second currency determined by the merchant, sending (212) a request for payment of the transaction to a card issuer, said request including information relating to the amount of the card holder's transaction in the first currency, sending (214) a third message to a financial institution associated with the merchant to the account of the merchant with an amount in a third currency determined by the merchant.

Description

PURCHASE TRANSACTION SERVICE

This invention relates to purchase transactions, such as those carried out using cards such as credit cards, debit cards or store cards, and in particular to purchase transactions involving multiple currencies. A purchase transaction in this regard relates both to a customer purchasing a product or service and a customer requesting a refund for previous payment for a product or service.

Traditionally transactions such as credit card transactions have taken place in the currency of the country in which a product is purchased. The currency amount is presented to a credit card settlement centre in the currency of purchase. The currency of purchase is then converted into the currency associated with the credit card used. For instance, a credit card issued by a UK bank would usually be associated with Pounds Sterling. When such a credit card is used outside the UK, for instance in Japan, the transaction is carried out in the local currency, in this case Japanese Yen. The transaction amount is then presented to the credit card settlement centre which then converts the amount from Japanese Yen into Sterling at an exchange rate determined by the credit card settlement centre.

The purchaser therefore has no knowledge at the time of purchase of the actual cost to the purchaser in his local currency and is exposed to exchange rate fluctuations.

In accordance with the invention there is provided apparatus for conducting purchase transactions comprising: memory for storing data relating to a transaction, a customer application for receiving a first message from a merchant, said first message defining the amount of a customer's transaction in a first currency defined by the customer, and for storing the amount in the first currency in the memory, a merchant application for receiving or generating a second message defining the amount of the customer's transaction, said second message defining the amount of the customer's transaction in a second currency determined by the merchant, and for storing the amount in the second currency in the memory, a payment application for sending a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount of the customer's transaction in the first currency, and a financial institution application for sending a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency determined by the merchant.

Thus the invention enables transactions such as credit card transactions to be carried out in a first currency which is the preferred currency of the credit card holder or issuer. This is achieved by the merchant selling the goods either entering the amount in the preferred currency of the credit card or entering an amount in a second currency (e.g. their trading currency) which is then converted into the first currency at the point of sale or at a central server. The credit card holder's voucher therefore shows the amount in their preferred currency even though the merchant has entered the amount in their trading currency. A central server stores a record of the amount of the transaction in the first, customer, currency and in the second, merchant, currency and also stores a record of the exchange rate used to convert from one currency to the other. Typically the first and second message are included in a single data stream from a point of sale device. The third currency, determined by the merchant, is typically the currency in which the merchant banks. In most cases this will be the same as the second currency i.e. the merchant's trading currency. If the second currency and the third currency are not the same, the amount of the transaction in the third currency is also stored in the memory.

The institution associated with the customer is typically the issuer of the information or card used to carry out the transaction. For instance it may be the credit card issuing section of a bank. The request for payment of the transaction may be sent to the institution (e.g. the card issuer) via an association with which the institution is associated. For example, in the case of a credit card, the request may be sent via a credit card association for the type of credit card used (e.g. Visa™, American Express™ etc).

Preferably the apparatus is further arranged to receive a message from the institution associated with the customer acknowledging payment of the customer's transaction, said fourth message including a record ofthe amount of the transaction in a fourth currency determined by the institution or more usually an association with which the institution is associated, and for storing the amount in the fourth currency in the memory. Thus, if the institution (e.g. the card issuer) or an association with which the institution is associated (e.g. Mastercard™) is unable to settle the transaction in the first, customer, currency then the apparatus keeps a record of the amount of the transaction in the currency of the institution or the association. A record is also kept of the exchange rate used.

Thus, for each transaction, a record is kept of the amount of the transaction in all the associated currencies involved in the transaction, together with records of the exchange rate(s) used in each transaction. Preferably the apparatus further comprises a reporting application to produce periodic reports in the associated currency of the total transactions within a reporting period to the financial institution, merchant and/or institution associated with the customer.

Typically the customer application, the merchant application, the payment application, the financial institution application and the reporting application are implemented in software and typically as a single software package. This may be implemented on a server provided by a single party providing a settlement service to a number of merchants, financial institutions and/or associations such as credit card associations.

In a second aspect of the invention there is provided a method for managing purchase transactions comprising: receiving a first message from a merchant, said first message defining the amount of a customer's transaction in a first currency determined by the customer, receiving or generating a second message defining the amount of the customer's transaction, said second message defining the amount of the customer's transaction in a second currency determined by the merchant, sending a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount ofthe customer's transaction in the first currency, and sending a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency determined by the merchant. Again, a card, such as a credit card, may be used to carry out the transaction. Preferably a record of the customer's transaction is stored in each of the currencies. A record ofthe exchange rate(s) involved may also be stored.

In a further aspect of the invention there is provided a system for managing purchase transactions comprising: a point-of-sale device for enabling a merchant to carry out a transaction with a customer, means for sending a first message from a merchant to a transaction server, said first message defining the amount of a customer's transaction in a first currency defined by the customer, the transaction server being arranged to receive or generate a second message defining the amount ofthe customer's transaction in a second currency determined by the merchant, the transaction server being arranged to send a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount of the customer's transaction in the first currency, and the transaction server being arranged to send a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency.

Preferably the third currency is determined by the merchant. In this case, the second and third currency will tend to be the same currency, since the merchant is likely to trade and bank in the same currency.

The invention will now be described further, by way of example only, with reference to the accompanying drawings, in which: Figure 1 is a schematic drawing of a credit card transaction system; and Figure 2 is a flow chart illustrating the steps used in a first embodiment of a card transaction server according to the invention.

Purchase transactions typically involve a number of parties: there is a customer, who is typically the cardholder wishing to purchase goods or services; a merchant, who is the seller of goods or services to a customer; an issuer, who is a financial institution such as a bank who provides a card to a customer; an acquirer, who is the financial institution such as a bank that provides card transaction clearing services to a merchant; and an association, such as Visa™, who licenses issuers and acquirers (members) to provide services to merchants and customers.

The currency ofthe card is usually determined by the domicile ofthe issuer and the customer. In most cases this will be the same domicile, so the currency of the issuer and the currency ofthe customer will be the same.

The association may also provide a link (clearing network) which passes card transactions and value between acquirers and issuers. (Visa is used as an example of one such association: others include Mastercard™, American Express™, Diners™, JCB™ etc....)

The acquirer bank may provide the transaction clearance services themselves or may elect to outsource them to a third party member service provider (MSP). A third party member service provider provides the services and functions that an acquirer would provide were it not to use an MSP. The MSP requires certification by an association (e.g. Visa) as an MSP, such certification being at the request ofthe acquirer (member). The currencies to be considered are as follows: Customer currency cardholder billing currency, usually the same currency as the issuer currency Merchant currency the merchant's domestic currency, in which he prices his goods/services for sale and in which he usually wishes to receive funding. Acquirer currency the acquirer's organisation currency, usually the domestic currency of the acquirer in which it operates, i.e., runs its General Ledger, profit & loss and business. Card settlement currency the currency in which the card association settles the acquirer.

The terms acquirer and MSP may be used interchangeably in the following description of activities, as the functions of the acquirer would be provided by the MSP where the acquirer uses the MSP as its outsource partner.

Figure 1 is a schematic drawing of a credit card transaction system. A point- of-sale (POS) device 2 provides the means by which a seller of goods or services (hereinafter referred to as a merchant) electronically processes a purchase transaction. The POS device 2 communicates with a central server 4 of the acquirer or MSP via a communications link, typically a telecommunications link. The server 4 has an associated database 5 for storing records of each transaction with which the acquirer or MSP is involved. The server 4 is connected by a communications link to a card settlement centre (CSC) 6, which typically is a central card settlement centre for a particular type of card association e.g. Visa™, American Express™ etc. The card settlement centre 6 will establish a connection with any of a plurality of servers 8a, 8b, etc of different card issuers, e.g. individual banks etc.

The central server 4 of an MSP also establishes a communication link with any of a plurality of financial institutions 10a, 10b etc. (such as a bank, known as an acquiring bank) that provide clearing purchase transaction services to merchants and customers. In response to a message from the server 4 of an MSP, the acquiring bank 10 adjusts the bank account of the merchant with the amount of the transaction undertaken i.e. by crediting or debiting the account. The central server 4 of an acquiring bank adjusts accounts of the merchant with the amount ofthe transaction undertaken.

The point-of-sale device 2 is the means by which a merchant processes a transaction, for example a card transaction, for a customer. Examples of such cards are credit cards, debit cards, store cards etc. The point-of-sale device 2 may be a stand-alone device provided at a merchant's premises or may be integrated into a merchant's till system. Alternatively the POS device may be implemented in software to provide a user interface for presentation to a customer (e.g. via the Internet and the World Wide Web) and the associated functionality as will be described below.

Information relating to bank identity numbers (BINs) and exchange rate tables is regularly downloaded from a central server 4 to the POS 2. Each issuer has a range of BINs associated with it. On the basis of the BIN number and/or the card number read from the card, the POS determines the issuing bank and thus the customer currency ofthe card.

The merchant and the acquirer agree which currencies are to be supported with respect to transactions carried out by the merchant. If the BIN relates to an issuer whose currency is supported by the merchant then the transaction is converted into that currency by the POS device. If the BIN relates to an issuer whose currency is not supported by the merchant, then the transaction proceeds in the currency ofthe merchant.

When a customer wishes to purchase something from the merchant, the merchant enters the amount of the transaction and the customer presents his credit card to the merchant. The merchant then, typically, swipes the card through a card reader associated with the point-of-sale device 2. This card reader reads from the card the details associated with the card e.g. the card number and the expiry date. Alternatively, where the POS device 2 is provided on a computer screen, the customer may enter the card details. The amount of the transaction in the merchant's currency may be entered by the customer or may automatically be entered by the software according to any previous selections made by the customer.

Details of the amount of the customer's transaction in the currency of the customer are then sent from the point-of-sale device 2 to the central server 4 for processing. This is achieved by the point of sale device establishing a telephone connection with the server 4.

The operation of a transaction scheme according to the invention will now be described in further detail with reference to Figure 2. Figure 2 shows the operation of the acquirer or MSP. First (202) the server 4 of the acquirer or MSP receives from the point-of-sale device 2 a message requesting authorisation of the transaction. This message indicates the details of the transaction carried out at the POS device 2 and in particular details of the transaction in the customer currency of the card used for the transaction. The server 4 also receives a message from the POS device indicating the equivalent amount of the transaction in the currency in which the merchant trades. Alternatively, the conversion ofthe transaction is carried out at the server 4. In this case, the server receives details of the transaction in the customer currency and then generates a message indicating the equivalent amount of the transaction in the merchant currency, or vice versa.

For instance, consider the following example:

• A customer has a card which is programmed with the customer currency of Canadian dollars CAD • A merchant trades in a merchant currency of Japanese yen JP Y

• The acquiring bank of the merchant uses the acquiring currency Korean won KRW

• The card settlement currency is US dollars USD

As stated, the server 4 receives (202) from the point-of-sale device 2 an authorisation request message indicating the amount of the transaction in the customer currency (Canadian dollars). The server 4 also receives or generates a message indicating the equivalent amount in the merchant's trading currency (Japanese yen). Server 4 then sends (204) an authorisation request message to the card settlement centre 6 which message indicates the amount of the transaction in the customer currency. The card settlement centre 6 then sends details ofthe transaction in the customer currency to the card issuer 8. Thus an authorisation request message relating to the amount of the transaction in the customer currency is sent from the server 4 via the card settlement centre 6 to the card issuer 8.

When the card issuer indicates that the transaction is authorised, a message is sent from the card issuer to the card settlement centre. The card settlement centre then sends the authorisation message to the server 4 which then receives and sends (206) it on to the merchant's POS device 2. The transaction is then authorised and the customer charged at the POS for the purchase in the currency of the customer. Details of the transaction (e.g. the card number, the expiry date, the customer currency associated with the card and the amount of the transaction in both the merchant's currency and the customer currency used) are stored in the POS device.

Periodically (usually once a day) the POS device 2 downloads (208) to the server 4, for clearance and settlement, details of all transactions that have taken place during the preceding period. Thus the POS device sends to the server 4 the details for each of the transactions, these details including the card number and the amount of the transaction in both the merchant's currency and the customer currency. The server stores (210) these details of the transaction in the records database 5 together with a record of the exchange rate used. The server 4 then sends (212) the details of the card number and the amount of the transaction in the customer currency to the relevant card settlement centre 6 which sends on the details to the relevant card issuer 8. The card holder's account is then charged with the amount of the transaction in the customer's currency.

The card settlement centre will clear transactions in the customer currency in which they are carried out, provided this is a currency supported by the card settlement centre. If the customer currency is not supported by the CSC, then the transaction will be converted by the CSC into the CSC credit card currency (in this case USD) for clearing.

The card settlement centre sends a message (213) to the server 4 indicating settlement of the transaction. This message indicates the amount of the transaction in the merchant currency (or the card settlement currency if the associations does not support the merchant currency). The server 4 then receives this message and stores (220) in the database 5 a record of the transaction in the card settlement currency and a record of the exchange rate used by the CSC. For a transaction for which the customer currency is supported by the CSC, then the server 4 simply stores a record of the transaction in the customer currency, the merchant currency and the acquirer currency.

The server 4 then sends (214) a message to the acquiring bank 10 associated with the merchant to adjust the account of the merchant with an amount in the merchant currency (JPY) equal to the amount of the transaction. For reporting purposes, the server stores (216) in the database 5 the equivalent amount of the transaction in the currency of the acquiring bank 10 together with a record of the exchange rate used, if any.

Thus the server 4 maintains a complete record of each transaction by keeping records of the transaction in all the currencies used during the transaction and also records of any exchange rates used during the transaction. These records can be examined should any of the parties involved (the credit card holder, the card issuer, the card settlement centre, the merchant and/or the acquiring bank) have any reason to query the transaction at any point.

As an alternative to the above scenario, the server 4 may receive a message from the point-of-sale device 2 which indicates the amount of the transaction in the merchant currency alone. The server 4 itself may convert this merchant currency into the customer currency and store a record of this in its associated database. Transactions are passed to the server in the merchant currency for authorisation. Thus, in this online format, the server carries out all the currency conversions in real time for all transactions, the server having exchange rate tables for this purpose. This avoids the batching of transactions at the end of the day from each POS device.

The exchange rates used by the server 4 may be determined by the acquiring bank. Alternatively the exchange rates may be agreed between the MSP and the acquirer for a given period, so meaning that the acquirer is then not exposed to currency fluctuation.

Clearly the currencies used may be the same for different parties, for instance the merchant currency is usually the same as the acquiring bank's currency and the customer currency is typically the same as the issuer's currency.

Thus the customer knows exactly how much in his own currency the goods or services cost, and this amount is charged to his account. Treasury revenue may be generated by buying and selling currency. This revenue may be shared between the acquirer and the merchant. Currency fluctuations during the lifecycle of the transaction (which in exceptional circumstances can be up to 180 days) do not result in currency exposure/loss for the acquirer or the merchant since the acquirer bank agrees the rates to be used.

Thus each transaction may be stored on the server platform 4 in four currencies. These are: Customer currency: either captured from the POS device 2, with a foreign exchange rate table downloaded daily to the POS device by the server, or converted at the server; Merchant currency: also captured from the POS device 2; Acquirer currency: this is not a value related currency, but is a reporting currency which allows the acquirer to manage its business in its financial and regulatory currency without any financial impacts or risks. The rate table used for all transactions, and GL feeds, may be provided by the acquirer or the MSP. It is applied to all transactions and all settlement and funding files, thereby allowing the acquirer to integrate its 'multi-currency' business into its domestic business for accounting and reporting purposes. Card settlement currency:

In some transactions, or more accurately for some currencies, the CSC will not settle the MSP in either the customer currency or the acquirer currency. In such cases, the platform (comprising the server 4 and the database 5) stores the card settlement amount of the transaction, which is settled using a rate table provided by the CSC. The platform stores the rate with the settlement amount and stores this currency amount.

Hence, each transaction that is processed across the platform is stored with every possible exchange rate and in every possible currency amount in which, in any circumstances, the transaction might require to be settled, funded, billed or reported.

The invention has the advantage that the currency conversion is carried out at the time of sale. Thus the customer knows exactly the cost of a purchase. The currency conversion is carried out at the server, or at the POS device, based on exchange rates set within the server or an application associated with the server. This moves the currency conversion process further towards the beginning of the transaction process. Exchange rates may be set by acquiring banks or alternatively agreed between acquiring banks and a third party member service provider. The MSP may carry out the whole transaction process including the exchange rate setting on a daily basis, having agreed with an acquiring bank an exchange rate to be used for the acquiring bank.

Claims

1. Apparatus for conducting purchase transactions comprising: memory for storing data relating to a transaction, a customer application for receiving a first message from a merchant, said first message defining the amount of a customer's transaction in a first currency defined by the customer, and for storing the amount in the first currency in the memory, a merchant application for receiving or generating a second message defining the amount of the customer's transaction in a second currency determined by the merchant, and for storing the amount in the second currency in the memory, a payment application for sending a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount of the customer's transaction in the first currency, and a financial institution application for sending a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency determined by the merchant.

2. Apparatus according to claim 1 further being arranged to receive a message from the institution associated with the customer acknowledging payment of the customer's transaction, said fourth message including a record of the amount of the transaction in a fourth currency determined by the institution or an association with which the institution is associated, and for storing the amount in the fourth currency in the memory.

3. Apparatus according to claim 1 or 2 wherein the transaction relates to a transaction completed using a card or an online service.

4. Apparatus according to claim 1, 2 or 3 further comprising a reporting application to produce periodic reports in the associated currency of the total transactions within a reporting period to the financial institution, merchant and/or institution associated with the customer.

5. Apparatus according to any preceding claim wherein the payment application is arranged to send the request for payment of the transaction to an institution associated with the customer via an association with which the institution is associated.

6. Apparatus according to any preceding claim wherein the apparatus is arranged to store a record of the exchange rate(s) used to convert between currencies.

7. A method for managing purchase transactions comprising: receiving a first message from a merchant, said first message defining the amount of a customer's transaction in a first currency defined by the customer, receiving or generating a second message defining the amount of the customer's transaction in a second currency determined by the merchant, sending a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount ofthe customer's transaction in the first currency, and sending a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency determined by the merchant.

8. A method according to claim 7 further including receiving a message from the institution acknowledging payment of the customer's transaction, said fourth message including a record of the amount of the transaction in a fourth currency determined by the institution or an association with which the institution is associated.

9. A method according to claim 7 or 8 wherein a card, such as a credit card, is used to carry out the transaction.

10. A method according to claim 7, 8 or 9 further comprising keeping a record ofthe customer's transaction in each ofthe currencies.

11. A method according to any of claims 7 to 10 further comprising providing periodic reports in the associated currency to the financial institution, merchant and/or institution associated with the customer of the total transactions within a reporting period.

12. A method according to any of claims 7 to 11 further comprising sending the request for payment of the transaction to an institution associated with the customer via an association with which the institution is associated.

13. A method according to any of claims 7 to 12 further comprising storing a record ofthe exchange rate(s) used to convert between currencies.

14. A system for managing purchase transactions comprising: a point-of-sale device for enabling a merchant to carry out a transaction with a customer, means for sending a first message from a merchant to a transaction server, said first message defining the amount of a customer's transaction in a first currency defined by the customer, the transaction server being arranged to receive or generate a second message defining the amount of the customer's transaction in a second currency determined by the merchant, the transaction server being arranged to send a request for payment of the transaction to an institution associated with the customer, said request including information relating to the amount of the customer's transaction in the first currency, and the transaction server being arranged to send a third message to a financial institution associated with the merchant to adjust the account of the merchant, said third message including information relating to the customer's transaction in a third currency.

15. A system according to claim 14 further comprising receiving at the central purchase server a message from the institution acknowledging payment of the customer's transaction, said fourth message including a record of the amount of the transaction in a fourth currency determined by the institution or an association with which the institution is associated.

16. Apparatus for conducting purchase transactions, the apparatus comprising; memory for storing data relating to a transaction, a customer application for receiving a first message from a merchant, the first message defining the amount of the customer's transaction in a first currency defined by the customer, and for storing the amount in the first currency in the memory, and a merchant application for receiving or converting a second message defining the amount of the customer's transaction in a second currency determined by the merchant, and for storing the amount in the second currency in the memory.