U.S. patent application number 11/582603 was filed with the patent office on 2007-02-15 for final sale merchandise card.
Invention is credited to Bertram V. Burke.
Application Number | 20070034688 11/582603 |
Document ID | / |
Family ID | 38456797 |
Filed Date | 2007-02-15 |
United States Patent
Application |
20070034688 |
Kind Code |
A1 |
Burke; Bertram V. |
February 15, 2007 |
Final sale merchandise card
Abstract
A system for activating a merchandise card and account that
permits a card user to initially purchase or reload cash value into
a merchandise account using a card issued by an issuer such as a
merchant, bank, or card association via a terminal, with or without
a PIN, and have the cash value on the card immediately converted to
a purchase of proxy merchandise offered by the card issuer, and at
the time of account debiting allowing said cardholder to make a
final selection of merchandise from the inventory of the issuing
merchant. The system operates a network, on a real time or batch
basis, that uses a communication system to connect point of sale
terminals, remote terminals, and computers operated by card
issuers, merchant headquarters, and account processors to issue
cards, calculates taxes and merchant costs, converts cash to proxy
merchandise, and allows cardholders at the time of debiting their
account to substitute the proxy purchase for a final selection of
merchandise.
Inventors: |
Burke; Bertram V.; (Monmouth
Beach, NJ) |
Correspondence
Address: |
CHRISTOPHER & WEISBERG, P.A.
200 EAST LAS OLAS BOULEVARD
SUITE 2040
FORT LAUDERDALE
FL
33301
US
|
Family ID: |
38456797 |
Appl. No.: |
11/582603 |
Filed: |
October 18, 2006 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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10823850 |
Apr 14, 2004 |
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11582603 |
Oct 18, 2006 |
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60462732 |
Apr 14, 2003 |
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Current U.S.
Class: |
235/380 ;
705/41 |
Current CPC
Class: |
G06Q 20/204 20130101;
G06Q 20/20 20130101; G07F 7/0866 20130101; G06Q 20/105 20130101;
G06Q 20/203 20130101; G06Q 30/06 20130101 |
Class at
Publication: |
235/380 ;
705/041 |
International
Class: |
G06K 5/00 20060101
G06K005/00; G06Q 40/00 20060101 G06Q040/00 |
Claims
1. A method for a card issuer to sell merchandise to a customer
using a merchandise card, comprising: using a remote terminal to
activate and issue a card to a customer with an identifier;
entering a cash value into the remote terminal to purchase a
percentage of a merchant's inventory using a proxy method,
resulting in a proxy sale; debiting from the merchant's account;
and at the time of debiting from the merchandise account,
exchanging said purchased proxy merchandise for other merchandise
from the merchant's inventory.
2. The method of claim 1, further comprising completing the proxy
sale by calculating the average historical costs associated with
the sale of the merchant's inventory.
Description
CROSS-REFERENCE TO RELATED APPLICATION
[0001] The present application is a Continuation Application
whereby the Applicant claims the benefit of pending application
Ser. No. 10/823,850, filed Apr. 14, 2004, by Bertram Burke,
entitled FINAL SALE MERCHANDISE CARD, which application is related
to and claims priority from U.S. patent application Ser. No.
60/462,732, filed Apr. 14, 2003, the entirety of all of which is
incorporated herein by reference.
FIELD OF THE INVENTION
[0002] This invention relates to the gift card, prepaid card, or
traveler's money card.
BACKGROUND OF THE INVENTION
[0003] In 2003, consumers purchased $45 billion in stored value
card (SVC) credits from card issuers who are retailers, mall
offices, banks, card associations, and travel service providers. In
the marketplace SVC are commonly referred to as gift, prepaid, or
traveler's money card programs.
[0004] The majority of SVC issuers provide consumers with mag strip
cards that are connected to a host-client network system. Consumers
use their cards to initially load and reload funds at remote
terminals, e.g. cash registers, POS terminals, Internet web site
POS terminals, etc.
[0005] After value has been added to a SVC, consumers use their
card to make purchases for goods and/or services at (a) merchants
who issue cards (a "closed" loop system) or (b) banks who issue
cards and provide cardholders with the opportunity to use their
cards at multiple and diverse merchants (an "open" system).
[0006] In return for selling and reloading SVCs, merchants have
benefited by consumers spending more than the face value of the
card, the float on the money held in their SVC account until the
funds are debited, and the "breakage" amount that occurs when
customers abandon 10-15% of the funds that they deposited into a
SVC account.
[0007] When banks sell SVC cards, they benefit from charging
customers loading fees on the amount of funds they deposit, float
fees on the funds maintained in the accounts, and interchange fees
when customers make purchases at participating merchants or use ATM
machines for cash.
[0008] Along with the outstanding success that merchants and banks
are gaining from offering the current SVC programs, they are also
experiencing the following problems (a) Consumers do not own any
merchandise or services when they purchase SVC credits; therefore,
if an issuer goes out of business or becomes insolvent, the
consumers loses the funds they deposited into their SVC funds. (b)
When issuers accept SVC funds, they cannot be recorded as an
immediate sale; therefore, the issuer cannot report the transaction
as revenue. (c) Issuers have to wait until cardholders debit their
accounts before they can declare any revenue. (d) The "breakage"
amount that occurs when customers abandon 10-15% of the funds, has
until recently been the property of the issuer. Now issuers are
being challenged by state treasuries, invoking existing "unclaimed
property laws", to turn over the funds to the state. As the impact
of this process expands, it is entirely possible that merchants
will lose all rights to the "breakage" funds that they were
formerly able to keep. (e) Furthermore, with the introduction of
state treasuries in the mix, issuers are now being required to
maintain costly SVC accounting records and conduct audits for
yearly reporting to the respective state treasuries. (f) In order
to deal with the growing elimination of "breakage" funds, issuers
have attempted to put expiration dates on their SVCs. As a result
of this very unpopular tactic, a growing number of states have
outlawed issuers from using expiration dates for SVCs. (g) As
another way to recoup from losing "breakage" funds, issuers have
also instituted monthly charges (avg. $2.50) when SVC accounts are
not being used. In response to this compensatory initiative, again
a growing number of states have passed laws blocking issuers from
charging non-user fees.
[0009] In analyzing the above cited problems, it is obvious there
are two major limitations within the current SVC system. They are
(a) issuers accept funds from consumers with the expectation that
they have made a sale and (b) consumers turn over funds to issuers
with the understanding they now own some merchandise or services,
for themselves or as a gift for others.
[0010] However, in reality, both parties do not receive what they
want. The fact is issuers are really selling "financial credits" to
consumers for future ownership of goods or services.
[0011] In the future, such "credits" can then be exchanged for
merchant supplied goods and services. Consequently, under the
current system, merchants do not have a sale until the customer
cashes the "credits" in for goods and services. Therefore, as it
now stands, merchants do not have any guarantee that there will
ever be a sale.
[0012] Under the current system merchants have to wait until the
customer redeems the financial credits for goods or services. Only
at that time does a merchant have reportable revenue from their
growing sales of gift, prepaid, or traveler's money cards. As a
result of the delay in timing, merchants are increasingly being
forced to under report what they think are their legitimate sales.
By increasingly under reporting their sales, merchants now are
asking the question: "Will this phenomena, have a negative impact
on their corporate earnings, valuations, and the price of their
company's stock?"
[0013] Lastly, after a time of nonuse, some states are viewing the
remaining balances in SVCs as being "unclaimed property". Under
such a declaration, state treasuries can implement escheat laws and
require issuers to surrender the unused funds to the respective
state treasuries.
[0014] Once "unclaimed property" laws are called to
action--customers, issuers, city and state sale tax authorities,
and the Internal Revenue Service--will all lose the rights to the
funds that issuers and consumers--upfront agreed--to be used to
conveniently purchase goods and services.
[0015] Accordingly, in light of the above, it would be advantageous
to improve the existing gift, prepaid, traveler's money cards so
that once funds are entered into the system there is an immediate
and recognizable sale of goods or services. Once this occurs, all
of the above cited problem factors ("a" through "g") by definition
and classification are eliminated from occurring. The method and
system that can provide order and purpose to this payment option is
a merchandise card.
SUMMARY OF THE INVENTION
[0016] An embodiment of the invention allows consumers to enter
cash value into a merchandise card account and immediately have the
issuer record the transaction as revenue from a sale of goods
and/or services.
[0017] According to another embodiment of the invention, merchants
or issuers will be able to convert the cash value entered into a
merchandise card account--into a sale of proxy merchandise--after
they calculate and report the average historical costs associated
with the merchant's or issuer's inventory. The merchant's or
issuer's costs to be considered would be (1) the applicable city,
state, federal taxes and (2) the cost of the sold goods and
overhead. Within this embodiment, at the time of the proxy
purchase, cardholders will be buying a percentage of the merchant's
or issuer's inventory. While making the purchase, under the terms
of the merchandise card, the merchant or issuer agrees to hold and
store the purchased inventory until the cardholders make a final
inventory selection.
[0018] According to another embodiment of the invention, at a later
time cardholders will be able to reconfigure and exchange the
initial sale of proxy merchandise for other goods or services. The
final selection of merchandise or services selected by the
cardholder will then be recalculated by the invention to determine
(1) the applicable city, state, federal taxes and (2) the cost of
the sold goods and overhead related to the final merchandise
selected by the cardholder. Effectively, once the final selection
of inventory occurs, the final transaction log will replace
whatever percentage of the initial proxy purchase was used up.
Also, at time of the final purchase, cardholders will take the
purchased inventory items away from the merchant's location.
[0019] According to another embodiment of the invention, in the
event that merchants or issuers go bankrupt or become insolvent,
the invention will be able to provide the court with records
indicating the percentage of the merchant's or issuer's inventory
that is owned by the merchandise cardholders. Once this occurs the
court will have the needed knowledge to instruct the merchant,
issuer, or trustee how much of the existing inventory should be
made available to the existing merchandise cardholders. The court
could then instruct the party in charge to set up claming sites
whereupon the merchandise cardholder will be able to select from
available inventory.
BRIEF DESCRIPTION OF THE DRAWINGS
[0020] Further objects, features and advantages of the invention
will become apparent from the following detailed description taken
in conjunction with the accompanying figures showing illustrative
embodiments of the invention, in which:
[0021] FIG. 1 is a block diagram of the components of a system
operated by a merchant and a third party to allow a merchandise
card system to make an initial "proxy purchase" followed by an
adjusted "final purchase" of goods and/or service in accordance
with the invention;
[0022] FIG. 2 is a block diagram of the components of a system
fully operated by the merchant alone to allow a merchandise card to
make an initial "proxy purchase" followed by an adjusted "final
purchase" of goods and/or service in accordance with the
invention;
[0023] FIG. 3 is a block diagram of the components of a system
operated by a bank or a card association to allow a merchandise
card to make an initial "proxy purchase" followed by an adjusted
"final purchase" of goods and/or service in accordance with the
invention;
[0024] FIG. 4A illustrates a financial transaction card
incorporating mag stripe technology with a unique ID account number
connecting to a cardholder's merchandise card account;
[0025] FIG. 4B illustrates a smart card incorporating integrated
circuit technology to convey a unique ID account number connected
to a cardholder's merchandise card account;
[0026] FIG. 4C illustrates a radio frequency device being used as
the conveyor of a unique ID account number connected to a
cardholder's merchandise card account;
[0027] FIG. 5 is a flowchart illustrating the process of opening a
merchandise account that is immediately used to make a "proxy
purchase" of goods and/or services in accordance with the
invention;
[0028] FIG. 6 is a flowchart illustrating the process of loading or
reloading cash into account that is immediately used to make a
"proxy purchase" of goods and/or services in accordance with the
invention;
[0029] FIG. 7 is a flowchart illustrating the process of a
cardholder debiting their account. Here a cardholder can convert
any part or percentage of their "total proxy purchases" of goods or
services to a "final purchase" of goods or services.
[0030] FIG. 8 shows an example of a merchant card transaction in
operation.
[0031] Throughout the figures, unless otherwise stated, the same
reference numerals and characters are used to denote like features,
elements, components, or portions of the illustrated embodiments.
Moreover, while the subject invention will now be described in
detail with reference to the figures and in connection with the
illustrative embodiments, changes and modifications can be made to
the described embodiments without departing from the true scope and
spirit of the subject invention as defined by the appended
claims.
DETAILED DESCRIPTION OF THE INVENTION
[0032] The invention describes a method and system for activating a
merchandise card MC and a merchandise account MA that permits a
cardholder CH to deposit cash into a merchandise account MA for the
purpose of the cash being immediately used to purchase a percentage
of the merchant's or card issuer's inventory.
[0033] After the transaction is completed the cardholder's
merchandise card account will show a record of the transaction and
the amount of cumulative inventory owned by the cardholder.
[0034] This purchasing transaction is called a proxy transaction PT
because at the time of purchase the cardholder instructs the
selling merchant or issuer to maintain possession of the inventory
until a later time when the cardholder will return to make a final
selection FS from the merchant's inventory.
[0035] In order to effect the invention, the system requires a
network of players, see FIG. 1 composed of cardholders, merchants,
card issuers, processors, etc. who process transactions using
remote terminals and central computers to load, reload, and debit
against merchandise card accounts using the following stations (1)
a purchasing/debiting P/DS station, (2) a merchant headquarters
station MH, and (3) an account processor station AP.
[0036] FIG. 2 shows the three stations in the network (P/DS, MH,
AP) being operated by the merchant organization.
[0037] FIG. 3 shows a configuration of a bank or card association
operating a central computer connected to customers and diverse
merchants.
[0038] The commonality among all system configurations is the fact
that the merchandise card account system MC is connected to card
issuer locations or purchasing/debiting stations P/DSx that allow
merchants and others to operate remote terminals RTx that in turn
are connected to computers and networks located in merchant
headquarters MH and an account processors AP.
[0039] Said remote terminals RTx are connected to merchant
headquarters MH and account processor AP stations via a
communication system CS. The CS may include telephone lines,
satellites, RF frequency devices, or cables.
[0040] In the embodiment, purchasing/debiting stations P/DSx are
equipped with remote terminals RTx composed of cash registers CRx
or POS terminals POSx with keypads KPx, card readers CRx, bar code
readers BCRx, printers Px, and display screens DSx to record the
amount of funds being entered into a MC account.
[0041] Throughout this specification, the term x, when appended to
the end of a reference character, is equal to 1, . . . M, . . .
N.
[0042] Said P/DSx with RTx are located in point of sale merchant
retail locations MRL, merchant online sales MOS facilities, direct
mail sales DMS facilities, shopping mall offices SMO, bank
locations B, and card association locations CA.
[0043] In said P/DSx locations, card issuers issue cards and
accounts to customers with individual and distinct account
identifiers. Once a customer has a card account, the customer can
tender cash value to card issuers and the funds will be entered
into remote terminals RI via mag stripe cards MSC, smart cards SC,
or radio frequency devices RFD for crediting to their MC
accounts.
[0044] As FIG. 1 shows, after said card is entered into a remote
terminal RT at a P/DS location, the RT connects with the merchant
headquarters MH and the account processor AP who manages the MC
account. When the RT connects with the computers and networks
located at MH and the AP, the system captures the critical
information needed to immediately convert the entered MC funds into
an actual sale, albeit a proxy sale, of merchandise until a final
sale is conducted at the time of account debiting.
[0045] Effectively, the proxy sale of merchandise has a customer
buying a percentage of the merchant's existing inventory using a
proxy sale method. The proxy sale represents a "stand in number"
until the cardholder makes a final selection from the merchant's
inventory. The proxy sale is conducted as an actual sale because
when the cash value is entered into the MC account, the issuing
merchant applies its average historical operational costs (i.e.
sale taxes, cost of goods, overhead costs, and federal taxes)
against the amount of cash value being entered into the MC
account.
[0046] To use the system, customers contact merchants or card
issuers and receive a card whereupon they initially load or reload
funds (i.e. $10, $50, $100, etc.) into a merchandise card MC
account.
[0047] Immediately upon loading funds into the MC account, the
system converts the "in funds" into a qualified sale of merchandise
using a "proxy purchase" algorithm.
[0048] In order to be booked as earned revenue from a sale of goods
or services, the system allows merchants to effect the "proxy
method" by calculating the appropriate deductions for sale taxes,
cost of goods, overhead costs, and the cost of federal taxes in
order to determine the merchant's retained earnings or after tax
net profit.
[0049] Under the system, each respective merchant or card issuer
will determine its own unique "proxy purchase" by inputting its
average costs of sales taxes, goods, overhead, and federal taxes
against its overall inventory. Merchants customarily keep such sale
records as required by Generally Accepted Accounting Practices
(GAAP) in their computer networks located at merchant headquarters
MH.
[0050] The system will now be described in more detail starting
with references to FIG. 5, when a customer opens a merchandise card
MC and an account.
[0051] In step 100, a remote terminal RT has been activated.
[0052] In step 110, a customer requests a MC account. Clerk swipes
card through the remote terminal RT.
[0053] In step, 115 the computer asks if this is a PIN (personal
identification number) card.
[0054] If the answer is yes, in step 120 the customer enters a PIN
number into the terminal.
[0055] In step, 115 if the answer is no, the computer goes to step
125.
[0056] At step 125, the clerk or customer enters the amount of
funds to be initially deposited to the MC account. The computer
then connects with the central computer and database in the account
processor AP station to report the card and account number, the PIN
if there is one, and the amount of cash entered in step 125.
[0057] In step 130, the computer connects with the central computer
and database in the merchant headquarters MH station, to lookup and
report if the merchant has assigned an average sales tax per dollar
to its inventory.
[0058] In step, 135 the computer applies the sales tax percentage
to the amount of cash entered to determine the amount of dollars to
be sent to a state tax authority.
[0059] In step 140, the computer reports back to the merchant
headquarters MC, the amount of sales taxes due produced in the
proxy sale.
[0060] In step 145, the computer prints out a receipt.
[0061] In step 150, the computer returns to step 100 to await the
next transaction.
[0062] The system will now be described in more detail starting
with references to FIG. 6, when a customer reloads their
merchandise card MC and account.
[0063] In step 200, a remote terminal has been activated.
[0064] In step 210, a card is swiped through the terminal.
[0065] In step 215 the computer asks if this is a PIN card?
[0066] If the answer is no to step 215, the computer goes to step
225.
[0067] If the answer is yes in step 215, the computer goes to step
220 and the customer enters a PIN number into the terminal. The
compute then goes to step 225.
[0068] At step 225 the computer asks how much is being loaded into
the MC account. Once the amount is entered, the computer goes out
to the Account Processor AP to report the amount of cash value
going in to the MC account.
[0069] In step 230, the computer asks is there a sales tax?
[0070] If the answer to step 230 is yes, at step 240 the computer
goes to the merchant headquarters MC and looks up the proxy sales
tax and calculates the amount of sales tax.
[0071] In step 245 the computer reports the amount of sales tax and
the net amount to merchant headquarters MH.
[0072] If the answer is no to step 230, the computer goes to step
245, and the computer reports the net amount to merchant
headquarters MH.
[0073] In step 250, the computer prints out a receipt.
[0074] In step 260, the computer returns to step 200 to await the
next transaction.
[0075] The system will now be described in more detail starting
with references to FIG. 7, when a customer uses their merchandise
card MC and account to make a debit.
[0076] In step 300, a remote terminal has been activated.
[0077] In step 310, the computer scans the bar code on an item to
be purchased.
[0078] In step 320 the computer asks if there is a sale tax on the
item?
[0079] If the answer is yes, in step 325 the computer looks up the
sales tax percentage at merchant headquarters MH and calculates the
amount of sales taxes.
[0080] In step 330, the computer totals the price of the item and
the sales tax.
[0081] In step 335, the computer repeats steps 310-330 if
additional items are being purchased.
[0082] In step 340, the computer asks if the customer wants to use
a MC card/account.
[0083] If the answer is yes, in step 350, the computer asks if the
MC card has a PIN number.
[0084] If the answer to step 350 is yes, in step 360 the computer
requests the PIN.
[0085] In step 365, the computer displays the amount to be debited
off the MC account and asks the cardholder to approve the debit
from their account. The computer goes to the account processor AP
station to gain acknowledgement that the funds are available and
the AP computes a new MC card account balance.
[0086] If the answer to step 340 is no, in step 370, the computer
asks for payment in cash, credit card, ATM card,
[0087] In step 375, the computer prints out a receipt.
[0088] In step 380, the computer returns to step 300.
[0089] FIG. 8 shows a list of steps 1-9 in a typical merchant card
transaction both funds in and funds out. The following is a
hypothetical example of a MC transaction in a convenience
store.
[0090] In step 1, said POS transaction, #1234, was completed on
Mar. 17, 2003 in store #141. The transaction was for $100.00 to go
to a gift merchandise account #35 -476-12.
[0091] The hypothetical store is 1 of the 1,400 stores operated by
the chain owner. In step 2-3, the remote terminal RT went online to
the chain's headquarters MH, to determine the average sales tax for
its transactions was 3%.
[0092] In step 4, the RT would go online to the Account Processor
AP and record a $100 to account #35-476-12.
[0093] In step 5, the RT goes to MH and in step 6, transaction
#1234 would show the following accounting: $3.00 due the state,
$55.00 cost of goods, $28.00 for business overhead, $6.02 to IRS
and $7.98 as after tax net profit to the convenience chain.
[0094] As long as transaction #1234 would stay as originally
processed, the "proxy" information in the MH would be recorded as
the details behind a final sale.
[0095] However in step 7, cardholder #35-476-12 went to store #151
and in transaction #6890 the customer debited $15.38 resulting in
step 8-9 producing the following records at Merchant
Headquarters:
[0096] On 4-2-03 cardholder #35-476-12 debited $15.83 at store #151
performing transaction #6890.
[0097] The following two items were purchased: [0098] Item 1--24
cans of premium soda--Price $8.43--Sale Tax 6%=$0.50 [0099] Item
2--1 women's blouse--Price $6.45--Sale Tax 0%=$0.00 [0100] Total
purchase $15.38
[0101] The RT will go online to AP station and debit $15.38 leaving
a balance of $84.62 on account #35-476-12.
[0102] When MH station receives the transaction the 2 records are
recorded as follows: [0103] Transaction #1234 is rewritten as
$84.36 with the following apportionments: [0104] $2.53 state sales
tax [0105] $46.40 cost of goods [0106] $23.62 overhead costs [0107]
$11.81 net profit [0108] $6.73 after tax profit
[0109] The debited final sale transaction #6890 is written for
$15.38 with the following apportionments: [0110] Item 1--price
$8.43 [0111] $0.51 state sales tax (@ 6%) [0112] $3.54 cost of
goods (@ 42%) [0113] $1.94 overhead costs (@ 23%) [0114] $5.99 net
profit [0115] Item 2--price $6.45 [0116] $0.00 state sales tax (@
0%) [0117] $3.03 cost of goods (@ 47%) [0118] $1.55 overhead costs
(@ 24%) [0119] $1.87 net profit [0120] Items 1 & 2 After tax
profit=$4.48
[0121] Once steps 1-9 are taken the system has completed its
cycle.
[0122] The net results of this total activity is that a customer
purchased a merchandise card that can be reloaded and the merchant
has a completed sale that can be immediately booked as revenue.
[0123] The system provides merchants with an improved way to accept
funds into a prepaid card account because when a merchant applies
the system "a sale is a sale".
[0124] Although the present invention has been described with
reference to certain preferred embodiments, various modifications,
alterations, and substitutions will be known or obvious to those
skilled in the art without departing from the spirit and scope of
the invention, as defined by the appended claims.
* * * * *