BACKGROUND

[0001] Prepaid cards, gift cards, and other such similar financial products are increasingly common in the retail industry. However, certain impediments and inconveniences of the prepaid card system present themselves For example, the load and activate transactions to fund and issue a prepaid card to the user and the point of sale (POS) terminals for issuing prepaid cards are relatively new. Many retailer networks lack the ability to easily integrate these new transactions at the point of sale terminal without upgrading terminals or completely replacing these terminals. The additional investment in the network to allow loading and activation of prepaid cards at the POS can be a deterrent to the retailer wanting to participate in prepaid programs.

[0002] Consider, for example, a scenario where a large quick service restaurant (QSR) chain desires tb pilot prepaid cards at its franchise restaurant locations.

Suppose the QSR has hundreds of locations and desires to integrate prepaid cards in a short period of time, while reducing the time to market and initial investment to create a pilot program. The pilot program would be used to determine if prepaid cards were a sufficiently viable product with the QSR's business model as to justify a terminal upgrade and centralization of the POS (Point of Sale) system to support prepaid in the future.

[0003] An immediate upgrade to the POS system is not a practical solution given the cost and time constraints to bring the pilot program to market. Additionally, each franchise location for this particular QSR operates as an independent corporation in partnership with the QSR, with the independent franchise acquirers maintaining their own POS terminals and merchant acquirer relationship. Typically, the QSR is not able to control the acquirer and so a solution that works within the existing

transactions and method of transaction processing supported by the various acquirers is needed.

[0004] Another example is the inconvenience of having to managing a potentially large inventory of prepaid cards. Conventional prepaid cards are manufactured by the card manufacturer in fixed denominations. The manufacturer prints indicia on the card that indicate the monetary amount. For example the text "$20" might be printed on the card, or an image of a snowman might printed on the card as a representation of the value of the card, and so on. Card issuers therefore are restricted, in practice, to limited number of denominations of prepaid cards. For example, a card issuer desiring to sell prepaid cards in $10 increments from $10 to $1000 would have to pre-order card stock for each of one hundred card

denominations. This becomes a very expensive undertaking, and so the retailer is likely to order card stock in card denominations of only $25, $50, $100, for example, in order to keep his prepaid card inventory manageable.

BRIEF SUMMARY

[0005] Embodiments of the invention allow a client with incompatible or outdated POS infrastructure to activate and load prepaid cards at a POS terminals using standard transaction sets. Embodiments of the invention therefore obviate the need for the client having to upgrade terminal infrastructure and the need for the POS terminal to be changed or replaced in order to support new prepaid card

transactions.

BRIEF DESCRIPTION OF THE DRAWINGS

[0006] Figs. A and 1 B show illustrative examples of typical prepaid cards according to an embodiment of the invention.

[0007] Fig. 1 C illustrates a typical conventional prepaid card.

[0008] Figs. 2A and 2B illustrate the use of a "merchandise return" transaction flow in accordance with the invention.

[0009] Figs. 3A and 3B illustrate the use of an "authorization" transaction flow in accordance with the invention.

[0010] Figs. 4A and 4B illustrate an SMS type of transaction flow in accordance with the invention.

[0011] Fig. 5 illustrates computer apparatus that can be configured in accordance with the invention. DETAILED DESCRIPTION

[0012] Figs. 1A and 1 B represent a prepaid cards in accordance with an

embodiment of the invention. The prepaid card is typically formed of plastic card stock with various indicia either printed or embossed or impacted on the card.

Typically, a background design is printed on the card. The card may include a security emblem to provide a measure against fraud. The card may include a bank emblem to identify the bank. A retailer name or other identification is printed on the card to identify the retailer or retailers where the card can be used by the card holder to purchase items.

[0013] Referring to Fig. 1 C for a moment, a typical conventional prepaid card is represented. Here, the primary account number (PAN) of the card is:

444412 xxxxxxxxxy

v v '

card number

The PAN is a sixteen digit number, where the first six digits is the bank identification number (BIN). The remaining ten digits constitute the card number where the last digit (indicated by "y") is a check digit. The ten digit card number in conventional prior art cards generally have no meaning and certainly are not associated with any monetary value. Nine of the digits are randomly generated and thus are not associated with any monetary value. Likewise, the last digit is a check digit determined based on the nine digits and thus is not associated with any monetary value.

Typically, the card stock originates from a card manufacturer. Among other things, the manufacturer will place the background design on the card and impacts the six- digit BIN on the card. The cards are purchased by an entity called the

personalization bureau ("personalizer"). This personalizer works with the issuer to print additional information such as expiration date, cardholder's name, some additional graphics perhaps, and so on. The personalizer also prints the remaining ten digits of the PAN onto the card to create the full account number for the card. The issuer will determine for each card what the ten digits are and give that list to the personalizer who then produces the cards in their final form for distribution to merchants for sale to consumers. [0014] Returning to Figs. 1A and 1 B, the PAN in accordance with the invention comprises an extended BIN. For example, Fig. 1 A shows the PAN:

4444120lOxxxxxxy

EXTENDED BIN ^ _mb ^

[0015] The extended BIN is nine digits in length, comprising three digits from the conventional ten digit card number. The card number in embodiments of the invention is seven digits in length. The last digit in the card number (identified by "y") is a check digit.

[0016] The extended BIN includes the original BIN plus a three-digit value that represents a predefined load value. For example, the extended BIN in Fig. 1 A (also shown above) is "44412010", where the first six digits "444412" constitute the identifier for the bank. The additional three digits "010" represent the predefined load value (e.g., units of dollars). Thus, Fig. 1A represents a prepaid card having a load values of $10. Similarly, Fig. 1 B shows an example of a prepaid card in accordance with the present invention having a load value of $500. Embodiments of the invention are directed to non-reloadable prepaid cards because the load value of the prepaid card is static by virtue of the fact that the digits of load value (e.g., "010", "500") are physically impacted on the card along with the other digits that comprise the PAN.

[0017] It is noted that the placement of the three digits that constitute the load value should follow the six-digit bank identifier and precede the last seven digits of the PAN. A primary reason for doing this is to avoid making it to easy for someone to predict the account numbers of the prepaid cards.

[0018] In accordance with the invention, an issuer of the prepaid card works with the personalization bureau to specify the three digit load value, in addition to the typical personalization information such as merchant name, expiration date, and so on. Thus, as an example, the issuer might instruct the personalizer to produce 100 cards having a load value of $20, 500 cards having a load value of $20, 500 cards having a load value of $300, and 200 cards having a load value of $900. Since the issuer is the entity that specifies what the ten digits are, it is a simple matter to specify the remaining ten digits in accordance with the invention. The personalizer will then print the following prepaid cards: prepaid cards with predenominated load amounts of $10.00: 4444120100000000 prepaid cards with predenominated load amounts of $20.00: 4444120200000000 prepaid cards with predenominated load amounts of $300.00: 4444123000000000 prepaid cards with predenominated load amounts of $900.00: 4444129000000000

[0019] Further in accordance with the invention, a suitable numbering convention is applied to the bank identification number so that conventional PANs can be distinguished from PANs constructed in accordance with the present invention. For example, XYZ Bank may be associated with the following bank identification numbers: 444410, 44441 1 , and 444412. The bank identification numbers "4444 0" and "444411 " might be used for conventional credit cards, where the card number portion comprises the full ten digits. However, the bank identification numbers "4444102" can be used to signify a prepaid card according to the invention, in which case the three digits following "444412" represent a load value and the card number comprises the remaining 7 digits.

[0020] Referring now to Figs. 2A and 2B, a discussion of the process for loading value onto a prepaid card using a retailer's legacy system in accordance with the invention will now be given. This is illustrated in Fig. 2A by the bolded flow

designated a "1 ". For the purpose of the discussion, the phrase "legacy system" and its variants will refer to a prior art merchant transaction system that is not configured for issuing prior art non-reloadable prepaid cards. The term "acquirer" is used herein to designate the financial institution (e.g., a bank) with which the merchant or retailer has an account for the purpose of acceptance, clearing, and settlement of the merchant's credit and debit card sales. An "issuer" is used herein to refer to a financial institution that establishes and maintains customer credit lines that are accessed through the use of a card, including prepaid cards in accordance with the invention. The phrase "payment processing network" (PPN) is used herein to refer to an institution and its infrastructure for mediating financial transactions between the acquirer and issuer. Commonly known PPN's include MasterCard, Discover, and Visa.

[0021] Continuing with Figs. 2A and 2B, a consumer who desires to purchase a prepaid card approaches a retailer (merchant), generally represented in Fig. 2A by the POS terminal. Suppose the consumer desires to purchase a $20 prepaid card. The consumer (soon to be cardholder) pays a cashier of the retailer $20. The cashier interacts with the POS terminal (e.g., swipes the card through POS terminal) and enters a MERCHANDISE RETURN transaction code to initiate a MERCHANDISE RETURN transaction with the acquirer. As will become clear, the MERCHANDISE RETURN transaction is the mechanism in a legacy system by which the prepaid card will be funded. Since the notion of returning merchandise is practically universal, most legacy merchant transaction systems are equipped with the ability to process MERCHANDISE RETURN transactions.

[0022] Continuing with Fig. 2A, The acquirer receives the MERCHANDISE

RETURN transaction code from the retailer. Associated with that code will be the amount and the PAN of the prepaid card. The amount will be logged for inclusion upon "settlement" with a payment processing network (PPN, e.g., Visa). More specifically, the transaction is logged in a BASE 2 file. The BASE 2 file logs all the settlement positions of the acquirer, indicating how much the acquirer needs to collect from the issuer (e.g., in the case of a purchase) and how much the acquirer needs to pay the issuer (e.g., in the case of a return).

[0023] At the end of the daily billing cycle, the BASE 2 file is forwarded to the PPN for settlement calculation. In the case of the $20 MERCHANDISE RETURN transaction, the accounts are settled as follows: the merchant owes his bank (the acquirer) $20, the acquirer owes the PPN $20, and the PPN owes the issuer $20.

[0024] When the issuer receives the settlement files (the BASE 2 files) for clearing, the issuer will see a credit of $20 in its account resulting from the $20

MERCHANDISE RETURN transaction. This $20 credit that results from the $20 MERCHANDISE RETURN transaction is treated by the issuer as a LOAD

transaction. The issuer will then credit the account of the prepaid card in the amount of $20. Recall that the PAN on the prepaid card contains the three digits which indicate the load value of the prepaid card.

[0025] When all the accounts are settled, every entity is "made whole" (i.e., paid) with respect to the $20 MERCHANDISE RETURN transaction. Starting with the issuer, the issuer is made whole because it receives $20 from the PPN. The PPN, in turn is made whole because it receives $20 from the acquirer. The acquirer is made whole because it will debit the merchant's account with the acquirer in the amount of $20. Finally, the merchant is made whole because it's cashier receives payment from the cardholder. The cardholder in turn receives a prepaid card having loaded thereon, at the issuer's centralized fund pool, a value of $20. [0026] Thus, it can be seen that the foregoing actions in accordance with the invention, utilizes an existing merchant transaction system in a novel and non- obvious manner to enable a merchant to sell and load a non-reloadable prepaid card.

[0027] Some acquirers settle their accounts in real-time; i.e., the authorization and settlement occur in a single message. Such acquirers are aptly referred to as single message system (SMS) acquirers. For SMS acquirers, the MERCHANDISE

RETURN transaction flows to the issuer in real-time. In other words, the acquirer computes and settles the transaction with the issuer right away. In those cases, the purchaser of the prepaid card will obtain a funded card at the time of purchase.

[0028] Many acquirers, however, typically do not send a merchandise return transaction in real-time to the issuer, but rather batch their merchandise return transactions in the settlement files and settle their accounts on a 24 hour settlement window (or some other similar period of time). In such a situation the issuer would not be aware of the card sale, and for the cardholder this means that the prepaid card will not be funded for about 24 hours, or longer depending on the settlement interval and thus the cardholder would not be able to use the prepaid card for a period of time. This would greatly discourage the use of prepaid cards.

Consequently, real-time settlement capability as in the case of SMS acquirers is needed.

[0029] Reference is now made to Figs. 3A and 3B for a discussion of a further aspect of the invention. Fig. 3A illustrates the flow to be discussed by the bolded flow lines designated as "2". In accordance with an embodiment of the invention, a transaction that is settled in real-time is used to alert the issuer of the sale of the prepaid card.

[0030] In the specific example illustrated in Fig. 3A, an authorization transaction of $0 is used. After the cashier performs the MERCHANDISE RETURN transaction discussed above, the cashier then swipes the prepaid card through the POS terminal and enters a $0 authorization transaction. This transaction flows to the acquirer and then to the PPN and then to the issuer in real-time.

[0031] When the issuer receives a $0 authorization transaction, it will examine the PAN from the prepaid card that accompanies the transaction. The issuer can determine that the PAN includes load value information, based on the presence of a predetermined bank identification number. As discussed above, a special bank identification number can be used to indicate that the card is a prepaid card in accordance with the invention and so the PAN contains load value information for funding the card.

[0032] The issuer can activate the card and credit the prepaid card account. Credit made to the card from the zero dollar authorization transaction is balanced with the settlement entry received for the merchandise return transaction.

[0033] As discussed above, some acquirers settle their accounts in real-time, and for these SMS acquirers the MERCHANDISE RETURN transaction flows to the issuer in real-time. Figs. 4A and 4B illustrate an example of an SMS flow in accordance with the invention.

[0034] The issuer is notified of the card sale and funding using the MERCHANDISE RETURN transaction as follows: When the card is sold, the merchant collects $20 from the consumer. The $20 must now be credited to the card account. The cashier swipes the card through the POS Terminal and enters a MERCHANDISE RETURN code for $20, which is the amount that is to be loaded to the card. The $20 merchandise return transaction is routed (sent) to the merchant acquirer, which then routes the transaction to the PPN. Note, that unlike the flow in Fig. 2A, there is no logging to a file. Rather, the transaction is routed in real-time to the PPN. The PPN in turn sends the transaction in real-time to the issuer.

[0035] The issuer recognizes the transaction as the first transaction on a new gift card that is in a non-active state. The issuer matches the load amount to the amount designated in the BIN and ensures there is a match before approving the

transaction; a mismatch results in a decline. The issuer activates the card and credits the prepaid card account for the amount designated by the amount in the transaction.

[0036] When settlement is calculated, the PPN determines that the acquirer settlement position is negative $20, and the issuer settlement position is positive $20. To balance this, the PPN collects $20 from the acquirer and sends $20 to the issuer. [0037] The acquirer collects $20 from the merchant. The merchant pays the acquirer the $20 that was collected from the consumer. In the end, each party involved has not balanced and $20 is not in the cardholder account.

[0038] As can be appreciated from the foregoing discussion, the phrase "real-time" as used in the context of the invention means a span of time that is not significant. For example, routing a real-time transaction means the transaction is routed without any significant delay. Thus, the purchase of the gift card and loading the purchased value onto the card is completed is completed in real-time in that at the end of the transaction, the cardholder will have a gift card that has a loaded value and can be used to make a purchase.

[0039] Any of the entities or components described above may include one or more of the subsystems or components shown in Fig. 5, which is a block diagram of a computer apparatus. The subsystems shown in the figure are interconnected via a system bus 875. Additional subsystems such as a printer 874, keyboard 878, fixed disk 879, monitor 876, which is coupled to display adapter 882, and others are shown. Peripherals and input/output (I/O) devices, which couple to I/O controller 871 , can be connected to the computer system by any number of means known in the art, such as serial port 877. For example, serial port 877 or external interface 881 can be used to connect the computer apparatus to a wide area network such as the Internet, a mouse input device, or a scanner. The interconnection via system bus allows the central processor 873 to communicate with each subsystem and to control the execution of instructions from system memory 872 or the fixed disk 879, as well as the exchange of information between subsystems. The system memory 872 and/or the fixed disk 879 may embody a computer readable medium.

[0040] Any of the software components or functions described in this application, may be implemented as software code to be executed by a processor using any suitable computer language such as, for example, Java, C++ or Perl using, for example, conventional or object-oriented techniques. The software code may be stored as a series of instructions, or commands on a computer readable medium, such as a random access memory (RAM), a read only memory (ROM), a magnetic medium such as a hard-drive or a floppy disk, or an optical medium such as a CD- ROM. Any such computer readable medium may reside on or within a single computational apparatus, and may be present on or within different computational apparatuses within a system or network. [0041] The above description is illustrative and is not restrictive. Many variations of the invention will become apparent to those skilled in the art upon review of the disclosure. The scope of the invention should, therefore, be determined not with reference to the above description, but instead should be determined with reference to the pending claims along with their full scope or equivalents.

[0042] One or more features from any embodiment may be combined with one or more features of any other embodiment without departing from the scope of the invention.

[0043] A recitation of "a", "an" or "the" is intended to mean "one or more" unless specifically indicated to the contrary.

[0044] It should be understood that the present invention as described above can be implemented in the form of control logic using computer software in a modular or integrated manner. Based on the disclosure and teachings provided herein, a person of ordinary skill in the art will know and appreciate other ways and/or methods to implement the present invention using hardware and a combination of hardware and software.