The Credit Only Principle
An account identifier enables a presenting party to effect a transaction in an account based on presentation of the identifier. The conventional use of account numbers, or account identification, even though a universal social practice, has a serious flaw which creates a substantial security problem. The serious flaw is caused by the use of a single account identifier for both the deposit and withdrawal of money. In traditional financial transactions, a unique ACCOUNT NUMBER, or some unique account identifier, here called a general identifier, identifies the bookkeeping entry that represents the value in the account. This entry may be a numeric value on paper or a data value in an electronic storage device. The general identifier is used as the primary identifier both to deposit value (credit) and withdraw value (debit) from the same DEPOSIT ACCOUNT. The general identifier has typically been the account number used on checks and deposit slips or other documents to exchange value into or out of an account. Substantial flexibility can be added to banking and finance processes by using SEPARATE NUMBERS or identifiers for the credit and debit process.
The primary activity which raises security concerns with storage and transfer of value is the PROCESS OF WITHDRAWAL (debit). The basic concern an individual has with their bank deposit is unauthorized WITHDRAWAL of money. Because the account number is the access key to the value of the deposit, protection of this number is very important. Provisions must be put in place to keep account numbers secret and to add additional identification security to the use of account numbers. Checks that withdraw money from the account are printed under control of the bank and when used must have the signature of an authorized user who has provided samples of the signature on authorization cards. A drivers license or other identification is also often required to use checks or withdraw money and the user is often photographed. If a bank card is used, it must be accompanied by a PIN number.
A totally new relationship with the account is created, however, if a new identifier is established that only allows DEPOSITS or CREDITS to be made to an account. An individual has little concern if money is mistakenly or even maliciously put into their account.
Based on these observations, an entirely new money management process, referred to here as the CREDIT ONLY PRINCIPLE can be established. This process would allow a financial account, or any account that represents value, to be identified by MORE THAN ONE IDENTIFYING NUMBER. In this process, one or more numbers can be used ONLY TO DEPOSIT VALUE (credit) into the account. Other numbers or identifiers must be used to withdraw (debit)) value from the account.
The credit only principle primarily provides a method to protect the FINANCIAL ACCOUNT of a RECIPIENT of value.
Credit Only Identifiers
New account identifiers created by the Credit Only principle are referred to in this document as CREDIT ONLY IDENTIFIERS or CO IDENTIFIERS. A CO identifier allows value to be added to an account but does not allow value to be subtracted from the account.
CO identifiers themselves are not transactions. Transactions are changes in information or value which occur through a process. A CO identifier may give part of the information needed to complete a process, but is not the process itself. CO identifiers themselves are not processes. Processes create a change in information or value. The presentation of an identifier can enable a process to occur. Effecting a transaction in an account means performing a process that changes information about an account or the value of the account. A CO identifier can enable a transaction by providing information or permission for the transaction to take place, thereby enabling the transaction.
A CO identifier financial account is any financial account for which positive value adjustments are authorized based on the presentation of a CO identifier and a stated value amount to be credited. Each account held by a bank could allow CO identifier access and thereby be considered a CO identifier account. If cash or electronic money is presented to a bank with a valid CO identifier, then the value in the related account would be increased, however, no value reduction can be made using the CO identifier.
An important characteristic of CO identifiers is that there does not have to be only one for each account. A CO identifier financial account can have a plurality of CO identifiers. This means, one or more CO identifiers can point to or designate the same financial account and transactions using different CO identifiers can put value into a single financial account. Each CO identifier has to be unique from all other CO identifiers so that the account it points to is unique, but many different CO identifiers may point to a single financial account. CO identifiers may also point to other CO identifiers as long as a circular reference is not created.
A CO identifier account also requires at least one debit or general identifier so that value can be taken out of the account. Debit and general identifiers can also be plural, however, they require special processing to insure that multiple, uncoordinated withdrawals do not reduce the account value below zero. No such concern is needed for CO identifiers because CO identifier transactions can only increase account value. Special processing would be require to limit the upper value in an account if the upper limit is not unrestricted.
To maintain the secrecy of a general identifier, a CO identifier should be structured so that it is not easy to determine a general identifier from a CO identifier. An example of such a process is to create CO identifiers using a process that does not reference the general identifier as part of the process.
An important property of account identifiers is persistence. Persistence here means that an identifier remains unique over time, even as other similar identifiers are created in the future. CO identifiers can be made “persistent” by applying processes during the creation of the identifiers which do not allow duplicates to be issued. A principle which substantially simplifies such processes is the concatenation of a time code into the CO identifier.
Use of CO Identifiers
The risk associated with disclosure of account numbers and thereby access to the value in the accounts, has led to strong account number protection. An example where this practice is followed in the extreme is the protection many Swiss banks provide for connections between account identifiers and their owners. Because CO identifiers can only be used to deposit value into accounts, they do not have to be protected. They can be made fully public without fear of loss of value in the account. This would allow CO identifiers to be used with unsecured communications without exposing the finances of the holders of those accounts to theft. There are many advantages to hiding a general identifier and creating other identifiers that point to it to cause an action to occur.
Because CO identifiers can be plural, they can be used for many functions beyond the deposit of money. Many identifiers, each with separate functions, can still accomplish the basic function of transferring funds to a single account. This expands the general nature of CO identifiers because different identifiers which are applied in different situations can still point to a single financial account.
For example, in addition to representing the financial account, the account identifiers also indirectly or virtually point to the bank or institution that holds that account. Pointing, here means that under secure conditions, the general identifier can be determined from other identifiers through some process. A CO identifier being used with a request for payment, can also be used to identify a physical address of the institution holding the account. The address could be used to route physical financial instruments. A CO identifier being used to direct payment as part of a purchase transaction, can also identify the merchant holding the account. A CO identifier being used to direct payment as part of a purchase transaction, can also be used to specify many more aspects of the transaction, such as identification of items being purchased. This transforms CO identifiers into very general purchasing instruments and payment instruments.
The account identifiers also point to the merchant, individual, institution or firm that owns the account. A CO identifier account can be used for the accounting of almost all forms of financial value, including, for example: private, commercial, government and institutional financial applications. Financial accounts that can be accessed by CO identifiers can be held by, without limitation: merchants, businesses or enterprises, another bank, individuals, charities, any party associated with a commercial transaction or any party to whom a CO identifier is presented. One of the objectives of CO identifiers is to create broad access to a financial account without creating risk for that account. Given that access is restricted to a credit only transaction, there could be unlimited access to an account by any party to make a credit. The actual processing of the records of the account would still remain with the institution that maintains the account.
In summary, where the Credit Only principle primarily protects the recipient, the use of CO identifiers produces additional protection for a sender by protecting the value represented by a financial instrument during transmission, and also opens up many additional functions for the identifier.
There are potential business applications which may focus on CO identifiers themselves, without direct involvement in the final deposition in a financial account. A business service that does not hold money can still provide commercial value by transferring valid CO identifiers or portions of CO identifiers. The intermediary, in capturing information in transit, can provide fulfillment services or separation or aggregation accounting services for another. This would be the equivalent of a “lock box” service, often used for paper checks, which tabulates the data on the checks and handles paper transportation, creating a more usable data handling format. A typical example would be a web service that provides marketing services for a charity. Customers wanting to send money to the charity could send a donation request to the web service who could then forward an aggregation of requests to a processor, without processing the requests as a payments. They might take a fee for this service. An entity that might forward a CO identifier transaction could be: a merchant, a marketing firm, a payment processor, a purchase processor, a network, an aggregator or data service. An entity that might receive a CO identifier transaction could include: an intermediate processor, an aggregator or an institution.
Aggregation of financial identifiers means the collection of data contained by the identifiers or associated with the identifiers for the purpose of providing a service for others. Aggregation could also include disassociation of previously aggregated data, followed by a re-aggregation of the data in a different format. This service could include, for example simplifying, organizing, enumerating or managing the transport, processing, reporting or storage of the identifiers.
Because of their inherent security, CO identifiers can be made publicly accessible or available. Such availability could become very widespread. There are many processes that can be used to do this, including, without limitation: publishing, distributing or selling aggregates of CO identifiers in lists, directories or books of printed material or computer readable media; display of CO identifiers in places accessible to consumers; placing aggregates of CO identifiers in computer memory or storage which is accessible to networks, the Internet or interactive voice response systems; having people in call centers provide CO identifiers in response to callers, providing special search software to find CO identifiers.
The Context Sensitive, Concatenated Identifier and Apparent Identifier Principle
Because of the very large number of consumers, merchants and products involved in world commerce, relatively large identifiers are needed to uniquely identify each of them. Examples of numbers used for consumers, merchants and individual products are given here:
Consumers: A typical financial instrument is a personal check. Another is a personal credit card. There are a very large number of people in the world who use these instruments. In order for each user to be uniquely identified, the identification code for each, which is usually a number, must be large. To simplify automatic processing, an even longer number is desirable. A personal check, in the U.S., typically has a 23 digit identifying number. This includes a routing number (also called a transit number), an account number and a check number. A credit card typically has a 20 digit identifying number which includes a 16 digit identity number and 4 digits for expiration date. Because these numbers are so long, it is not practical for people to remember them or present them one digit at a time. To make the use of the numbers more convenient, mechanisms have been implemented by industry, like the plastic credit card with magnetic stripe and card reader, to free the consumer from having to handle the numbers. There are other “people related” number systems, not directly used for consumer payments, that also show the need for long numbers. One is the social security number, a 9 digit number, and the telephone number, a 10 digit number for use internal to the United States and up to 16 digits when making international calls.
Merchants: A 9 digit employer I.D. number (EIN) is used by U.S. state and federal governments to identify merchants for tax purposes. If merchant identification is considered in a broad sense, the most universal identifier is probably the spelled out company name. With spelling, company names as short as three characters, IBM for example, can be sufficient to uniquely identify a merchant. But in most cases, the identifier is much longer, with 29 characters not being unusual, Commonwealth of Massachusetts, for example.
Products: Most goods in U.S. commerce are identified using a standard code called the UPC (Universal Product Code) which is a 12 digit number. Because the number is long and would be difficult for people to interact with, automated methods have been developed to read the numbers. One common method is the bar code. The first 6 digits of the UPC are used to identify the product manufacturer. The combination of manufacturer ID (first 6 digits) and product ID (5 digits following the manufacturer ID) combine to form a unique product identifier.
But, despite the ubiquitous use of these numbers by government and industry in commerce, none of them, nor any other numeric or alpha numeric system, is directly used by consumers whereby the consumer directly enters the identifier in a purchasing transaction. Alphabetically spelled out company and individual names might be thought to be an exception to this statement. They are not, however, because, as used today, company and individual names are not unique.
A factor which must be considered in providing uniqueness for identifiers is PERSISTENCE. Identifiers are used in commerce as an element of a transaction. Typically, a record of that transaction is made and stored for later use. For a system of identifiers to be useful, the identifiers must not only be distinct at the time they are created, but they must remain distinct into the future.
Two of the strongest drivers of consumer acceptance for products and services are CONVENIENCE and EASE OF USE. The typical financial and product related identifiers in current commercial use, examples of which were given above, are too large and too abstract for the average consumer to use directly. This has been one of the major factors discouraging the use of portable communication devices like cell phones for making consumer purchases. To overcome the inconvenience and difficult use imposed by long identifiers, a number of processes have come into widespread practice that inherently reduce the size or complexity of the identifying numbers. These processes usually appear transparent to the consumer. They are generally taken for granted by industry as well. The processes are used so often and are so transparent that they appear to be fundamental parts of making payment transactions.
One of these fundamental processes is to use the CONTEXT in which a transaction is taking place to inherently restrict the size of the set of object that need to be identified. An example of this is the use of catalogs of company products for remote purchases. Because a company publishes a catalog which contains only the products that it manufactures or distributes, or even a smaller subset of these items, the number of items that need to be identified, within the CONTEXT of that catalog, is greatly reduced from the universe of all possible products in the world. For example, a catalog with 1000 items could uniquely identify each with 3 identity digits, 000 through 999 for example. If the identifier could be characters instead of numbers, that is either numbers or letters, then 2 characters, 00 through ZZ, are sufficient to identify 1296 items.
In order, however, for this small identifier to be used to adequately identify specific items during a purchasing transaction, other processes must also be employed simultaneously. To uniquely identify the items in the catalog, the consumer must also, somehow, identify the specific catalog that is being used. The merchant must take this catalog identification information into account when processing the order. The actual item identifier is then a combination
(CONCATENATION) of the catalog or subset identifier with the item identifier. On an order form provided for use by the consumer, for example, the catalog identifier might already be printed. The consumer enters only the short item identifiers. The manufacturer's agent thereby uses CONTEXT to restrict the quantity of items in a set and CONCATENATION of the set identifier (catalog identifier) and item identifier (item number) to uniquely identify the selected item.
CONTEXT and CONCATENATION are frequently employed to reduce the size of the APPARENT IDENTIFIER. In the previous example, the actual identifier is quite long. The identifier for each item is made up of a concatenation of a catalog identifier and an item identifier. But, because of the way the information is presented to the consumer, the two identifiers are not dealt with the same way. The catalog identifier may be printed on an order form sent with the catalog and never even be noticed by the consumer. In this case, only the item identifier is apparent to the consumer. In processes where a consumer sends a large identifier but is only aware of a subset of the identifier, the subset can be considered an APPARENT IDENTIFIER.
Another example of the apparent identifier process is the use of symbols or processes that are already familiar to the user as contexts. These can be used either alone or in combination, to create context identifiers that are quite long, but in ways that the consumer, and often the merchant as well, are not aware of. For example, as part of the ordering procedure for a particular catalog, the consumer is told to place an order using a specific phone number which the merchant has established for that catalog. The customer service people answering that phone number have order sheets which convert the item identification numbers in the catalog into much larger manufacturer stock numbers. The telephone number thus becomes an indirect part of the identification. To place an order for one item with just a 2 character identifier, the consumer can be considered to be entering a twelve character identifier composed of a 10 digit telephone number and a 2 character item number. But in the consumers mind, this only appears to be a 2 character transaction. The 10 digit telephone number is not interpreted to be part of the item identification process. The consumer also handles the 10 digit telephone number relatively easily because it is a process that has been learned in our culture.
In Summary:
One or more CONTEXTS can be applied to identifiers used to uniquely identify financial accounts, merchants, products and services to reduce the size of the identifiers needed to identify individual items by creating subsets. These CONTEXTS can be extended beyond the typical association catalogs make with a merchant or item set to include associations based on location, time and personal associations.
Long item identifiers can be created by the CONCATENATION of short item identifiers, of which one or more may not be apparent to the user.
Convenience and ease of use are not identically associated with short data entry. Large identifiers can be created, which are easy to remember and convenient to use, by concatenating small identifiers, each of which is significant to the user and easy to remember, based on PSYCHOSOCIAL FACTORS. Psychosocial factors are generally context attributes related to the experience of the individual that have familiar structures such as names, dates, locations or some personal association.
Identifiers, which involve PSYCHOSOCIAL FACTORS related to the existing culture and available skills in the population, make some elements of an identifier APPARENT to the user while other elements of the identifier, even though directly handled by the consumer, are not apparent.
CHARACTER BASED IDENTIFIERS which use letters and numbers can create account identifiers that are easier to remember and may be more compact than identifiers composed of numbers alone.
PERSISTENT identifiers can be created by concatenation of a time code into the identifier.
A major benefit of this new process is that consumers can identify goods, services, financial accounts and merchants, using electronic communication devices, in ways that appear to require minimal data entry, and thereby are viewed as convenient and easy to use.
Security by Associating a Device Identity and Payment Account
In existing purchasing processes that use modern financial instruments like credit cards, there is still an implicit, fundamental, socially based model that underlies the process: the physical handing of a payment from a purchaser to a merchant. This model established the basic structure for most current money transfer instruments. The model starts with value carried by an individual. The value carried by an individual is extended by establishing an association between the individual and a bank or financial institution which includes setting up a financial account for the individual. The value in the account is a virtual extension of the value carried by the individual. The account is typically accessed by an account number. A check, debit or credit card is a physical representation of an account number, carried by the individual, to access the virtual value in the individual's account. When a payment is made, the check or payment card is physically handed from the consumer to the merchant, mimicking the age old process of payment.
The development of many modern financial instruments like checks and credit cards was based on a model whereby value was physically transferred directly from consumer to merchant. The structure of the transaction processes related to these instruments is based on the physical transfer principle underlying the instruments themselves. These structures therefore exhibit many of the security and convenience liabilities of the instruments as well.
With the introduction of new technologies, like the Internet, there have been numerous attempts to adopt the existing instruments. This is not always successful. Considering credit cards as an example, the card can not be physically passed from consumer to merchant over the Internet. For Internet payment transactions, the number represented by the card is passed as data. Because using the Internet, the data is sent over unsecured communication channels, new security problems are introduced that were not present in the direct physical hand-to-hand transaction upon which the card was developed.
The fundamental model of a direct physical hand-to-hand transaction can be seen in the flow of a typical payment as shown in FIG. 1. A consumer 100 wishes to make a purchase from a merchant 118. The consumer is not carrying sufficient cash for the purchase and therefore decides to use virtual cash by using a credit card 114. Virtual cash is shown in FIG. 1 by large solid arrows. The consumer making the purchase has sufficient credit for the purchase in a credit card account 104. Virtual cash, shown as arrow 102, flows from the credit card account 104 to the consumer 100. To make a payment, value flows from the hand of the consumer 112 to the hand of the merchant 124. The transfer of virtual cash is shown by arrow 110. The trade of value is direct from consumer to merchant. The merchant responds by handing goods 108 directly to the consumer. The merchant—consumer relationship in this model, shown by arrow 106, is strong.
When the merchant receives the consumer's virtual cash, another model, which is just as fundamental, can be added to explain how the payment is completed. In this second model, the merchant has not actually received payment of cash. Instead, the merchant has received virtual cash which can be viewed as an implied IOU 120 for goods tendered. A financial institution, shown here as payment processor 126, has agreed, for a fee, to settle the financial details. Virtual cash 122 is passed from merchant 118 to payment processor 126. Payment processor 126 instructs the credit card account 104, via an electronic communication channel 116, to pay merchant bank 130 thereby transferring virtual cash 128 to the merchant's bank 130. The cash value 132 is actually transferred from the credit card account 104 to the merchant's banks 130 through electronic processing or paper transfers as shown by arrow 134.
History has shown that new approaches designed specifically to use the unique features of new technologies may exhibit substantial advantages over attempts to apply older practices with the new technologies. A new communication technology based payment system using CO identifiers is shown in FIG. 2. It is based on a substantially different model from the hand-to-hand transfer model shown in FIG. 1. The payment system using CO identifiers is based on a remote purchase model with remote transfer of payment and third party delivery of goods.
In this new model, a purchase transaction is initiated by consumer 202 for a specific item of goods 214. The specific merchant or distributor may not be known to the consumer. The purchase transaction is conducted with a third party agent, shown here as a purchase processor 230. The purchase processor 230 receives purchasing instructions from the consumer 202 through a communications channel 224. The communication channel includes a communications device 206. The purchase processor 230 takes on the role of a purchasing agent and places an order for goods with a merchant 226. The purchase processor has now become the merchant's customer. The merchant has now become a fulfillment service for the purchase processor. The purchase is made against a purchase order 228 and goods 214 are shipped to an address 200 specified by the purchase processor. In this model, the merchant—consumer relationship, shown by arrow 212, is weak. The purchase processor also instructs 210 credit card account 208 to pay the merchant's bank 236. The credit card account 208 transfers cash value 238 to the merchant's bank 236 over an electronic channel 240. Account 208 from which value is taken by the credit card company is based on instructions from purchase processor 230 which in turn were based on a consumer identifier received in a message over communications channel 224. The consumer identifier was assumed to have originated with communications device 206, which accurately generated the identifier and which is assumed to be under the authorized use of a specific consumer 202.
Transfer of virtual cash is very different in this communications model from the model shown previously in FIG. 1. Virtual cash is shown in FIG. 2 by large solid arrows. The consumer 202 receives virtual cash 204 based on value in a credit card account 208. The consumer's virtual cash 218, however, is no longer directly transferred to the merchant. It is now transferred to purchase processor 230. The purchase processor transfers virtual cash 222 using electronic communication 220 to merchant 226 using purchase order 228. The merchant sends virtual cash 232 back to purchase processor 230. Purchase processor 230 instructs credit card account 208 to pay merchant bank 236, thereby transferring virtual cash 234 to merchant bank 236. The credit card account backs the virtual transfer by sending cash value 238 over an electronic communication channel 240 to merchant bank 236.
The connotation of transferring value in this model to a merchant only occurs as a remote transaction, depicted as the two step 218, 222 virtual cash transfer. Where the traditional credit card transaction is implemented based on transferring value from consumer to merchant, the communication technology based payment system using CO identifiers is implemented based on transferring a COMMUNICATIONS DEVICE IDENTITY from a communications device to a PURCHASE PROCESSOR and the ASSOCIATION OF A PAYMENT ACCOUNT with a COMMUNICATIONS DEVICE IDENTITY.
In the CO identifier model, the consumer is not directly identified for basic processing. Only the communications device is identified. This is done using caller ID 216 or a device registration number or some other identifier built in an unique to the communications device. Identification of the communications device user is an extra step that may only be required in a few cases. One such case is “cash and carry” purchases.
In summary, for traditional payment methods, the merchant transfers the consumer's actual account number along with a stated payment value to a processing center; the processing center, using identifying digits in the card number, forwards the identification number and payment value to the consumer's card issuing bank. The consumer is normally required to prove identity through a manual signature and separate paper handling process. If the information portion of such a transaction is conducted over an unsecured communications channel, the account number is subject to theft.
With CO identifiers, a communications device transfers its own identity to a processing center. A CO identifier and payment value are also transmitted; a bank card identification number is associated with the transmitting device identification; the card identification number and payment value are forwarded to the users card issuing bank. The user is generally not identified. This transaction can be conducted over an unsecured communications channel, without encryption, without fear of exposing the user's account number.
In Summary:
The conventional use of account numbers, or account identification, such as credit card numbers, even though a widespread social practice, has serious flaws which limit flexibility and create substantial security problems. The serious security flaw is caused by the transmission of an account identifier over unsecured communication channels which is sufficient to access value. Substantial security can be achieved, even with unsecured transmissions, by replacing financial account numbers with device identifiers.
In modern purchase transactions, an ACCOUNT NUMBER, or some unique account identifier, that represents value held by a consumer, is still used as the primary identifier to transfer value from the hand of the consumer to a merchant.
The primary activity which raises security concerns during financial transactions conducted over unsecured communications channels is the transmission of ACCOUNT NUMBERS, or identifiers that can ACCESS VALUE. Substantial security can be achieved by transmitting a CONSUMER IDENTITY NUMBER, or identifier, which alone is insufficient to access value, instead of an account number.
Substantial security can be added to the purchasing processes by using a DEVICE IDENTITY NUMBER, or device identifier as the primary identifier for payment transactions instead of account numbers.
Substantial flexibility can be added to the purchasing processes by using a DEVICE IDENTITY NUMBER, or device identifier as the primary identifier for payment transactions instead of account numbers.
For telephones or electronic communications devices, the CALLER ID or DEVICE REGISTRATION NUMBER can be a sufficient device identifier.
Security by Associating a Payment Account with a Securely Selected Delivery Address
One of the problems introduced by a modern, communications based purchasing system and the use of caller ID or a phone registration number to identify a purchaser account, is exposure to theft of the communications device. If the communications device is used by a person not authorized to use it, a fraudulent purchase could be made. An example of how a theft can be accomplished in a modern communications based purchasing system using caller ID is explained using FIG. 3. In FIG. 3, thief 300, has just stolen communications device 302 and is attempting to fraudulently obtain merchandise 310. The thief activates the communications device which the authorized owner has preprogrammed with all required access information. The communications device establishes a communications channel 314 with a purchase processor 320. The communications device sends its caller ID 312 to the purchase processor 320. Using additional merchandise identification information, the thief completes an order for the desired merchandise. As part of the process, the purchase processor 320 places a purchase order 318 with merchant 316. If this was a “cash and carry” situation where the thief could immediately take possession of the merchandise, the merchant 316 would hand merchandise 310 directly to the thief 300, as shown by arrow 308, and the thief would take it and leave the purchase location, having gained the value of the merchandise. However, the purchase processor 320 would have electronically 306 authorized payment from the authorized credit card account 304 belonging to the authorized owner of the communications device 302, to the merchant's bank 322 transferring cash value 324. The result is that the thief would have been rewarded for the fraudulent use by obtaining merchandise for which he did not pay. The payment would have been taken from the authorized users account.
If the same scenario is used with one critical change, the result can also be changed. FIG. 4 shows a similar attempted fraudulent use, but in the case of FIG. 4, the merchandise is shipped, rather than taken at the point of purchase. The critical change in the process is that the shipment address is a securely selected address which is logically linked to the payment account.
In FIG. 4, thief 404, has just stolen communications device 406 and is attempting to fraudulently obtain merchandise 414. The thief activates the communications device which the authorized owner has preprogrammed with all required access information. The communications device establishes a communications channel 418 with a purchase processor 424. The communications device sends its caller ID 416 to the purchase processor 424. Using additional merchandise identification information, the thief completes an order for the desired merchandise. As part of the process, the purchase processor 424 places a purchase order 422 with merchant 420. Because this is a “ship to address” purchase, the merchant 420 ships merchandise 414 to a securely selected shipping address 402, as shown by arrow 412. Thief 404 has been bypassed, does not receive the merchandise and thereby gains no value from the effort. To be sure, the purchase processor 424 would have electronically 410 authorized payment from the authorized credit card account 408, belonging to the authorized owner of the communications device 406, to the merchant's bank 426 thereby transferring cash value 428. However, though inconvenient, the consumer 400, who unexpectedly obtained merchandise 414, can send it back to merchant 420 and get the cash value 428 refunded. The result is that a thief would still be exposed to legal action for fraudulent use but would NOT be rewarded for the fraudulent use, thereby making this practice impractical. Also, the consumer and merchant, although inconvenienced by the event, could both recover the value of the merchandise and thereby not be subject to substantial loss.
In Summary:
The reward of fraudulent use of credit card or account information is DELIVERY OF VALUE TO THE FRAUDULENT USER. This can be denied by LINKING A PAYMENT ACCOUNT to a SECURELY SELECTED DELIVERY ADDRESS. The payment account may be obtained from the identifier of the communication device.
In such a system, consumers could have multiple delivery addresses and chose among them during the purchase process, while still maintaining security, as long as all selectable addresses were selected using a secure process. Consumers could make changes in delivery addresses as long as the process used to change addresses was secure from fraudulent use.
Structure of a Consumer Purchasing System Using the Credit Only Identifier Principle
FIG. 5 shows an overview of a basic consumer payment system implemented with CO identifier principles. The objective of FIG. 5 is to show the steps of one method by which a consumer can make a purchase using a cellular telephone. In FIG. 5, a consumer 506 wishes to make a purchase using a cell phone 508 as a payment device. For purposes of this example, the item to be purchased will be a flower arrangement of a dozen roses being advertised on a billboard 500 in a rose garden. The consumer is sitting on a park bench in the rose garden. The flower arrangement will be delivered to the consumers home.
Prior to ordering any merchandise or services using the CO process, the consumer will have had to contact a call processing service 512 and provide the service with identity, payment and merchandise delivery information. For the example shown in FIG. 5, the identity information might be simply the consumers cell phone number, the payment information might be the consumer's credit card number and expiration date, and the deliver information might be the consumer's home address. This information only needs to be presented to the call processing service a single time. The process of providing this information would typically be referred to as “consumer registration” and the information provided would typically be referred to as “consumer registration information.” Also, prior to ordering merchandise, a merchant 506 will have had to contact a CO identifier sales service (to be discussed later) to obtain a CO identifier 502 for the particular item or service being advertised. In this example the CO identifier 502 is the number “477”. The process of providing this information would typically be referred to as “merchant registration” and the information provided would typically be referred to as “merchant registration information.”
To purchase the flower arrangement, the consumer 506 activates the cell phone which has been registered with the call processing service 512. The consumer selects a pre-stored number from the phone's auto-dial index which is the telephone access number for the call processing service 512 and calls the service. The phone call is routed through the conventional public telephone system 510 to the call processing service 512. After completion of call processing (to be discussed later), the call processing service 512 sends information concerning the amount of money and mechanism of payment to a conventional transaction processing company 514. The transaction processing company 514 would then arrange payment settlement between the consumer's bank 516 and the merchants bank 520. The result is the transfer of money from the consumer's bank or credit account to the merchant's bank account. After completion of call processing, the call processing service 512 would also contact the merchant 504 and send fulfillment details for the purchase such as specific item to be purchased, number of items, payment amount and delivery information.
Therefore, using a system as shown in FIG. 5, a consumer, using only a cell phone, can place a call from anywhere that has cell phone service and place an order for goods or services without ever interacting directly with a merchant. An order for the goods or services will be sent to a merchant for fulfillment. A financial account of the consumer specified during consumer registration will be debited a charge for the goods and services. A financial account of a merchant specified during merchant registration will be credited for the goods or services ordered. All of these activities can be conducted safely using unsecured radio transmissions and the effort required by the consumer to place the order is very simple.
FIG. 6 expands call processing process 512 referred to in the discussion of FIG. 5 as the payment processing system element 602. The payment processing system 602 shows the basic elements of a process for handling consumer calls using CO identifier principles. The objective of FIG. 6 is to show the steps of one method by which specific information is determined during a payment transaction call. FIG. 6 also assumes the model of a consumer, sitting on a park bench, using only a cell phone, purchasing an item advertised on a billboard using only the cell phone, without ever interacting directly with a merchant, and having that item delivered to their home.
In FIG. 6, a call is received from the consumer's cell phone 600 by the call processing service 602 using an Interactive Voice Response (IVR) system 604. The IVR system provides an audio confirmation to the consumer of receipt of the call such as, “Hello, this is xyz payment processing service.” The identity of the phone is determined by a phone identification process 606 that makes use of caller ID or the cell phone internal registration number. The phone identification process also determines the location of the phone and the current time. The actual identity of the caller may not be needed or verified during this process. After determination of the identification of the phone, IVR system 606, using an audio message, requests a transaction processing number, using a message such as, “Please enter your transaction processing number.” The consumer is expected to enter a transaction number at this point which is a CO identifier, “477” in the example of FIG. 5. The identity of the product or service desired by the consumer is determined by a product selection process 608 based on the entered CO identifier using the CO identifier, time, location of the phone and phone identification according to the methods disclosed in this document. Once the product or service is determined, which may include a plurality of items, an extension pricing, tax and delivery process 610 computes the total payment due and requests confirmation from the customer. This may be accomplished with an audio message such as, “Your total order includes x,y,z and the total payment will be $xx.xx. If this is acceptable, please press 1.” If an acceptable confirmation is received, the IVR system would close the connection after playing a closure message such as, “Thank you for your order.” At that point, a payment and fulfillment process 612 would complete two transactions. A payment transaction would be sent to a conventional payment processor which tells the processor what bank account to debit (the consumer's account) for this transaction and where to send the money (the merchant's account). A fulfillment transaction would be sent to a merchant telling them what product or service to send and where to send it.
It is assumed that prior to use of the CO process, a consumer personal information registration process 614 will have been performed using a secure method, to obtain personal information for the consumer. During this preliminary contact, the consumer will need to give the service information consisting of at least: a. phone number of the cell phone; b. a delivery address for items purchased which will be associated with that specific phone number; and c. information concerning method of payment, which can be a checking account, a debit card, a credit card or some other mechanism.
FIG. 7 expands FIG. 5 by adding CO identifier sales and user registration element 702 to show where creation of CO identifiers and processing of user registration could be handled in an overall system. Specifically, FIG. 5 shows how the CO identifier principle is used by a consumer to make a purchase. But before the purchase process can occur, there is a substantial amount of preliminary effort needed to collect user information and to create and distribute CO identifiers. FIG. 7 shows the sales and registration element 702 that manages the preliminary effort. FIG. 7 also shows that the sales and registration element 702 interacts with consumers, merchants and the payment processing system.
One of the links in FIG. 7 is between a sales and registration element 702 and a payment processing system 708. The reason for this link is that to process calls from consumers, the process needs a list of CO identifiers and their associated information. The sales and user registration element 702 would have the responsibility to generate this list and pass the list to the payment processing system 708.
The other links to the sales and registration element are discussed in relation to FIG. 8.
Categories of CO Identifiers
CO identifiers can be applied in multiple ways. The multiple uses include four general categories that can be used to organize the uses: permanent CO identifiers, individual product identifiers, special promotional identifiers and individual consumer identifiers.
FIG. 8 shows these four categories as four basic functions needed to establish relationships between CO identifiers, merchants and individual consumers. FIG. 8 also shows that the four functions might be considered as basic divisions of a sales organization 802, here called CO identifier sales and user registration, which performs processes to select the identifiers and establish relationships between the CO identifiers, merchants and individual consumers. Sales organization 802 was shown previously in FIG. 7 as sales and user registration element 702.
One such function is the establishment of permanent CO identifiers 810. Permanent CO identifiers identify specific payment accounts for individual merchants, charities or specific institutions. The identifiers are referred to as “permanent” to imply that these identifiers will not be frequently changed. They may eventually become brand identified with the merchant, charity or institution. For example, a major U.S. merchant like Sears, might be assigned the CO identifier “500” or the IRS might be assigned the CO identifier “1040”. Payment transactions with Sears or the IRS could use this number by itself or in combination with additional information. A major charity like the Red Cross might be assigned the CO identifier 100. Donations to the Red Cross could be made using the “100” identifier by itself or in combination with additional information. The selection of primary identifiers would be done based on logical and financial considerations from a relatively restricted list of numbers or alpha numeric symbols. The key characteristics of primary identifiers are that the identifier for each merchant, charity or institution be distinct and that the selection is only done infrequently, once in many cases.
A second function of the sales process is the establishment of individual product identifiers 812. Individual product identifiers identify individual product items and an associated payment accounts for those items. Selecting these identifiers is a very complex process because of the very large number of products in use, the variable lifetime that the products are available, and the need to keep the CO identifiers short. The task of the sales organization is to coordinate the creation of the CO identifiers with merchants using all of the size reducing mechanisms disclosed in this document. The key characteristics of product identifiers are: variable lifetime but typically longer than a few weeks, usually associated with a specific manufacturer, may be associated with specific points of sale at specific locations, or are advertised in specific media.
A third function of the sales process is the establishment of special promotional identifiers 814. Special promotional identifiers identify individual product items and associated payment accounts for those items. Selecting these identifiers is a somewhat complex process because of the large number of promotions that can occur simultaneously and the need to keep the CO identifiers short. The task of the sales organization is to coordinate the creation of the CO identifiers with merchants using all of the size reducing mechanisms disclosed in this document. The key characteristics of special promotional identifiers are: short lifetime typically shorter than a few weeks, usually associated with a specific manufacturer or merchant, may be associated with specific points of sale at specific locations, or are advertised in specific media.
A fourth function of the sales process is the establishment of individual consumer identifiers 816. Individual consumer identifiers specify accounts of individual consumers. This is a somewhat complex process because of the large number of individuals in the world and the need to keep the CO identifiers short. The task of the sales organization is to coordinate the creation of the CO identifiers with individuals using all of the size reducing mechanisms disclosed in this document. The key characteristics of individual identifiers are: long lifetime, typically longer than a few weeks, usually associated with a single individual, changing association circumstances, and account portability.
FIG. 7 shows how CO identifier sales and user registration 702 fits into the overall structure of a business process incorporating the CO identifier principle. Specifically, CO identifier sales 702 creates identifiers in cooperation with and for use by individual consumers and merchants. The identifier relationships are then provided to a payment processing center 702 for use in processing consumer requests.
General Properties of Co Identifiers
CO identifiers may not always be presented or transmitted in their entirety because of the use of the context sensitive, concatenated identifier principle and the apparent identifier principle. In fact, in most cases to achieve the goal of user simplicity, only a partial CO identifier would be used. To determine a complete identifier from a partial identifier, a process would be used. Because each CO identifier has the ability to be coded within itself for a separate process to decode it, the number of processes used to translate CO identifiers can be very large. Two typical processes might be table lookup and concatenation of separate elements. The process would be appropriate to the circumstances and context in which the CO identifier was used. Examples of such processes are given in detail elsewhere in this patent.
Because a CO identifier only allows value to be added to an account, it does not have to be protected. It can be made publicly accessible and widely used. A CO identifier, in addition to pointing to a general identifier and therefore a financial account, can also be used to specify other attributes in transactions that transfer value. Examples of such attributes include: an identity, a shipment address, phone number, personal information or commercial information. In addition to specifying attributes, a CO identifier can also carry functional information to initiate and control actions. Because the actions are dependent on the content of the identifier itself, and the fully concatenated identifier can be very large, the potential number of actions can also be very large. Not all uses can be envisioned at this time. Examples of categories of actions that a CO identifier can initiate are: transfer of money, initiation of a purchase of goods or services, request for information, specification and transmission of information. The information which a CO identifier can specify is very broad. Some examples are: a pointer to the identity of the recipient of funds; special categories from which a recipient can be selected; a time stamp for a purchase; a location at which a purchase was conducted; the identity of a merchant or vendor; an identity of a commodity, goods or services; definition of a purchase order which lists goods and services, a pointer to an index of information, a pointer to information; an affiliation group. CO identifiers can be used with commercial transactions, private transactions and institutional transactions.
A CO identifier can be generally described as a character string. It may have any length although each application may limit the size of the CO identifier for that application. In some applications the size of the CO identifier is dependent on the data supplied by the user. For example, if a person's name is used as part of the CO identifier, the length of the CO identifier can change depending on the length of the name. The identifier may include characters that have the form of a phone number, a social security number, an e-mail address, a person's name, a person's mailing address, or a person's affiliation group. But more generally stated, it may include any phrase whether readable or not, any number, any mixture of letters or numbers, any data codes, or the concatenation of any or all of these in any order or grouping.
A CO identifier could be communicated as a transaction using most types of electronic communications devices which have two way communications capability, including: cell phones, regular telephones, PDAs and computers connected to a network. A CO identifier could be communicated as an advertisement using most forms of electronic devices or paper media which are used for advertising or display. Examples of such electronic devices are: radio, TV, outdoor displays, elevator displays, kiosks, lasers and loud speakers attached to vehicles. Examples of such paper media are: newspapers, magazines, books, flyers, posters, billboards, napkins, banners pulled by aircraft and writing on vehicles.
A CO identifier can be communicated in many forms. Some examples are: tones sent through a communication channel, voice communications sent through a communication channel, digital data, alphanumeric data displayed on a monitor, alphanumeric data printed on any readable surface.
A great benefit of the CO identifier principle is that a financial instrument which uses a CO identifier essentially links the value of the payment conveyed by the instrument to the account of the designated payee. The inherent security of this link creates many opportunities for new services to transport financial instruments which use CO identifiers. Because the financial instrument is resistant to theft, it does not have to be so carefully handled. Presenting a CO identifier payment means the transfer of any money instrument bearing a CO identifier whereby the responsibility for transport or processing of the instrument is also transferred and an individual accounting is made for the instrument. Some examples of presenting with paper checks include: consumer handing the check to a merchant who associates the value of the check with a transaction; merchant passing a bag of checks with CO identifiers to a courier along with a list of the specific checks in the bag; courier handing the bag of checks to a processing service that will sort out the CO identifier checks and take the data off the checks for electronic processing; any party that presents the paper checks to any financial institution for deposit as a value of money to an account. Some examples of presenting with electronic money transfer include: processing service handing a floppy disk with checking data on it that lists CO identifiers and money values associated with them; a processing service that sends data using telecommunication signals which include representations of CO identifiers, either directly readable or encrypted, to another processing service; a processing service that submits money transfer data which uses CO identifiers for routing to a national processing service; a national processing service that communicates money transfer data to any financial institution which uses CO identifiers to deposit as a value of money to an account. An example of presenting using a telecommunications device is the act of an individual pushing the control keys of the device to specify a CO identifier and an amount of money for transfer to any other device connected to the telecommunications system.
Presenting a CO identifier can be related to private transactions, commercial transactions or institutional transactions.
At each stage in the chain of events involved with processing a CO identifier, there is an input, a process and an output. Any entity who takes an action that brings CO identifier data to another party for processing can be considered a presenter of that CO identifier. The presenter may include, for example: a party, a first party, a second party, one party, a purchaser, a consumer, an individual, a purchaser of goods or services, or a payer.
The CO identifier can be presented to, for example: a party, a merchant, to others, a payment processor, a purchase processor, a financial institution, a bank, a consumer, or a payee.
Use of Co Identifiers with Checks
Personal checks still constituted the largest method of consumer payments in the U.S. in the year 2000. An estimated 28.7B consumer checks were written that year, for a total of $2,211B (Federal Reserve Report for cy2000). While check processing has become routine, the process is actually complex, including many steps. A check is, in fact, a formal document which requests that one bank remove money from an account and send it to another account at the same bank or another bank or pay the money as cash.
Benefit of the Use of Co Identifiers with Checks for Payments to Individuals
An example detailing the steps which one individual would typically use to send money to a second individual is shown in FIG. 9. To use the checking system, individual 900 opens an account 918 with bank 914 which offers checking as a service. To open the account, the individual supplies the bank with numerous forms of identification 902 including: a photo ID, drivers license and a social security ID card. The individual also supplies the bank with personal information 904 including: name, address, phone number, date of birth, social security number, mother's maiden name, drivers license number, e-mail address and employer identification. If there is a co-applicant, a similar set of information is required for them. The individual must also designate a number of account options 916 which could include: account type, related debit cards, reporting options and check style. The individual must also supply the bank with samples of their signature 906 which can be used as a security method to authorize the withdrawal of funds. Upon approval, the bank will print paper checks 908. Some details which appear on a typical check are shown in FIG. 10. Check 1000 shows the name and address of the account owner 1002, an identifier for the originating bank 1026, the account number that the check can take money out of 1024, a serial number to identify this individual check 1028, a date upon which the check becomes active 1022, a field where the identity of the payee can be entered 1020, the amount to be paid written as a number 1030, the amount to be paid written as words 1004, a field to enter a note about the payment 1006, a field for the issuer to place an authorizing signature 1032, and a second machine readable occurrence of the account identifier 1008, which is composed of a bank identifier 1010, the individual's account number 1012 and the check serial number 1014. Because of the potential checks have for theft, a number of security elements are frequently incorporated into the check printing such as invisible inks, microprinting, water marks, chemically sensitive paper, eraser use indicators and copy resistant colors on the reverse side of the check. The reverse side of the check 1016 is also used in the checking process. When the check is to processed by the person specified in payee field 1020, that person or a designee can enter an identifying signature 1018 called an endorsement, on the reverse side of the check. Checks 908 must be physically transported 920 from bank 914 to individual 900 for use. To use the check, individual 900, who now becomes the sender, must fill in all the applicable fields of the check. In this example, the sender, individual 900 enters the name “Fred Smith” of individual 944 into payee field 1020. This is often considered by a sender to be the completion of the process for them, but it is not so. To complete a payment, many more steps are still needed. The sender must physically transfer the check to the recipient. This can be done in person, hand to hand, but is frequently done using the postal service. The act of delivering the check to the recipient is an integral and necessary part of the process. An envelope 912 must be prepared with the recipient's mailing address, a return address and postage. Check 908 must be placed 910 into envelope 912 and the envelope mailed. The postal service 932 transports 934 the envelope to Fred Smith 944.
When Fred Smith gets the check, he become part of the process. He must, in turn, physically transfer 942 the check to a specific bank 936 with which he has also established an account 938. At bank 936, in order to deposit the check, further identifying information is needed for Fred Smith such as deposit slip 940. At that point, the receiving bank begins an automated process to transfer funds. Bank 936 places a request 928 to transfer money with a check clearing system referred to as the Automated Clearing House (ACH) 924 which transfers value 922 through the ACH system from bank 914 to bank 936. Bank 936 deposits the value received into account 938 based on the information provided by Fred Smith using deposit slip 940. Bank 936 then sends 930 check 908 to the ACH for forwarding 926 back to bank 914 for final verification of signature. If any of these steps are not completed, the transfer can fail. For example, if the check is sent to the wrong address, it must be returned because it does not have sufficient information for processing. If the check somehow gets separated from its envelope, it must also be returned to the sender because of insufficient information to complete the process.
Specifically, the current process of identifying a unique recipient account includes: entering on the check a named recipient in field 1020; identifying a physical address for the recipient with an envelope 912, physically placing 910 the check in the envelope, physically transporting 934 the check to the recipient 944 using a service such as the postal service 932; physically transporting 942 the check to a specific recipient's bank 936 and attaching additional recipient identification to the check using deposit slip 940 which bears the account number for the recipient's personal account 938.
The concept of CO identifiers provides an alternative approach to identify recipient accounts and thereby to process checks that is much more efficient than the current method. A conventional check 1000 shown in FIG. 10 can still be used. Instead of placing the name of a recipient in the payee field 1020, the sender would use a CO identifier that uniquely identifies the recipient. The rest of the check would be filled out in the traditional fashion. As shown in FIG. 11, sender 1100 of check 1102 could then either by hand or postal delivery using an envelope 1104 and postal service 1110, send 1108 the check to the sender's own bank 1106. Bank 1106 could then initiate funds transfer 1112 through ACH 1114 to the recipient's bank 1116 and the recipient's account 1118. Bank 1106 or the ACH system 1114 could translate the CO identifier into a forwarding account by looking up the CO identifier in a lookup table. Unlike current account numbers which must be carefully protected, CO identifiers require no protection. They can therefore be published widely and indexed in multiple computer data bases. Bank 1106 would already have check 1102 at the beginning of the process and could approve it using normal verification procedures, including signature verification.
There are many benefits with this new approach. For the sender, because CO identifier checks would all be sent to the sender's bank, not to each individual recipient, they could be handled together. That is many checks could be mailed in a single envelope. The mailing address is the sender's bank which is conveniently known or would be made convenient using pre-stamped, pre-addressed envelopes. Bulk mailing of checks reduces the cost for the sender. Because the sender may have other reasons to visit his own bank, checks could frequently be dropped off by hand further reducing mailing costs. For the postal system, mail volume would be reduced. For the recipient, there would be no check handling required, no mailing, no deposit slips. For the banking system, there are also many benefits. The funds transfer is more certain because the determination of adequate funds to back the check is done at the beginning of the process. Signature verification could also be done at the beginning. The check information only has to be handled once, by the originating bank, rather than multiple times, which now include the recipient bank and the ACH. No checks have to be physically sorted or transported through the ACH system.
A significant concern in the use of checks is theft. This is the reason so many security provisions, as discussed above, are used with them. One of the mechanisms of theft occurs because the checking system allows checks made payable to a first recipient to be endorsed by that first recipient and handed to a second recipient for cashing or deposit. If a check is stolen, the thief can fraudulently endorse the check and then proceed to cash it as if it were genuinely endorsed. Because endorsement with a true signature cannot easily be verified at the location where the check is cashed, theft of this type is prevalent. Many mechanisms have been put in place to try to stop this form of theft. One preventive measure in use is to write the words “for deposit only” in the area of the check normally used for endorsement. In this case, the check can only be deposited to the account of the designated payee. The use of a CO identifier automatically accomplishes this same protection. That is, if the check is made payable to a CO identifier, no endorsement and redirection is possible. But the CO identifier is more effective because of its redirection capabilities. There is also an advantage that the CO identifier is printed on the same side of the check as all the other accounting data. When the “for deposit only” message method is used, that message must normally be affixed to the rear of the check. In automated methods, this requires double printing or special machinery which is less efficient and therefore more costly.
Benefit of the Use of Co Identifiers with Checks for the Postal System
A major concern for the postal system is mail fraud, and specifically, the theft of checks from the mail. Because financial instruments that use a CO identifier can only transfer money into the account specified by the CO identifier, the financial instrument is not useful to a thief. Stolen checks cannot be endorsed and diverted to cash.
Benefit of the Use of Co Identifiers with Checks for Employers
While direct deposit of payroll is becoming more common, there are still many firms that do not use it. One reason is that direct deposit exposes individual bank accounts to theft because of the requirement for employees to give their bank account numbers to the employer for processing. While this is often done using a check that has been marked “void”, the “void” marking only protects against fraudulent use of that one check and not fraudulent use of the account number. By using CO identifiers for each employee, the same efficiency achieved by direct deposit can be achieved without bank account exposure. Using this approach, a small firm could list all payments to be drawn from a particular bank on a single sheet of paper and make one mailing to the bank, effectively creating a “composite” check. The paper would show payment amounts and their related CO identifiers. The CO identifiers would not disclose information that would allow anyone to get access to the money once deposited and therefore would be acceptable to many employees.
Benefit of the Use of Co Identifiers with Checks for Charities
Where a payment is made to a charity by check, a consumer typically prepares some form of document describing that they are making a donation and how much the donation is for. A check is made out in the name of the charity and check stub or ledger information is recorded. The consumer must then find a valid mailing address for the charity. A stamped envelope must be made out with mailing and return addresses. The document and check are then placed in the envelope and physically mailed. At the charity, the envelope must be opened and the information provided physically copied or optically scanned into a data base. The check must be physically transported to the bank where the charity has an account. Using CO identifiers, a consumer could make out the check using a CO identifier for the payee. They could then include that check with others being sent to their own bank for processing. This would reduce the effort required by the consumer. Since an electronic deposit would result to the charity, check handling would be eliminated.
Benefit of the Use of Co Identifiers with Checks for Utilities
Consumers frequently make payments to utilities and banks for services rendered. Examples would be a phone bill and a mortgage payment. The primary method of payment is by check using postal mail. The consumer usually pays the utility in response to a bill for service sent to them. To respond to the bill, the consumer prepares a submittal form usually included with the billing statement describing what service they are paying for and how much the payment is. A check is made out in the name of the utility and check stub or ledger information is recorded. The consumer must copy a valid mailing address for the utility on to a stamped envelope and fill out a return addresses. Some utilities provide special window envelopes to reduce this effort. Return addresses must still be added. The submittal form and check are then placed in the envelope and physically mailed. This process is generally disliked by consumers because it must be repeated a number of times for multiple bills, and repeated for the same bills on a monthly basis. At the utility, the envelope must be opened and the information provided physically copied or optically scanned into a data base. The check must then be physically transported to the utility's bank where the utility has an account for processing. Using CO identifiers, a consumer could make out utility payment checks using a CO identifier for the payee. They could then group checks for multiple utilities and send them in one envelope to their own bank for processing. This would reduce the effort required by the consumer. Since an electronic deposit would result to the utility, check handling would be eliminated. Furthermore, since funds availability would be verified by the consumer's bank at the beginning, there would be many fewer check failures.
Benefit of the Use of Co Identifiers with Checks for Government
There are many government organizations that send money to individuals. Examples of these payments include: social security, veteran benefits, IRS refunds, welfare and Medicare reimbursement. Most of these payments are still made with paper checks. In order to avoid the costs involved with paper checks, some have adopted electronic payment approaches such as direct deposit of social security payments. While efficient, this approach exposes individual bank accounts to theft because of the requirement for individuals to give their bank account numbers to the government agency for processing. Many people also feel the government should not have access to this information. By using CO identifiers for each individual, the same efficiency can be achieved without bank account exposure. To achieve this result, the government agency could simply send a list of CO identifiers with associated payment amounts to a CO identifier processing center via any electronic channel. Because of the security of CO identifiers, encryption or other special forms of protection would not be needed.
There are many government organizations that receive payments by way of checks. Examples of these payments include: taxes and fines. Using CO identifiers, a consumer could make out a payment check using a CO identifier for the government payee: They could then include that check with others being sent to their own bank for processing. This would reduce the effort required by the consumer. Since an electronic deposit would result to the government organization, check handling would be eliminated.
Use of Co Identifiers with Money Orders
Many Americans do not have bank accounts or checking accounts. A money order is a paper payment instrument which is similar to a personal check. It has a number of differences. It can be purchased with cash. The purchaser does not have to have an account with the issuer. The issuer is usually a store or the post office, not a bank. While sharing the handling conveniences of a check, it also has all the risks of a check as well. The primary use of CO identifiers with money orders would occur if the money order was being purchased for a known recipient who had a CO identifier. Then, the money order could be labeled with the CO identifier of the recipient, thereby reducing the possibility of theft. An alternative approach, where the recipient has a CO identifier, could be an “e-money order” whereby upon presenting cash to purchase the e-money order, the equivalent value is sent electronically to the recipient using a CO identifier processing center.
Use of CO Identifiers with Wire Transfers
CO identifiers can create an international financial identification system which makes wire transfers easier and safer. People all over the world could be granted CO identifiers. Because the CO identifiers are inherently safe, wire transfers could be sent using unsecured communications channels. This is easier where computing infrastructure is not sophisticated. This wire transfer process can remain unsecured all the way to the final depository. Alternatively, it could, at any point, reach a processing center which routes the transaction on secured channels as either a CO identifier transaction or a conventional wire transfer.
Use of CO Identifiers with Telephones
Payments using telephones are limited to information forwarding financial instruments such as credit or debit cards where the payment can be transacted using information which is forwarded electronically. Telephones cannot transmit cash or checks because they are physical objects. A new practice is occurring where some banks will allow phone transactions based on direct use of the consumer's bank account number. The following sections will discuss how CO identifiers can be used with telephones to improve financial transfers for each of these methods.