U.S. patent application number 11/895981 was filed with the patent office on 2008-04-24 for method, system and apparatus for the establishment of a virtual banking environment in a merchant venue while increasing the deposit-based assets of optionally interfaced traditional banking institutions subject to fractional-reserve banking.
Invention is credited to William O. Berntsen, Lawrence P. Casey.
Application Number | 20080093438 11/895981 |
Document ID | / |
Family ID | 39319246 |
Filed Date | 2008-04-24 |
United States Patent
Application |
20080093438 |
Kind Code |
A1 |
Berntsen; William O. ; et
al. |
April 24, 2008 |
Method, system and apparatus for the establishment of a virtual
banking environment in a merchant venue while increasing the
deposit-based assets of optionally interfaced traditional banking
institutions subject to fractional-reserve banking
Abstract
A system, method and associated apparatus for establishing
virtual banking in a merchant venue or syndication of merchants to
a consumer while optionally increasing the deposit-based assets of
a related traditional banking institution, having a consumer
portable device for containment of currency amounts linked to the
consumer's account and enabled to perform commercial transactions
at the direction of the consumer that affect the balance of the
consumer's account, which consumer portable device also displays
balance and transactional information; a node device for
containment of currency amounts accurately reflecting the
consumer's account and optionally associated with a captive account
at the banking institution and enabled to perform commercial
transactions that affect the balance of the consumer's account in
accordance with instructions received from the consumer portable
device, which node device also optionally provides for balance,
statements, transactional information, and profiling of the
consumer's transactional activities; an interface between the
portable device and the node device for communication therebetween
to accurately affect commercial transactions between the two;
transacting at least one commercial transaction of the commercial
transactions between the two devices; and if there is an optionally
related captive account at a financial institution, accurately
communicating the transaction to the banking institution such that
the balance of said captive account is properly maintained in
accordance with the at least one commercial transaction. The
commercial transactions also include credit, debit, ATM, money
transfers and the like.
Inventors: |
Berntsen; William O.;
(Whitehouse Station, NJ) ; Casey; Lawrence P.;
(Annandale, NJ) |
Correspondence
Address: |
Mitchell A. Stein, Esq.;STEIN LAW, P.C.
Suite 4, 24 Woodbine Avenue
Northport
NY
11768
US
|
Family ID: |
39319246 |
Appl. No.: |
11/895981 |
Filed: |
August 28, 2007 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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11789260 |
Apr 24, 2007 |
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11895981 |
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60853866 |
Oct 24, 2006 |
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60853866 |
Oct 24, 2006 |
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Current U.S.
Class: |
235/379 |
Current CPC
Class: |
G06Q 20/327 20130101;
G06Q 20/10 20130101; G06Q 20/40 20130101; G06Q 40/02 20130101; G06Q
20/3672 20130101; G06Q 20/32 20130101; G06Q 20/108 20130101 |
Class at
Publication: |
235/379 |
International
Class: |
G07F 19/00 20060101
G07F019/00 |
Claims
1. A system for establishing a virtual banking environment in a
merchant venue to a consumer with a consumer's account while
optionally increasing the deposit-based assets of a related
traditional banking institution having a captive account therein
for fractional-reserve banking at the banking institution,
comprising: (a) a consumer portable device for containment of
currency amounts linked to the consumer's account and enabled to
perform commercial transactions at the direction of the consumer
that affect the balance of the consumer's account, which consumer
portable device also displays balance and transactional
information; (b) a node device for containment of currency amounts
accurately reflecting the consumer's account and optionally
associated with a captive account at the banking institution and
enabled to perform commercial transactions that affect the balance
of the consumer's account in accordance with instructions received
from the consumer portable device, which node device also
optionally provides for balance, statements, transactional
information, and profiling of the consumer's transactional
activities; (c) an interface between said portable device and said
node device for communication therebetween to accurately affect
commercial transactions between the two; (d) transacting at least
one commercial transaction of said commercial transactions between
the two devices; and (e) if there is an optionally related captive
account at a financial institution, accurately communicating the
transaction to the banking institution such that the balance of
said captive account is properly maintained in accordance with the
at least one commercial transaction.
2. The system of claim 1, wherein said commercial transactions are
selected from the group consisting of general spending and
purchases, government benefits, check cashing, child support
payments and receipts, credit functions, savings functions,
insurance functions, ATM functions, money transfers, travelers'
checks, electronic and paper check writing, employee related
functions, miscellaneous functions, fractional currency deposits
and withdrawals, and combinations thereof.
3. The system of claim 1, wherein the accounts comprise fractional
currency.
4. The system of claim 1, wherein the portable device comprises a
microprocessor, display means for displaying said balance and
transactional information, and communications with an operator of
the device, operator interface means for entering and receiving
transaction related and balance related data, power, memory, and
wireless communication means for optional communication with the
banking institution and direct communication with the node
device.
5. The system of claim 1, wherein the portable device further
comprises security means for ensuring the accuracy of the
transaction and operators of the respective portable and node
devices.
6. The system of claim 1, wherein the node device comprises a
microprocessor, display means for displaying said balance and
transactional information, communications with an operator of the
device, operator interface means for entering and receiving
transaction related and balance related data, power, memory, and
communication means for communicating with the banking institution
and portable device.
7. The system of claim 1, wherein a consumer receives from the
merchant a portable device with a predetermined, prepaid amount,
which is utilizable solely at the merchant's facility.
8. The system of claim 1, further comprising the steps of: (a)
receiving a check from a consumer; (b) cashing the check by adding
the funds from the check to the consumer account.
9. The system of claim 1, further comprising inter-bank means
wherein a portion of the money represented by the portable device
is interchangeable at another bank via an ATM network with another
merchant.
10. A method for increasing the asset base of a banking institution
having a merchant account captive therein for fractional-reserve
banking, comprising: (a) encrypting in a consumer portable device
currency amounts linked to a consumer account captive at the
banking institution; (b) encrypting in a node device currency
amounts linked to the merchant account at the banking institution;
(c) enabling the performance of commercial transactions wherein one
account is debited a specific amount and the second account is
credited that amount in accordance with a commercial transaction;
(c) communicating in an encrypted manner between said portable
device and said node device for communication therebetween to
accurately affect the commercial transaction between the two that
comprises a credit to one and a debit to the other in accordance
with the specific amount; (d) transacting a commercial transaction
between the two devices such that one of the accounts is debited
for the transaction said specific amount and the other account is
credited said specific amount commensurate with the commercial
transaction; and (e) communicating the transaction to the banking
institution such that the balances of each respective account are
properly credited and debited in accordance with the commercial
transaction.
11. The method of claim 10, wherein the commercial transaction is
selected from the group consisting of general spending and
purchases, government benefits, check cashing, child support
payments and receipts, credit functions, savings functions,
insurance functions, ATM functions, money transfers, travelers'
checks, electronic and paper check writing, employee related
functions, miscellaneous functions, fractional currency deposits
and withdrawals, and combinations thereof.
12. The method of claim 10, wherein the accounts comprise
fractional currency.
13. The method of claim 10, further comprising the steps of: (a)
receiving a check from a consumer; (b) cashing the check by adding
the funds from the check to the consumer account.
14. The method of claim 10, further comprising inter-bank means
wherein a portion of the money represented by the portable device
is interchangeable at another bank via an ATM network with another
merchant.
15. An apparatus for increasing the asset base of a banking
institution having a first and second account captive therein for
fractional-reserve banking, comprising: (a) portable means for
encrypted containment of currency amounts linked to the first
account at the banking institution and enabled to perform
commercial transactions that affect the balance of the first
account; (b) node device means for encrypted containment of
currency amounts linked to the second account at the banking
institution and enabled to perform commercial transactions that
affect the balance of the second account; (c) encrypted interface
means between said portable device means and said node device means
for communication therebetween to accurately affect a commercial
transaction between the two that comprises a credit to one and a
debit to the other; (d) such that by transacting a commercial
transaction between the two device means one of the accounts is
debited for the transaction a specific amount and the other account
is credited said specific amount debited commensurate with the
commercial transaction; and (e) communicating means for
communicating the transaction to the banking institution such that
the balances of each respective account are properly credited and
debited in accordance with the commercial transaction.
16. The apparatus of claim 15, wherein the commercial transaction
is selected from the group consisting of general spending and
purchases, government benefits, check cashing, child support
payments and receipts, credit functions, savings functions,
insurance functions, ATM functions, money transfers, travelers'
checks, electronic and paper check writing, employee related
functions, miscellaneous functions, fractional currency deposits
and withdrawals, and combinations thereof.
17. The apparatus of claim 15, wherein the accounts comprise
fractional currency.
18. The apparatus of claim 15, wherein the portable device means
comprises a microprocessor, display means for displaying said
balance and transactional information, communications with an
operator of the device, operator interface means for entering and
receiving transaction related and balance related data, power,
memory, and wireless communication means for communicating with the
institution (which may not be subject to Regulation D banking) and
node device.
19. The apparatus of claim 15, wherein the portable device means
further comprises security means for ensuring the accuracy of the
transaction and operators of the respective portable and node
devices.
20. The apparatus of claim 15, wherein the node device means
comprises a microprocessor, display means for displaying said
balance and communications with an operator of the device, operator
interface means for entering and receiving transaction related and
balance related data, power, memory, and communication means for
communicating with the banking institution and portable device.
Description
FIELD OF THE INVENTION
[0001] The present invention relates to the field of methods,
systems and apparatus for the creation of a virtual banking
environment in the venue of a merchant location offering a
plurality of services while simultaneously providing heretofore
unavailable consumer reporting functions and optionally interfacing
with traditional institutional banks for increasing banking
reserves and fractional-reserve banking, while employing electronic
methods, systems and devices to enable virtual banking in the
merchant venue and to gather predominantly the market for the
unbanked and underbanked.
BACKGROUND OF THE INVENTION
[0002] The world of financial transactions including banking (both
institutional and virtual--where services akin to traditional banks
are provided but without the cloth of the traditional banking
institution) is in a state of evolution. Among the elements of
import lie the enormous volume of merchant-related activities--from
check-cashing, bill payment, money orders, ATM functions, money
transfers, credit cards, debit cards, gift cards and the like, and
the impact upon the world of the so-called "unbanked" or
"underbanked." This former class, which includes those who have no
bank accounts (the "unbanked") to those who may have access to
banking services yet do not generally use the same (the
"underbanked") estimated at some 73 million of 208 million income
earning American households (approximately 33.2% of all), are those
who are unable to hold a bank account in the traditional method,
for credit or other reasons, and are relegated to living on the
essential fringes of the banking world. While the volume money that
passes through this class is large, the ability for banks to
utilize such money and for those in the class to actually grow into
"bankable" households with credit and normal bank accounts has
heretofore been a relative impossibility. The numbers of this class
rise, while the solution to blend this group into the traditional
banking scenarios has remained an unresolved problem. It is one of
the objects of this invention to provide solution(s) that fall
within the rubric of legal structure. Lying behind this array of
elements is a fairly well-established, yet unwieldy banking system,
including fractional-reserve banking, which has been established
over a multiplicity of years, but yearns to grow to meet these
newly developing demands. These elements and solutions are
explained and integrated herein.
[0003] For example, the traditional approach of banks courting
savings customers has given way to an estimated 14% of U.S. income
earners, as much as 28 million people, lacking in bank accounts,
with another 22%, or about 45 million people using banks
intermittently. Such people are often called the "unbanked" or
"underbanked" but nonetheless spend an estimated $11 billion in
fees for some 324 million "alternative" financial transactions
annually at check-cashing outlets, money-wire companies or other
operations, all as reported by the Chicago-based Center for
Financial Services Innovation. Many banks are anxious to capture
this customer base, but both customers and banks are concerned with
risks inherent in becoming "banked." Typically, such "unbanked"
customers use a myriad of check-cashing facilities to liquidate
their paychecks and then to use the cash thereby received. Banks
and merchants are increasingly establishing facilities to handle
these types of transactions, as the fees charged through normal
card-based banking systems are unwieldy. It is one of many objects
of this invention to capture the transactions of these so-called
"unbanked" and "underbanked" customers and to provide them with
services that are equivalent to those typically provided to the
banked with reservations as necessary to minimize the risk.
[0004] Indeed, in an almost transparent attempt to utilize the
enormous volume of sales activities and to avoid the costs of
traditional credit card transactions, Wal-Mart sought an
application to itself become a bank--an application withdrawn on or
about Mar. 16, 2007 for reasons that may appear mysterious, yet,
have become clearer. Upon the heals of withdrawal of the
application, Wal-Mart announced an array of services largely
specialized to its customer base, with the utilization of GE Money
Bank, including financial services, services for the unbanked and
underbanked and money centers. It is unclear the extent of the
tie-in to GE Money Bank, although the advantages are many.
[0005] The Office of Regional and Community Affairs of the Federal
Reserve Bank of New York released a white paper in August of 2005
("Stored Value Cards as a Method of Electronic Payment for Unbanked
Customers") which generally indicates the issues confronting the
merchant, open and closed loop cards, and Regulation E which
governs electronic fund transactions. The deepest concern expressed
therein is that the nature of stored value cards ("SVC's) does not
permit the consumer to create credit portfolio's, basically as a
result of the inability to render account statement information.
Indeed, one can well recognize that a simple SVC is but a magnetic
sweep means and a code identifier--there is no specific means for a
consumer who uses such an SVC to be capable of even knowing the
card balance, let alone checking on account activity other than a
manual process. It is thus an object of the instant invention to
satisfy the long felt need in the industry to provide a stored
value-styled environment wherein a device provides the very
equivalents of statements, transactions, histories and balances on
demand to the consumer and downloaded at merchant sites.
[0006] It should be further appreciated that whether open or closed
loop, the merchant who endeavors to provide a system that enables
statement equivalents, transactions, histories and balances to the
consumer, maintains the same in-house, and generally supervises the
transactions. To be gained by an interface with a financial
institution are many advantages, yet they are but optional to the
merchant. Indeed, in "one stop shops" like Wal-Mart, it is easy to
recognize that a modality that permits the full gamut of customer
services equivalent to that of a bank through a device that is
SVC-type but provides the necessary predicates to satisfy
traditional Regulation E requirements, permits the merchant to act
as if it were a bank, and even to provide credit services as if it
were a virtual bank, where the security for the transactions is not
the FDIC (which guarantees up to $100 k per account), but is,
instead the merchant which can also securitize a much greater
amount. Furthermore, it is not clear that where the merchant acts
in the capacity of a virtual bank it is subject to regulatory
authority, while providing perhaps greater services and security
than an actual regulated bank. That having been stated, however, it
is also observable that in such environments, the merchant may very
well wish to be tied in with a bank (as Wal-Mart has done with GE
Capital) in order to increase fractional-reserve banking
opportunities, as explained in greater detail hereinbelow.
[0007] It is thus an object of the present invention to provide a
virtual banking environment in a merchant location and the option
to the merchant of "banking" one or more of its transactions with a
regulated banking institution to enable fractional-reserve banking,
via a method, system and series of devices that provide a plurality
of SVC-type services to the consumer while simultaneously giving
statement equivalents, transactional information, histories and
balances on demand. Indeed, one could well recognize that the
instant invention renders the merchant a virtual bank--perhaps
without regulation--permitting a potential intrusion into the world
of the banked in a significant way, in that the merchant can offer
protection in excess of the $100 k FDIC limit per account, backed
not by the full faith and credit of the United States Government
(with the debt load and fees involved), but instead backed by the
actual security of the merchant. If the merchant is robust, with
positive earnings and significant inventory, these assets can
permit the merchant to potentially offer a degree of per account
protection of, e.g., $250 k, thereby attracting the attention of
the banked investor who may well wish the greater protection that
the robust merchant can offer. Inasmuch as the method, system and
devices of the instant invention provide "on demand" account
information (as shown hereinbelow), it is thus an object of the
instant invention to enable merchant(s) with the ability to act as
virtual banks primarily targeting the unbanked and underbanked, but
likewise viable for the banked.
[0008] By way of further background, customers who are banked,
unbanked and underbanked are sought after by the banking community.
In the course of any given day, such customers utilize a composite
of mechanisms to perform financial transactions. In particular,
credit cards, debit cards, checks and cash are employed. As a
subclass, "gift cards" are used: an industry that has arisen with
some reported 54,100,000 Internet sites offering gift cards for
purchase. Often, as well, merchants create cash checking and ATM
scenarios just to have the marginal float associated therewith.
[0009] "Gift cards" are generally themselves a class of
"stored-value cards" which represent money that has been given to
the card issuer for the acquisition of the card which often include
not just a pre-determined amount of money to be used on the card,
but a cost for the acquisition itself. Typical applications include
items like transit system cards, prepaid telephone cards, and
merchant-specific cards. For example, transit system cards are
acquired by passengers to eliminate the handling of money in
connection with a transit ride (buses, subways, trains and the
like). Of important among transit system cards--like card usage in
general--is the ability to accurately track usage, not just of the
transit system, but individual profiles of the user. It is
recognized that users are pattern-oriented: taking the same means
of transportation at predetermined times daily and purchasing
habits are predicable, making the data acquired in connection with
card usage itself a valuable commodity. Predictability of the
profiled customer usage also plays a key role herein in the
advantages that can be obtained in a virtual merchant environment
as well as fractional-reserve banking, as discussed in greater
detail below.
[0010] Fundamentally the only difference between a gift card and a
stored-value card is that the former is a closed loop system.
Additionally, the stored-value card is reloadable in the sense that
additional money can be added thereto at any given time for an
additional fee. Gift cards are usually of a predetermined amount
provided by a specific merchant. In this sense, in the gift card
process all activity remains captive within the specific merchant's
environment in which the acquisition of the card has occurred. The
broader category of stored value cards still has a predetermined
amount--that amount having been provided in order to place the
substantial equivalent value on the card--but the system is open in
that the card is typically a card that can be used in any location
that utilizes the specific card service. In the instant invention,
it is the intent to provide the full gamut of services, not just
those limited to stored value cards but a full, virtual banking
environment.
[0011] It is important to understand the background of the card
industry and its history to recognize the costs associated with the
transactions and the driving need by merchants to avoid paying
those costs and instead "capture" the entire transaction without
having to pay to the card systems employed a percentage-based
expense associated with the transaction.
[0012] Since the 1980s, Visa U.S.A. (Visa) and MasterCard
International (MasterCard), remained the bank-controlled credit
card associations that together have accounted for approximately 70
percent of today's credit card market. Financial institutions, have
been able to control the use of and access to their fee-based
networks to the disadvantage to their merchant members. Recently,
however, the credit card industry has been changing in that some
merchants are now large enough to exert their own leverage (like
Wal-Mart), legal defeats have impeded the ability of credit card
associations to control the market, and some participants have
developed new arrangements and alliances that may be a prelude to
further changes in the industry.
[0013] By way of background, merchant credit has been available
since virtually the birth of civilization. Yet, the present-day
credit card industry in the United States originated in the
nineteenth century. In the early 1800s, merchants and financial
intermediaries provided credit for agricultural and durable goods,
and by the early 1900s, major U.S. hotels and department stores
issued paper identification cards to their most valued customers.
When a customer presented such a card to a clerk at the issuing
establishment, the customer's creditworthiness and status were
instantly established. The cards enabled merchants to cement the
loyalty of their top customers, and the cardholders benefited by
being able to obtain goods and services using preestablished lines
of credit. Generally these cards were useful only at one location
or within a limited geographic area--an area where local merchants
accepted competitors' cards as proof of a customer's
creditworthiness.
[0014] In 1949, Diners Club established the first general-purpose
charge card, enabling its cardholders to purchase goods and
services from many different merchants in what soon became a
nationwide network. The Diners Club card was meant for high-end
customers and was designed to be used for entertainment and travel
expenses. Diners Club charged merchants who accepted the card a 7%
charge for each transaction. Merchants found that accepting Diners
Club cards brought more customers who spent more freely. The Diners
Club program proved successful, and in the following decade it
spawned many imitators. Certainly, Diners Club created the
fundamental notion of a closed loop card that could be used for
purchase with merchants who had an established relationship with
Diners Club--the issuer--and who paid the fee of 7% of all
transactions for the right to accept the card. Each transaction was
processed through Diners Club--with no intervening banks or other
institutions--hence acting as a closed loop system.
[0015] Whether closed or open looped systems, as explained
hereinbelow, it is well understood that the expansion upon this
basic principle has resulted in a huge volume of merchant sales and
payments of billions of dollars to the card providers for the
"privilege" to accept the cards. Interestingly, the charge per
purchase absorbed by the merchant is largely transparent to the
customer, who pays the ticket price and tax, but has little to no
idea that a significant percentage is paid by the merchant in
connection with the transaction. Merchants are thus interested in
minimizing the costs associated with accepting credit card
transactions, thereby maximizing profits by minimizing the fees
associated with such cards--another object of the instant
invention.
[0016] The industry of charge cards grew from its birth with Diners
Club in 1949. In the late 1950's, Bank of America, located on the
West Coast, began the first general purpose credit card (as opposed
to charge card) program. At that time, banking laws placed severe
geographic restrictions on individual banks. Virtually no banks
were able to operate across state lines, and additional
restrictions existed within many states. Yet for a credit card
program to be able to compete with Diners Club, a national presence
was important. To increase the number of consumers carrying the
card and to reach retailers outside of Bank of America's area of
operation, therefore, other banks were given the opportunity to
"license" Bank of America's credit card. At first Bank of America
operated this network internally. As the network grew, the
complexity of interchange--the movement of paper sales slips and
settlement payments between member banks--became hard to manage.
Furthermore, the more active bank licensees sought greater control
over the network's policy making and operational implementation. To
accommodate these needs, Bank of America syndicated its credit card
operations into a separate entity that evolved into the Visa
network of today.
[0017] In 1966, in the wake of Bank of America's success, a
competing network of banks issuing a rival card was established
which thereupon evolved over time into what is now the MasterCard
network. In these scenarios, an "open" model is used, in that a
bank that issues a card is not necessarily the bank that acquires
the transaction. In particular, when a consumer purchases at a
merchant, that merchant's banking relationship is considered the
acquiring bank, which passes back through the Visa/MasterCard
networks, back to the issuing bank--the bank that originally issued
the card to the cardholder. Again, from the customer's vantage
point, that the issuing bank is different from the acquiring bank
(in that the merchant has a banking relationship with a bank other
than the issuing bank) is transparent, yet the fees paid not just
by the merchants but by the inter-banking systems become sizeable
as the volume has increased enormously.
[0018] In addition, firms that were not constrained by interstate
banking restrictions formed card networks on the single-issuer
model (the model established by Diners Club, in which many
merchants accept payments on a card with a single issuer and hence
had a single relationship with the card provider and/or issuing
bank.) For instance, the American Express Company introduced its
charge card system in 1958, and Sears, Roebuck and Co. established
the Discover Card credit card in 1986. Among the challenges each of
these networks faced was bringing together large numbers of
cardholders with large numbers of merchants who accepted the cards
as payment. Achieving a sufficiently large network was hard, partly
because merchants, especially larger retailers, were reluctant to
honor credit cards that would compete with their own store-branded
credit cards. Some smaller merchants, however, viewed
general-purpose credit cards as a way to compete with larger
merchants for customers. Merchants of all sizes have traditionally
remained averse to having fees imposed on them by the credit card
network.
[0019] Currently the U.S. credit card industry is a mature market.
Today credit cards are widely held by consumers: in 2001 an
estimated 76 percent of families had some type of credit card.
Recent estimates suggest that among all households with incomes
over $30,000, 92 percent hold at least one card, and the average
for all households is 6.3 credit cards. Credit cards are also
widely accepted by merchants, and with the recent addition of
fast-food and convenience stores to the credit card networks,
credit card payments are now processed at nearly all retail
establishments.
[0020] The structure of the credit card industry is also
noteworthy. As noted above, the general-purpose card market is
dominated by Visa and MasterCard, two bank-controlled card
associations. The four major card networks have a variety of
corporate structures. Visa is a nonstock for-profit membership
corporation that as of 2004 was owned by approximately 14,000
financial-institution members from around the world. Until 2003
MasterCard was a nonstock not-for-profit membership association,
but then it converted to a private-share corporation known as
MasterCard Inc., with the association's principal members becoming
its shareholders. MasterCard has more than 23,000 members
(including the members of MasterCard's debit network). The Board of
Directors of Visa is elected by the member banks with voting rights
based primarily on transaction volume. Control of the Visa and
MasterCard card associations is roughly proportional to the
transaction volume of member issuing banks. American Express is an
independent financial services corporation, and Discover Financial
Services is now a subsidiary of investment bank Morgan Stanley Dean
Witter & Co. The issuance of credit cards is concentrated among
the five banks, now narrowing with the acquisition of MBNA by Bank
of America including its subsidiary MBNA America Bank, NA (MBNA), a
monoline credit card bank, and Washington Mutual, Inc.'s
acquisition of Providian Financial Corporation, including its
Providian National Bank, another monoline credit card bank. As the
conglomeration has occurred, so too has the consternation of the
merchant population discussed further hereinbelow
[0021] In the industry today, debit cards are also quickly
expanding as a product line. Debit transactions reached a record
$15.6 billion in 2003. Debit cards are essentially cards that can
be used either to directly withdraw cash from cash-dispensing
equipment at banks (like ATM's), or can be used as ATM withdrawals
at merchant locations, or as credit cards via Visa, MasterCard, or
other networks. In the ATM scenario, the amount of a payment made
using a debit card is immediately withdrawn from the cardholder's
checking account, with the result that, for the card issuer, both
the opportunity to earn interest on revolving balances and any
inherent credit risk are eliminated. Likewise, when used as a
credit card, despite the availability to have the money immediately
withdrawn as an ATM-styled transaction, the credit card fee charged
by the networks is immediately invoked. (Reasons behind the choice
by the consumer are also explained hereinbelow, although the
consequential costs are again born by the merchant and largely
transparent to the customer.)
[0022] The ability to use the Visa and MasterCard networks to post
debit transactions was developed in the 1970's, but not until the
1990's was there a significant volume of transactions in these
systems. If a merchant has a personal identification number (PIN)
entry keypad at its sales location, the transaction is routed like
an ATM transaction. In the absence of a keypad, the merchant
compels the customer to execute a credit-styled transaction
authorization. These transactions then travel through the payment
systems like a credit card transaction (except that the
cardholder's bank will be informed of the transaction immediately
and will be able to hold the customer's funds until settlement is
completed).
[0023] It should be appreciated that many consumers opt out of the
ATM-styled transaction to avoid having to enter their secret PIN
number, despite the availability of the entry key pad. Inasmuch as
the customer is left to pick without regard to the costs to the
merchant, the differing fees charged to merchants for transacting
PIN debits and signature debits has became the basis for conflict
and resultant litigation.
[0024] Interchange fees are set by the card associations and in
2004 were a source of some $25 billion in revenue to card issuers.
At the same time, interchange fees are a source of irritation to
merchants and can be among the largest and largest-growing costs of
doing business for many retailers. A standard interchange fee is
around 200 basis points, plus $0.10 per transaction, but many
transactions have lower fees and some have higher fees. Large
merchants can negotiate directly with the card association for very
low interchange fees, but these fees are not publicly
circulated.
[0025] The pricing structure of interchange fees is complex. The
specific interchange fee depends on the card association, the type
and size of merchant, the type of card, and the type of
transaction. Merchants that sell low-margin items--for example,
convenience stores, supermarkets, and warehouse clubs--have lower
rates. Hotels and car rental establishments have higher rates.
Newer premium credit cards that offer more rewards have high rates.
Credit card transactions have higher rates than signature debit
card transactions, whose rates are higher than PIN debit card
transactions. Sales transacted over the telephone or Internet have
higher interchange rates, ostensibly to compensate for the greater
risk of fraud associated with transactions that are not conducted
in person. There is considerable friction among network
participants over the issue of interchange fees, and card
associations are being challenged on the structure and application
of those fees. Merchants increasingly view interchange fees as an
unnecessary and growing cost over which they have no control.
Furthermore, banks are now issuing credit cards with even higher
interchange fees. Merchants are unable to refuse transactions made
with these cards. Therefore, merchants perceive issuing banks as
earning revenue at their expense, with no added value to merchants.
Merchants pass on the costs of interchange fees to their customers,
who are largely unaware of this cost. Thus, it remains an object of
the invention to permit merchants the opportunity to become virtual
banking environments--generally free from regulation--by the
provision of the method, system and devices set forth herein which
provide to the merchant and the consumer transactional information
on demand.
[0026] Among other factors, the interchange fee structure that
favors large merchants over smaller ones is inspiring merchants to
challenge the interchange system more actively. Early in 2005,
merchants formed a trade association for the purpose of changing
interchange fees. In addition, Visa and MasterCard have been forced
to defend the interchange arrangement from litigation filed in June
2005 by a group of smaller merchants.
[0027] Despite merchant discontent, card issuers have incentives to
maintain or increase interchange fees. Issuers are marketing credit
cards with reward or loyalty programs that encourage greater card
use and reinforce customer loyalty to the brand. An estimated 12 to
24 percent of cards held by consumers have rewards associated with
them, and in 2003 an estimated 60 percent of credit card spending
was attributed to cards with rewards. Card issuers are funding
these increasingly popular reward programs through interchange
fees--another loop effectively financed by the merchants.
[0028] Thus, it is of no great surprise that merchants seek an
alternative mechanism, whereby transactions can occur without the
significant fees associated with the networks. To keep the
transactions in a closed or even open loop environment, as
described further herein, also creates a vast, untapped opportunity
for fractional-reserve banking, also discussed hereinbelow. It is
thus an additional object of the instant invention to provide such
solutions.
[0029] It is important to understand the role of cash in all
transactions as well. It is habitual to consumers that despite the
availability of card-based options, cash (i.e., paper and coinage)
remains a primary vehicle for financial transactions. Daily,
consumers withdraw cash or receive cash for purchases, whether the
purchase is major or incidental.
[0030] Yet, as a result of historical underpinnings to such
transactions (tax predominantly), the amounts of money involved in
such commercial transactions rarely result in whole numbers, but
rather include fractions of a dollar. Nor are such transactions
rounded to the nearest paper value (like a dollar, for instance)
but rather to the penney (one hundredth of a dollar), as the
perception of the consumer defies any alternative. With pricing and
taxing, the net sum for transactions is therefore rendered in
fractions of a dollar.
[0031] Indeed, even in the retail world of check cashing, rarely
does the number reach a whole one, but invariably includes
fractions of a dollar.
[0032] Thus, in virtually every commercial scenario, there is a
residual, fractional portion of at least a dollar remaining from
such transactions. In transactions where cash is a result for
change, or where cash is tendered to initiate the transaction,
fractional metallic currency is inevitably received as coinage.
Thereupon, the consumer must face the requirement of handling
coinage and determining the best mechanism to utilize the same.
Perhaps as a result of the bulk in carrying coinage about, or its
perceived limited value (in comparison to paper money), or some
other factor that renders the same a nuisance, carrying coinage is
short term. The consumer generally seeks to disband the same.
[0033] One mechanism of disbanding of coinage is, e.g., a
compulsory tip. In this manner, at the point of sale ("POS"), a
consumer may simply say "keep the change" or present the change.
While styled as a gracious gesture, the harsh reality is that the
consumer would rather give away what appears to be trivial than
face the nuisance associated with carrying the same. Of course,
mathematically, calculating for that consumer the amount of money
lost by avoiding the nuisance of change amounts to non-trivial
amounts over time. Yet, this is but one option to avoid the
necessity to handle metallic currency and determine where to place
the same, or to carry the same.
[0034] Historically, the use of a "piggy bank" was predominately
invoked as a curious form of non-institutional savings account (for
which no interest is received). As the name connotes, the "piggy
bank" was principally used by children as a means to teach
conceptual savings and the individual valuations of the
denominations of fractional metallic currency. Of course, such use
for teaching is no longer necessary, as imitation "play" money is
available, and children are trained to understand the fractional
differences in currency quite rapidly. Thus, the juvenile teaching
aspect of fractional metallic currency has truly become a relic of
past memory, and not of present interest.
[0035] Moreover, as a result of the perceived substantial
dissimilarity in value of individual coins (in comparison to large
tranches of higher valued paper dollars), the perceived
inconvenience of bulky currency has resulted in adults--not
children--literally dumping their pockets at days end into
containers (baskets, buckets, jars and the like), rarely to be seen
or used by anyone again. All too often, jars are filled with
coinage not because the consumer wishes a non-interest bearing
savings account, but rather because the consumer wishes not to have
the need to carry the bulk of coinage about. Industries have arisen
that provide, for example, the ability--for a fee--to take such
heavy and bulky containers filled with coinage to a location where
the coinage is automatically sorted and paper currency (or chits)
provided for conversion. Banks will accept coinage, but except for
a rare few charge the customer for presenting the same. Even banks,
as discussed in greater detail below, view coinage as a nuisance
(while missing the point, pivotal to the subject invention, of the
actual quantity of fractional metallic currency in circulation).
Considering the heft of the containers and a cost for the
transaction, one might determine that all those storage containers
are not really worth the effort. Nonetheless, other than simply
overtipping by the consumer in a transaction to avoid the receipt
of fractional metallic currency (coinage) or simply giving the same
away, of necessity the consumer will receive such heft, and
routinely store it in some portion of the consumer's living space
generally to be ignored for the future.
[0036] Antithetically, a number of devices still require the use of
coinage for operation. For example, while "dropping a dime" in a
telephone for a call has since changed in price, the concept of
using coinage remains the same. Vending machines for the purchase
of consumables or other items still require the use of coinage.
Passive vending machines, like parking meters, tolls, admissions
rights, municipal and private transit (trains, subways, buses,
taxis and the like) all require some fraction of a dollar
("fractional currency") which generally amounts to coinage. (Some
"smart" vending machines permit the use of debit or credit cards,
but the technical interface is difficult to humanize, and market
entry has been limited. Hard currency still remains the predominant
form for the same.)
[0037] Despite the fact that consumers routinely engage such
vending devices during the course of any given day, based upon the
habitual desire to avoid the perceived nuisance of change
(generally heft, ringing in the pockets, and other forms of
consumer concern), rather than having change handy, the consumer
who faces such devices must now scurry to a vendor not for a
purchase, but to provide coinage--change on the dollar. This, of
course, creates a never-ending burden on, for example, a street
vendor proximate to an array of parking meters, to keep a stock
pile of coins for swapping for dollars--of zero net sum gain--or,
in the alternative, to almost rudely deny the desperate requestor
who has parked and is racing to avoid the ticket.
[0038] No matter the scenario, rarely does a day end with cash
transactions "zeroing" out. Rather, the end result is that the
consumer who initiates the day with no coinage (having dumped the
change from the prior day in the family bin to avoid inconvenience)
now completes the day with more coinage, which, in turn hits the
same family bin. The situation escalates, in typical fashion.
Rarely does the consumer actually prepare for the event, but
rather, disturbingly, must face coinage at the time of the
occurrence. Interestingly, despite the fact that the result of a
failure to pay for, by way of example, a parking meter, results in
a multiple dollar fine--which is in whole dollars and is typically
paid by a mailed in check--such sanction is avoided only upon the
necessity of the moment. As a result of the inherent nuisance of
change, many a consumer will avoid the necessity for change-related
behavior, or face the urgency of the moment if it occurs.
[0039] As shown by the foregoing, it has become known that
consumers receive more coinage then they actually place back into
commerce. For a further example, at the "register" in stores for
typical commercial transactions, it should be noted that generally
coinage is given away. Reportedly, many retail stores
(supermarkets, for example) have daily (and at times more
frequently) delivery of coinage in all denominations. Such stores
must track the rate of depletion of the plurality of forms of
fractional metallic currency in order to predict the needs and
avoid the confusion of having too much of one form of coinage and
not enough of another. While paper currency leaves such stores in
armored trucks to be transferred to a banking institution, coinage
is actually routinely delivered to such retail stores as the paper
is extracted. The need to provide fractional currency in commercial
transactions--which is heretofore solely in the form of coinage--is
a constant, nagging occurrence to many retail establishments.
[0040] Likewise, at the merchant end, a plethora of other problems
arise in connection with transactions. For example, at many
registers today, as described above, the consumer has the option of
using a debit card or using the same card as a credit card.
Interestingly, the debit card does not involve a fee to the
merchant, whereas the credit card transaction involves a
complicated scheme in which a percentage (say 1-10% depending on
the credit card and the rating of the merchant) is lost as a
transaction cost. (Patrons avoid the "debit card" feature over fear
that someone may see entry of their personal number--the same used
at a bank to withdraw cash.) To say that this amounts to billions
of dollars for carrying forward the mere transaction alone is an
understatement. The merchant loses money based upon a credit
transaction fee, while the card companies and underlying banks
enjoy the percentage of the sale as the transaction fee itself.
Indeed, this scenario has resulted in the National Retail
Foundation reporting a total membership sales volume of $4.7
trillion upon a membership of 1.4 million. Retailers who are
members employ 23 million employees. Indeed, there is a reported
lawsuit concerning unfair credit card usage charges to such
merchant/retailers in a drive to reduce this mechanized
approach--with limited value added--because of the huge loss in
revenue to the merchant as a result thereof.
[0041] In this vein, as discussed, prepaid gift cards have become a
predominant tool. Not only does the consumer have the ability to
gift a finite amount to another, but the merchant has received the
money for the card and the card is viable predominantly at the
merchant's location (but occasionally elsewhere as well).
Currently, gift cards predominate as a means to capture the sale
both ways--acquisition of the card by paying therefor, and use
thereafter. Even here, however, gift cards have a remaining balance
(small as it may be) not easily recoverable to the consumer.
[0042] Returning to coinage, which still remains a predominant
issue, while governments can (and do) repatriate paper currency in
large and successful manners for a host of necessary reasons, the
same cannot be said of fractional metallic currency. Observably,
consumers "hoard" coinage not because they are numismatists (coin
collectors, of which there are many but the total amount of money
involved is small) but because they simply wish to avoid the
nuisance associated therewith. Simply put, paper is lighter and
worth more. Yet, the Department of the Treasury reported that the
total value of all fractional metallic currency in circulation is
approximately a staggering $33.3 billion dollars, growing at a rate
of about $900 million annually. Thus, the accumulation of coinage
in total numbers is remarkable. Indeed, the sum total value of all
paper currency in the form of $1, $5, and $10 bills in circulation
is less than the value of metallic currency. Considering the
disparate value between paper and coinage, the sheer bulk of such
coinage is overwhelming, and the value staggering, heretofore
beyond the control of the banking institutions.
[0043] It is thus an object of the instant invention to provide a
system, method and devices that enable the minimization to
elimination of fractional metallic currency from transactions
without forfeiture of the underlying value. Likewise, it is a
further object of the instant invention to provide a platform for
which not just metallic currency is eliminated, although that is
presently preferred, but likewise all currency, gift cards, SVC's,
and cash received for check cashing can be eliminated in the
future.
[0044] In order to understand the subtlety of the instant
invention, it is necessary to understand money, banking, and the
concept of "fractional-reserve banking."
[0045] Arguably, money was perhaps the most important advancement
as a platform for human development and exchange of products and
services. Money has been independently utilized at one time or
another in each important civilization in the history of the world.
There is also a remarkable similarity in the process by which money
has evolved in different times in history and in different parts of
the world.
[0046] Historically, money has typically evolved through three
stages. In the first stage, money is comprised of a rare and
inherently valuable material. The value of each denomination is
related to the quantity of rare material contained therein. In the
second stage, money is made of another material, such as paper,
with no inherent value. In this stage, however, such other material
can be exchanged into the rare material upon demand. In the third
and final stage, money cannot be exchanged into anything physical,
but its value is determined by law and custom.
[0047] Physical money has historically arisen as a means to
facilitate trade. In most cases some form of metallic money has
been used, but there are also other examples, where shells, or even
large stones (on an isolated island) have been used as money. Oil
was proposed as form of currency by the great Soros (and indeed is,
at some level, used as a currency in and of itself). Gold and
silver have predominated in the world as intrinsically valuable
rare materials that can be easily rendered into denominations
(contained pictures or other images of origin or pictorial images),
but other metals have occasionally also been used. Bronze was the
basis of the monetary system in early Roman times. Copper has also
been used at times, for example in Spain and Sweden. In many cases,
combinations have been used, with fixed exchange rates between
different metals. Those fixed exchange rates have usually broken
down as the relative value of the metals has moved due to changes
in supply or demand.
[0048] Coins are the basis of almost every metallic monetary
system. A coin in a physical money system is a piece of metal with
a stamp. The stamp is a guarantee that the metallic weight and
content is correct. Likewise, it is a mechanism to standardize
coins of the same denomination as actually being of the same
weight, caliber and value. While metallic coinage may appear
trivial in the current climate, quality was historically important.
Previously, metals had to be weighed in order to determine value,
and that made trade more difficult.
[0049] In the United States, the third stage indicated above--where
paper currency is no longer backed by the value of the underlying
rare material--occurred as a result of the abolition of the gold
standard by President Franklin Roosevelt in 1933. At this point was
born the substitution of fiat paper tickets by the Federal Reserve
as the United States' "monetary standard." Some thirty years later,
the fractional metallic currency (coinage) followed suit, with the
substitution of alloys for the traditional intrinsically valuable
copper, silver and nickel originally used as the coinage material.
Another crucial part of this process was the federal cartelization
of the nation's banks through the creation of the Federal Reserve
System in 1913.
[0050] Banking is a particularly arcane part of the economic
system; one of the problems is that the word "bank" covers many
different activities, with very different implications. During the
Renaissance era, the Medicis in Italy and the Fuggers in Germany,
were "bankers;" their banking, however, was not only private but
also began at least as a legitimate, non-inflationary, and highly
productive activity. Essentially, these were "merchant-bankers,"
who started as prominent merchants. In the course of their trade,
the merchants began to extend credit to their customers, and in the
case of these great banking families, the credit or "banking" part
of their operations eventually overshadowed their mercantile
activities. These firms lent money out of their own profits and
savings, and earned interest from the loans. Hence, they were
channels for the productive investment of their own savings.
[0051] To the extent that banks lend their own savings, or mobilize
the savings of others, their activities are productive and
unexceptionable. Even in our current commercial banking system, if
a customer purchases a $10,000 CD ("certificate of deposit")
redeemable in six months, earning a certain fixed interest return,
that customer is actually taking savings and lending it to the bank
(in exchange for the CD which is an "IOU"). The bank, in turn lends
upon the money actually received in exchange for the CD at an
interest rate higher than that being paid to the customer who
purchased the CD. The difference between the higher rate to the
debtor who received the loan, and the lower rate to the CD-holder
who placed the cash, constitutes the bank's earnings. Indeed, in
this manner, the bank has served the function of channeling savings
into the hands of credit-worthy or productive borrowers.
[0052] The same is even true of the great "investment banking"
houses, which developed as industrial capitalism flowered in the
nineteenth century. Investment bankers would take their own
capital, or capital invested or loaned by others, to underwrite
corporations gathering capital by selling securities to
stockholders and creditors. The problem with the investment bankers
is that one of their major fields of investment was the
underwriting of government bonds, which plunged them hip-deep into
politics, giving them a powerful incentive for pressuring and
manipulating governments, so that taxes would be levied to pay off
their and their clients' government bonds. Hence, the powerful and
baleful political influence of investment bankers in the nineteenth
and twentieth centuries: in particular, the Rothschilds in Western
Europe, and Jay Cooke and the House of Morgan in the United
States.
[0053] By the late nineteenth century, the Morgans took the lead in
trying to pressure the U.S. government to cartelize industries they
were interested in--first railroads and then manufacturing: to
protect these industries from the winds of free competition, and to
use the power of government to enable these industries to restrict
production and raise prices.
[0054] In particular, the investment bankers acted as a ginger
group to work for the cartelization of commercial banks. To some
extent, commercial bankers lend out their own capital and money
acquired by CD's. But most commercial banking is "deposit banking"
based upon a perception, which most depositors believe, that their
money is "down at the bank," ready to be redeemed in cash at any
time. For example, if person X has a checking account of $1,000 at
a local bank, X knows that this is a "demand deposit," i.e., that
the bank pledges to pay him $1,000 in cash, on demand, anytime he
wishes to "get his money out." Naturally, the X's are convinced
that their money is safely there, in the bank, for them to take out
at any time. Hence, they think of their checking account as
equivalent to a warehouse receipt. (If one puts a chair in a
warehouse before going on a trip, one expects to get the chair back
whenever one presents the receipt.) Unfortunately, while banks
depend on the warehouse perception, the fact is far more
complicated. Indeed, the money is not actually there at the
warehouse.
[0055] An honest warehouse makes sure that the goods entrusted to
its care are there, in its storeroom or vault. Deposit banks as the
Banks of Amsterdam and Hamburg in the seventeenth century indeed
acted as warehouses and backed all of their receipts fully by the
assets deposited, e.g., gold and silver. This honest deposit or
"giro" banking is called "100 percent reserve" banking. Ever since,
banks have habitually created warehouse receipts (originally bank
notes and now deposits) less than 100 percent, out of a carefully
constructed fractional-reserve banking, meaning that bank deposits
are backed by only a small fraction of the cash they promise to
have at hand and redeem. Currently, in the United States, this
minimum fraction is fixed by the Federal Reserve System annually.
Presently and historically this level has been at 10 percent.
[0056] To understand fractional-reserve banking in the absence of a
central bank, an example can be shown. "Y" invests $1,000 of cash
in a bank 1. This amount is thus captive in the bank 1 subject to
the terms of the investment. It pays out at a rate. This bank 1
then lends $10,000 to "W," either for consumer spending or to
invest in his business. The question arises: how can a bank lend
more than it has received? The answer resides in the "fraction" in
the fractional-reserve system. The bank simply opens a checking
account of $10,000 for W. Why does W borrow from the bank? Well,
for one thing, the bank charges a lower rate of interest than Y
would have. Since demand deposits at the bank function as
equivalent to cash, the nation's money supply has just increased by
$10,000.
[0057] Now, W spends the money he borrowed. Sooner or later, the
money he spends, whether for a vacation, or for expanding his
business, will be spent on the goods or services of clients of
another bank 2. Bank 2 receives a check from bank 1 and applies the
same to demand cash (captive) so that it can utilize the same for
fractional-reserve lending. Yet, if bank 1 defaults, the system
could collapse.
[0058] Hence, under free competition, without government support
and enforcement, there will only be limited scope for
fractional-reserve banking. Banks could form cartels to prop each
other up, but generally cartels on the market fail without
government enforcement, without the government cracking down on
competitors who insist on busting the cartel, in this case, forcing
competing banks to pay up.
[0059] Hence historically there was a drive by bankers to compel
the government to cartelize their industry by means of a Central
Bank. Central Banking began with the Bank of England in the 1690's,
spread to the rest of the Western world in the eighteenth and
nineteenth centuries, and finally was imposed upon the United
States by banking cartelists via the Federal Reserve System of
1913. Particularly enthusiastic about the Central Bank were the
investment bankers, such as the Morgans, who pioneered the cartel
idea, and who by this time had expanded into commercial
banking.
[0060] In modern central banking, the Central Bank is granted the
monopoly of the issue of bank notes (originally written or printed
warehouse receipts as opposed to the intangible receipts of bank
deposits), which are now identical to the government's paper money
and therefore the monetary "standard" in the country. People want
to use physical cash as well as bank deposits. If, therefore, X
seeks to redeem $1,000 in cash from his checking bank, the bank
draws down its own checking account with the Federal Reserve Bank
(the "Fed"), effectively "buying" $1,000 of Federal Reserve Notes
(the cash in the United States today) from the Fed. The Fed, in
other words, acts as a bankers' bank. Banks keep checking deposits
at the Fed and these deposits constitute their reserves, on which
they can and do perform fractional-reserve banking at the average
leverage of 10 to 1.
[0061] For further example, if the Fed determines that it is
advisable to expand (i.e., inflate) the money supply, the Fed goes
into the market (called the "open market") and purchases an asset.
It does not really matter what asset it buys; the important point
is that it writes out a check. The Fed could, if it wanted to, buy
any asset it wished, including corporate stocks, buildings, or
foreign currency. In practice, the Fed routinely acquires U.S.
government securities.
[0062] Let's assume that the Fed buys $10,000,000 of U.S. Treasury
bills from some "approved" government bond dealer (a small group),
say Investment Banker on Wall Street. The Fed writes out a check
for $10,000,000, which it gives to Investment Banker in exchange
for $10,000,000 in U.S. securities. Investment Banker can do only
one thing with the check: deposit it in its checking account at a
commercial bank. The "money supply" of the country has already
increased by $10,000,000; no one else's checking account has
decreased at all. There has been a net increase of $10,000,000.
[0063] The commercial bank is delighted to get a check on the Fed,
and rushes down to deposit it in its own checking account at the
Fed, which now increases by $10,000,000. This means that commercial
banks can create loans and deposits based upon their reserves. But
this checking account constitutes the "reserves" of commercial
banks, which have now increased across the nation by $10,000,000.
This means that commercial banks can create deposits based on these
reserves, and that, as checks and reserves seep out to other banks
each one can add its own fractional-reserve move, until the banking
system as a whole has increased its demand deposits by
$100,000,000: ten times the original purchase of assets by the Fed.
The banking system in most circumstances is required to keep cash
reserves or cash equivalents at the Federal Reserve Bank amounting
to 10 percent of customer deposits. The basis of this 10% reserve
activity is called a "net transaction." There are two other lesser
activities that require no reserve to be provided to the Federal
Reserve Bank: "non-transactions and non-personal saving deposits."
The banking system on a fractional-reserve basis on a net
transactions designation has a "money multiplier"--the amount of
deposits the banks can expand on top of reserves--which is 10. A
purchase of assets of $10 million by the Fed has generated very
quickly a tenfold, $100,000,000 increase in the money supply of the
banking system as a whole.
[0064] It should be observed that banks are regulated (like
Regulations D and E) in the manner in which protections are
provided to prevent this leveraged system from collapsing. Yet,
observably, banks today are highly competitive, seeking to increase
their "captive" reserve in order to increase their
fractional-reserve and ability to expand in the exponential process
indicated above.
[0065] In order to permit expansion of the reserve at banks, banks
are constantly seeking depositors, those who wish to have their
money captive by a bank (as in, e.g., a CD) which permits the
reserve to increase and the leverage (of about 10:1) to be employed
upon this money.
[0066] The meeting between the approximately $33 billion of
fractional metallic currency and the fractional-reserve banking
system lies as part of the heart of the instant invention which
provides a system, method and devices to achieve the goal of
minimizing the use of fractional metallic currency as coinage, but
rather keeping the same and transactions related thereto within the
scope of a banking institution for use by both the depositor and
the bank(s) in accordance with standard fractional-reserve banking,
while permitting the depositor to avoid the inconvenience of the
actual fractional currency without forfeiture of any of its
value.
[0067] Likewise, the stored value card market, while huge in
volume, also leaves fractional currency behind on the card.
Interestingly, while Wal-Mart.RTM., with sales of some $348.50
billion, which employees some 1.9 million people at over 4000 U.S.
locations, Wal-Mart has recently withdrawn its application with
FDIC for a banking license, left, again to stumble around banks,
entertain a multiplicity of credit cards (with billions of dollars
in fees), check cashing facilities (where cash is the final
product, thereby reducing the amount of money Wal-Mart has
available), and an inability to control its own credit card which
is, instead, through G.E. Money Bank, passed through the Discover
wire network, with the concomitant fee. (Wal-Mart is also offering
a vast array of other services to its customers which likely do not
involve G.E. and tend to suggest Wal-Mart's incursion into the
virtual banking environment. Yet, with that having been stated,
even the concept of, let alone the specific formulae for, the
instant invention and its inherent benefit to an entity like
Wal-Mart which has indicated its preference to act as a virtual
bank whenever possible, is an object of the instant invention.)
[0068] It is thus an object of the instant invention to provide a
mechanism whereby money is captive with the merchant, i.e., where
virtually all banking activities occur, from currency, credit
cards, gift cards, SVC's, debit/credit transactions, ATM actions,
and check-cashing are predominantly merchant-specific and results
in a mechanism wherein the "cash" is, in reality, captive in large
part with the merchant. It should be appreciated that the Wal-Mart
theme of a "one stop shop" where everything can be purchased (even
grocery food) is attractive to a consumer in that the consumer need
not shop anywhere else for virtually all goods necessary. Clearly,
it is an object of the invention to provide a system whereby a
method, system and series of devices are given in replacement of
gift cards and cash, used within the merchant's location, with but
a trivial amount actually leaving the captive reserve of the
merchant. In this manner, the merchant can virtually predict the
amount of captive money--an advantage to a banking institution with
whom that merchant can optionally bank, in that that institution
can add virtually billions of dollars to its captive, fractional
reserve for banking purposes.
[0069] Other objects of the instant invention will be shown
hereinbelow.
SUMMARY OF THE INVENTION
[0070] The various features of novelty which characterize the
invention are pointed out with particularity in the claims annexed
to and forming a part of the disclosure. For a better understanding
of the invention, its operating advantages, and specific objects
attained by its use, reference should be had to the drawings and
descriptive matter in which there are illustrated and described
preferred embodiments of the invention.
[0071] The foregoing objects and other objects of the invention are
achieved through system, method and devices that establishes a
virtual banking environment in a merchant venue while optionally
increasing the deposit-based assets of a related traditional
banking institution having a captive account therein for
fractional-reserve banking at the banking institution. In
particular, the invention comprises a virtual banking environment
at the merchant's venue. In particular, the merchant provides a
portable device interfaced to a node, as indicated hereinbelow,
wherein all transactions are stored and rendered available,
including virtually all banking activities.
[0072] For example, where check cashing is provided in a "one stop
shop" environment (typified by, e.g., Wal-Mart), it can be
predicted and/or predetermined the amount of the check that will
remain on the device for expenditures at that merchant. In a "one
stop shop" environment, such a scenario is most advisable, as the
consumer can cash a check and acquire virtually all goods normally
necessary, while retrieving a small portion of cash, if necessary
for other uses. It should be appreciated that while observing the
customer's specific transaction history, it can be predicted the
frequency of such check cashing and the amount that remains captive
with the merchant, as but a predictable fraction remains, if any,
removed as cash. Likewise, a predetermined amount (like a gift
card) placed upon the consumer portable device is completely
captive as its use remains solely within the constrains of the
merchant. Even other features--like credit, payments of bills and
the like--remain predictable such that an actual bank--in
comparison to the merchant operating as a virtual bank--can
determine the amount of money that will be received by the system
and dispensed, wherein the remainder predictably remains
captive.
[0073] It should be appreciated that in all such modalities, the
predictable nature of the captive amount remaining in the system is
directly useable for fractional-reserve banking. Likewise, by
avoiding the entire pre-existing credit card processing systems
explained hereinabove, the extra percentage expense can be avoided.
Yet, the optionally associated banking institution gains greater
advantage. Rather than receiving a percentage of a sale via a
credit card system (which has created such large friction between
merchant and bank), in these instances the optionally associated
bank has a 10:1 leverage of the captive money remaining with the
merchant for direct use in fractional-reserve banking. It can
easily be observed that the key feature of the instant invention
thereby obtained is that the optionally associated bank's revenue,
based upon fractional-reserve banking resulting therefrom, is
greater in utility and actual return than the frictional
credit-card processing systems heretofore employed.
[0074] Likewise, the consumer is benefitted, another feature of the
instant invention, in that the consumer--whether the "banked" or
"unbanked"--has the ability to acquire nearly all necessary food
and household goods from the "one stop shop" on a predicable,
budgetary basis, leaving but a small need, if any, to withdraw
cash. For if the consumer can purchase all necessary goods and
supplies, pay all necessary bills, and accomplish all transactions
typically occurring in a multitude of more complicated manners, the
consumer actually enjoys the "one stop shop" convenience in all
forms and results in having no need for cash. The consumer is also
benefited by the full gamut of services that are provided by the
merchant as if it were a virtual banking environment, with a record
of such activities, in that the consumer device (as well as the
node) are immediately readable in that display means are provided
linked to the account information such that the consumer can know
at any given time the precise amount of money remaining on the
device and the transactional history that caused such a result,
thereby overcoming the heretofore known need in the industry to
provide statements (or their equivalents) to the consumer. It
should be appreciated by one of ordinary skill in the art that by
providing on demand consumer account information to the consumer on
a portable device, the consumer's use of such a device is a
tremendous advantage over the heretofore used card-swipe systems.
In the card system, there is no mechanism for the consumer to view
balance and transactional information as the card is but an account
information provider encrypted in a magnetic swipe portion. Thus
the Federal Reserve's indicated need to provide account information
as a predicate to permitting scoring for creditworthiness for the
so-called "unbanked" or "underbanked" is herein provided to both
the consumer and the merchant, as well as optionally to a banking
institution. In this manner, the merchant and/or banking
institution can now exercise the ability to provide credit to this
consumer class as the historical transactional information is
stored and rendered available to both sides of the transaction.
[0075] Moreover, to the extent cash is still necessary, the
portable device leaves a cash reserve thereupon, for use in the
system of the instant invention.
[0076] In this manner, one of ordinary skill in the art can well
see that virtually inevitably, cash in all of its forms becomes an
item of the past, all are benefited, the costs are lessened, and
while the traditional credit card networks may suffer, the
merchants with, or without the banks, also enjoy the benefits of
fractional-reserve banking: the 10:1 leverage. This is a far
greater reward for all involved.
[0077] Likewise, the system enables the capture of fractional
metallic currency values by a financial institution that can
thereupon utilize the same as part of its fractional-reserve. In
particular, under the preferred embodiment, there are two types of
devices that are employed: a portable device and a node device.
Both are intended, under this embodiment, to be linked to an
account within the same financial institution.
[0078] In particular, a portable device is employed herein. The
portable device has a number of features, including security (like
a biometric reading means or other), a display, a microprocessor,
memory, and the like. In this manner, the portable device is
actually an interface to the account at the merchant, which
optionally ties to a specific banking institution. (It should be
appreciated by one of ordinary skill that the specific phrases
"bank," "institution," "financial institution" and the like are
utilized herein virtually synonymously for all such banking
institutions that provide accounts and can take advantage of
Regulation D and/or fractional-reserve banking.)
[0079] The portable device is also the equivalent of the piggy bank
in the sense that it is a recordation and display device for all
money, including fractional metallic currency, in this embodiment.
The piggy bank, instead of an animate object holding actually
coinage, is an account with a merchant and/or financial
institution, devoted solely and captive therewith, in which the
user has deposited currency for use of the device. In this regard,
overcome is the necessity to have containers for change, as the use
of the portable device is developed, as explained herein, there
will be a steady decline to zero of the need for use of any coinage
(and even paper currency) whatsoever, while the amounts of money
per transaction of under the minimum paper value (a fraction of,
e.g., a dollar) accumulate or decline as transactions occur.
[0080] It should be appreciated that in this embodiment, the
consumer can also receive the equivalent of a stored value card
from the merchant with a predetermined, prepaid amount, which is
utilizable either solely at the merchant's facility such that the
transaction does not result in any reduction in the
fractional-reserve of the banking institution, or in other
facilities. Thus, once the equivalent of a stored value card is
purchased, the money is given to the merchant. Should the
equivalent of a stored value card be utilizable solely at the
merchant's facility, it should be appreciated that the funds never
leave the captive fractional-reserve of the facility. The
traditional stored value card as used herein, can also include
merely adding the amount to a patron's portable device. In this
manner, the fractional-reserve of the bank is optionally
increased--and never decreased. Even though the amount is decreased
from the portable device when the recipient uses the same, the net
to the merchant never changes when the device is utilized solely by
the merchant.
[0081] Likewise, a check from a consumer can be cashed and the
amount kept captive, at least in large part on the portable device.
In this manner, for example, the employee of a large "one stop shop
store" can also receive pay via the portable device, and be capable
of using the same to acquire virtually all needed purchases from
that merchant in the manner explained hereinabove. Thus, the
payroll payment from the employee is forever captive--once the pay
check is "cashed" the money never leaves the bank, as it is passed
to the (also captive) portable device, and used therefrom for
purchases from the merchant. The fractional-reserve amount of the
bank, heretofore reduced by payroll, is now completely captive.
[0082] In certain instances, such employee may cash the check,
place a portion (if not all) on the captive device, and wish to
extract cash. Yet, based upon the purchasing patterns of such
people, it is adduced that but a small fraction will ever leave the
merchant, and hence will forever remain captive to the merchant.
This amount is predicable, based upon the behavior of the
employees, as the use by each is tracked from payroll through the
use of the portable device.
[0083] It should also be appreciated that a non-employee can cash
checks. The check cashing industry is in the billions of dollars.
To give to the recipient a portable device with most, if not all,
of the paycheck thereupon not only induces intra-merchant purchases
(and hence a predicable captive amount) but the ability for the
employee to avoid taking cash and spending on ill-conceived items,
for purchases at the merchant, where it is "one stop shop" are
generally of items of use, rather than items of entertainment or
the like. This, like the piggy bank analogy, assists in increasing
the saving-nature of the check casher who is now more inclined to
avoid impulse cash expenses in favor of actual necessary
purchases.
[0084] It should be further appreciated that the merchant, while
not a banking institution, becomes a virtual one for transactions,
and optionally "buddies" with a specific banking institution to
create a reliable multi-million dollar addition to that
institution's fractional reserve. Not only does the stored value
card equivalent remain captive, but the inducement to check cashing
also increases captivity. Hence the advantage to all concerned is
clearly established as a significant feature of the instant
invention.
[0085] The portable device has an encrypted interface with a node
device. The node device, in distinction from the portable device,
is actually linked to a point of sale device "POS" (whether an
actual POS device or its equivalents, like a passive or active
vending machine). The portable device is independently battery
powered and is with a customer. On the other hand, the node device
is generally considered to be with a vendor. Importantly, both
devices through encryption interfaces connect with the banking
institution. In this manner, it can be observed that the
transaction(s) between the portable device and the node device
remain within the constraints of but one banking institution, in
this preferred embodiment. In this manner, while currency passes
electronically for services or goods between the portable device
and node device (customer and vendor, e.g.), the actual underlying
money never leaves the banking institution.
[0086] Observably, as more transactions occur, the merchant with
(or without) the banking institution maintains, as captive, the
total amount of money exchanged between the parties--it merely
moves from one account to another. In this manner, the reserve for
which fractional leverage can be had by a bank is increased.
Likewise, in light of maintenance of the records of transactions
available to consumer, merchant and bank alike, the
lending/borrowing power is thereby increased as well. Since the
preferred embodiment is intended to also capture the fractional
metallic currency market, conceptually, the bank has now garnering
portions of the aforementioned approximately $33 billion in coinage
in circulation adding the same to its reserve--a situation
heretofore unknown and practically impossible to achieve. Thus,
whereas coinage has been a nuisance and typically invokes a charge
for conversion, in this manner, coinage has now become a captive
asset of the bank, and transactions involving the same are also
beneficially added to the reserve of that bank.
[0087] Likewise, benefits enure to customers as well. Rather than
have the nuisance and inconvenience of cash, checks or metallic
currency, customers can utilize a "fob" styled (a "fob" is a small
device attached to a short strap, ribbon or chain) simple portable
device for all fractional exchanges, from purchases from active
vendors, to passive vendors, POS devices and others. No longer must
the customer keep cash, checks or coinage. Instead, money is
converted, and added (at the bank if no consumer transaction is
invoked) on an as needed basis. As a result of the design, the
customer can view on the portable device the balance and
transactional history, and the merchant with (or without) the bank
has the full record of each transaction as well reported by the
portable device when engaged at the merchant and/or banking
institution and via communications per transaction by the node
device(s).
[0088] Observably, it is within the letter, sprit and intent of
this invention to permit the elimination of all forms of currency
and virtually all forms of consumer banking. Even so, capturing a
heretofore ubiquitous $33 billion coinage that has heretofore been
but a nuisance, and transform the same to an asset captured by the
reserve of a bank is an observably beneficial feature.
[0089] Further, it is a feature of the invention to permit
inter-bank transactions, as may be desired in the future. As this
may be cumbersome, the instant invention demonstrates utility
specific to a single bank (but all of its branches and affiliates)
to increase the reserve of that bank. Clearly, inter-bank exchanges
can be affected as the case my be, without deviating from the
spirit and scope of the claimed invention.
[0090] The portable device is activated by an optional security
interface which may take the form of a number of different
variations. Such security is important to the extent that the
portable device may not be "hacked" or otherwise misappropriated
and the amount of money in the account to which it is linked
stolen. In this respect, it is a goal to employ a biometric
interface (like a thumb scanner) to read the thumb print of the
owner, compare it to that of the owner (pre stored) and thereupon
permit use of the device. Other security features are also
considered. The user can lock down the device by engaging a code
through the interface, and unlock the same by engaging the same
code. Other security interface mechanisms can be employed without
deviating from the letter, scope and claims of the subject
invention. Importantly, the security feature must balance user
compliance issues with power constraints in order to achieve
maximum efficacy.
[0091] The goal of the portable device is to engage a battery
source (that is preferably rechargeable optionally by a solar
panel) for daily operations without a "down" time. Thus, all
hardware components and their relative draw-down on the battery are
considered for optimal performance.
[0092] The portable device also contains an operator interface for
entry of instructions (as in a push button and a wheel, a display
for indicating the progress of security, the transaction, and
balance and transaction reporting, memory for storing instructions
and permitting changes based upon transactions, a processor with
digital input/output ("I/O") support to process the pre-encoded
algorithms and to regulate the operation of the hardware, power
management for controlling the power supply, a wireless
communication interface (which includes a properly determined
antenna) for proximate engagement with the bank and with a
plurality of node devices, and an optional wired communication
interface for a hardwired connection, if so desired.
[0093] In the preferred embodiment, wireless communication utilized
the "Bluetooth.RTM." standard encryption. Observably, any
electromagnetic spectra frequency can be employed, as well as
ultrasonic devices, as well as any standardized encryption
algorithm provided both sides that can "speak" effectively. It
should be appreciated by one of ordinary skill in the art that
while the present, preferred embodiment uses Bluetooth.RTM., any
such communication system that provides substantially the same
results can be employed without deviating from the scope, spirit
and claims of the subject invention.
[0094] BlueTooth.RTM. is a specification for the use of low-power
radio communications to wirelessly link phones, computers and other
network devices over short distances. The name "Bluetooth" is
borrowed from Harald Bluetooth, a king in Denmark more than 1,000
years ago. Bluetooth.RTM. technology was designed primarily to
support simple wireless networking of personal consumer devices and
peripherals, including cell phones, PDAs, and wireless headsets. In
this manner it is currently an ideal communication method herein,
but the invention is not limited thereto. Wireless signals
transmitted with Bluetooth.RTM. cover short distances, typically up
to 30 feet (10 meters). Bluetooth.RTM. devices generally
communicate at less than 1 Mbps.
[0095] Bluetooth.RTM. networks feature a dynamic topology called a
piconet or PAN. Piconets contain a minimum of two and a maximum of
eight Bluetooth.RTM. peer devices. Devices communicate using
protocols that are part of the Bluetooth.RTM. Specification. The
Bluetooth.RTM. standard utilizes the same 2.4 Ghz range as 802.11b
and 802.11g, typically used in WiFi systems.
[0096] The node device has components similar to those of the
portable device, save for one preferred change. Since the node
device is generally not portable, it has sustaining power supply
via wall power, and its communications to the merchant and/or
banking institution can be through normal telephone communications
(whether twisted pair, voice over IP, Internet direct, cable, or
the like).
[0097] In operation of the method and system, agreements are
executed between customers and vendors. Each are given,
respectively, portable and node devices, and the communication
system established. Each portable device is initiated by placing
thereupon currency, preferably (but not for limitation) fractional
metallic currency equivalents. In this respect, a bank can capture
the actual metallic currency and "credit" the portable device
therewith. The portable device, which is both a "credit" and
"debit" device (herein considered a "cre-bit" device) then lists
debits when transactions occur at designated nodes.
[0098] Nodes are widely dispersed, much like their predecessors of
magnetic swiping machines. Thus, it is perceived that nodes will be
in retail establishments, attached to POS devices, in vending
machines both passive and active, and the like.
[0099] In this manner, it is a general feature of the instant
invention to provide a system, method and devices for capturing a
heretofore $33 billion fractional metallic currency market and
adding the same to the fractional-reserve of at least one bank,
while simultaneously eliminating the nuisances associated with
transactions and bulk of fractional metallic currencies.
[0100] A system, method and apparatus for increasing the asset base
of a banking institution having a captive account therein with at
least one merchant for fractional-reserve banking at the banking
institution, having a consumer portable device for encrypted
containment of currency amounts linked to a consumer account and
enabled to perform commercial transactions that affect the balance
of the consumer account; a node device for encrypted containment of
currency amounts linked to the captive account at the banking
institution and enabled to perform commercial transactions that
affect the balance of the captive account; an encrypted interface
between said portable device and said node device for communication
therebetween to accurately affect a commercial transaction between
the two that comprises a credit to one and a debit to the other;
transacting a commercial transaction between the two devices such
that one of the accounts is debited for the transaction a specific
amount and the other account is credited said specific amount
debited commensurate with the commercial transaction; and
communicating the transaction to the banking institution such that
the balances of each respective account are properly credited and
debited in accordance with the commercial transaction. In this
case, a consumer can also receive an electronic equivalent of a
stored value card from the merchant with a predetermined, prepaid
amount, which is utilizable solely at the merchant's facility such
that the transaction does not result in any reduction in the
fractional-reserve of the banking institution. Likewise, a check
from a consumer can be cashed and the amount kept captive on the
portable device.
[0101] Under a preferred embodiment, the accounts and transactions
are based on fractional currency, resembling but replacing cash,
checks and metallic currency (coinage). In this manner, money is
eliminated from the transaction in respect of the operators of the
portable and node devices, and virtually the entire transaction
remains captive to the initiating merchant. Observably, since the
money remains captive, the amount never changes despite the
transactions, and hence the fractional-reserve leverage never
changes. This is of obvious advantage to the initiating merchant
and optionally the related bank, as it can now capture heretofore
non-capturable money and encroach upon, if not entirely subsume the
multi-billion dollar currency market, adding the same to its
reserve for fractional-reserve banking.
[0102] In order to effect the same, the portable device comprises a
microprocessor, display for displaying the balance and
communications with an operator of the device, an operator
interface for entering and receiving transaction related and
balance related data, power, memory, and wireless communications
for communicating with the banking institution and node device.
[0103] The portable device further has a security system for
ensuring the accuracy of the transaction and operators of the
respective portable and node devices.
[0104] Likewise, the node device comprises a microprocessor,
display for displaying the balance and communications with an
operator of the device, operator interface means for entering and
receiving transaction related and balance related data, power,
memory, and communication for communicating with the banking
institution and portable device.
[0105] Preferably, the microprocessor of the portable device is an
ARM Processor, the display means is an LCD display approximately
one inch by one inch, the operator interface comprises a mouse-type
button, LED and wheel, power is provided by a battery, memory
comprises memory selected from the group consisting of SRAM, Flash,
ROM and combinations thereof, and the communication is via a
Bluetooth.RTM. chip.
[0106] It should also be appreciated that biometrics can be
included, as indicated hereinabove for added security upon
determination of the power management issues associated therewith,
without deviating from the spirit and claims of the subject
invention.
[0107] Lastly, it should be appreciated that the present currency
rounds to the nearest hundredth of a dollar. This is a result of
the penney, which represents the smallest amount of U.S. currency.
Yet, mathematically, numbers are rounded. The instant system,
method and apparatus completely overcomes this limitation. Rather
than rounding, there is an electronically inherent opportunity to
capture the >10.sup.-3 quantities of money which themselves can
reface reserves, thus creating a true and honest exchange of goods,
services and currency to the benefit of the National good.
[0108] Other features of the present invention will become apparent
from the following detailed description considered in conjunction
with the accompanying drawings. It is to be understood, however,
that the drawings are designed solely for purposes of illustration
and not as a definition of the limits of the invention, for which
reference should be made to the appended claims.
BRIEF DESCRIPTION OF THE DRAWINGS
[0109] In the drawings, wherein similar reference characters denote
similar elements through the several views:
[0110] FIG. 1 is an overall diagrammatical view of the steps
involved in the method and system of the preferred embodiment of
the instant invention utilizing the proprietary devices further
shown herein;
[0111] FIG. 2 is an overall diagrammatical view of the components
that comprise the system, method and devices of the preferred
embodiment of the instant invention;
[0112] FIG. 3 is a block diagrammatical view of the components of
the portable device in accordance with the preferred embodiment of
the instant invention;
[0113] FIG. 4 is a block diagrammatical view of the node device in
accordance with the preferred embodiment of the instant
invention;
[0114] FIG. 5 is a flow chart schematical representation of the
portable device operation with the node device, in accordance with
a preferred embodiment of the subject invention;
[0115] FIG. 6 is an exploded side view of the portable device
showing specific components and layout in accordance with a
preferred embodiment of the subject invention;
[0116] FIG. 7 is an exploded back view of the portable device
showing specific components and layout in accordance with a
preferred embodiment of the subject invention;
[0117] FIG. 8 is a perspective bottom view of the portable device
in closed manner, in accordance with a preferred embodiment of the
subject invention;
[0118] FIG. 9 is a perspective side view of the portable device
view in closed manner, in accordance with a preferred embodiment of
the subject invention; and
[0119] FIG. 10 is a perspective front view of the portable device
in closed manner, in accordance with a preferred embodiment of the
subject invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0120] In accordance with the subject invention, FIG. 1 shows the
system and components 200, merchant offering an SVC-type portable
device at step 202 to a consumer. The merchant, in this scenario
may then be considered a "sponsoring company" as that term has been
defined by the Federal Reserve as it is operating as a virtual
bank, providing to the consumer the device at step 202 which
operates, within the constraints of the method and system of the
device, to provide the full gamut of services, earmarked in FIG. 1,
as discussed hereinbelow.
[0121] In particular, at step 202 the merchant may choose to
optionally interface with a bank 4. In consideration of the
recognition by the Federal Reserve that merchants may be
"sponsoring companies" it is within the purview of the subject
invention to provide an interface with a bank 4 as an option, and
not a requirement. Should the option be invoked, then the
fractional-reserve banking component of the instant invention is
also enhanced as detailed hereinabove. However, should the merchant
not select the interface, then the merchant remains a sponsoring
company not subject to Regulation D but compliant with Regulation
E's requirement of consumer disclosure, providing to the consumer
the full gamut of services shown in FIG. 1.
[0122] At step 204, a selection is made of closed or open loop
device, as these terms are known in the art and as utilized
hereinabove. Thereafter, at step 206, the customer procures the
mobile device and elects deposit/withdrawal functions and/or credit
function. It should be appreciated that as a result of the fact
that the method, system and devices of the instant invention
provide on-demand account information, as well as the ability to
track usage, there is provided the ability to determine
creditworthiness of the consumer and hence to provide credit either
via the merchant or, should the merchant have so elected, via the
interface with bank 4.
[0123] Observably, at step 208 the device procured by the customer
provides statement equivalents, as shown hereinbelow, with
transactions, histories and balances via a display, also as shown
and described hereinbelow.
[0124] At step 210, the device in either the open or closed loop
mode provides at least the following demonstrable services to the
consumer: general spending and purchases via step 212, government
benefits (like government checks or payments) via step 214, check
cashing and/or writing via step 216, child support payments or
receipts via step 218, credit functions via step 220, savings
abilities via step 222, insurance abilities via step 224, ATM,
money transfers and/or travelers' checks via step 225, employee
related benefits (like payroll and employee payments, loan receipts
and all other "payroll card functions") via step 226, and any other
category of banking-related services via miscellaneous provision at
step 228.
[0125] In accordance with the subject invention, FIG. 2 shows the
system and components 2, wherein banking institution 4, having been
elected in FIG. 1, is seeking to capture some of the fractional
currency in this preferred embodiment and to add the same to its
asset base (reserve) for fractional-reserve banking 6. Portable
device 8 has an account with Merchant 21 which can include any of
the known forms of banking, including an SVC-styled arrangement and
a captive account associated with node device 10 which are resident
in banking institution 4 for the purposes of enabling fractional
currency-based and other transactions. Such accounts are
established in advance of enabling the system and apparatus, and
generally remain in bank 4. Indeed, despite the fact that
transactions occur between two accounts, where the two accounts are
with the same merchant and/or bank, the underlying currency merely
moves from one location to another, but remains intra-bank 4 (or
intra-merchant, as the case may be). In this manner, the actual
asset base of the bank remains unchanged, while the currency moves
between accounts. Thus, the fractional-reserve banking remains
unchanged, despite the differences between account balances, as the
asset base of the bank is not depleted with such transactions,
thereby achieving a hereinbefore indicated objective and feature of
the invention set forth.
[0126] It should be appreciated that portable device 8 also
accommodates SVC-styled transactions in the full gamut shown in
FIG. 1. As to an SVC-styled modality, the traditional card is
itself replaced with a portable device 8, in this preferred
embodiment, which provides the full reporting functionality as
indicated. It has amounts (like a gift card or stored value card,
except it is interactive and not a plastic card with a magnetic
strip). Yet it operates in the same manner, except insofar as the
lack of necessity (albeit availability) to handle more than a
finite transaction as determined by the amount deposited thereupon.
Nonetheless, it can serve the same function as an SVC to provide a
finite amount to the captive, fractional-reserve of a bank or
merchant. Once acquired, it is used with node device 10.
[0127] It should be further appreciated that when a check is cashed
at merchant 21, the amount is, as well placed largely, if not
exclusively, on a portable device 8. In this manner, observably,
the amount has become captive, optionally for fractional-banking at
the associated bank. As aforesaid, while an amount (prelimited or
not) may be removed from portable device 8 for checks cashed and
added thereupon the percentage is relatively predeterminable, based
upon the recorded usage of customers, in order to provide
actuarial-styled analyses to determine the amount of the
fractional-reserve. Alternatively, and preferably, when the check
is cashed, an amount of cash is given, and the remainder placed
upon portable device 8, thereby eliminating any unpredictability
once portable device 8 is engaged with that amount, that there will
be any reduction in the net fractional-reserve of banking
institution 4.
[0128] Communication between node device 10 and banking institution
4 is determined based upon an encrypted interface 1 (item 20), and
can be achieved through the Internet, telephone system, intranet or
any other suitable means known to one of skill in the art. As with
encrypted interface 1 (20), node device 10 communicates with
portable device 8 through encrypted interface 2 (item 22), and
portable device 8 via encrypted interface 3 (item 24) with banking
institution 4. It should be appreciated that portable device 8
communicates in close proximity, utilizing a limited power output,
to node device 10. In banking institution 4 is an additional
receiver for engaging communications with portable device 8. With a
limited dispersive angle transceiver mechanism in portable device 8
and low power output, limited power is used, and the device 8 must
be proximate to the receiver for communications to occur, thereby
enhancing privacy. As indicated, Bluetooth.RTM. is a preferred
encryption and communication modality, although other such
modalities may be used provided the specifications are compatible
with the underlying letter and spirit of the claimed invention.
[0129] Node device 10 takes the form of a multiplicity of
transactional devices, including an active vendor 12, a passive
vendor 14 (like a parking meter, as discussed), a POS device 16, or
other (gift card usage, stored value card usage, check cashing,
etc. as shown in FIG. 1) 18. Each of these devices is enabled to
communicate with the account resident in the same banking
institution 4 as portable device 8. Clearly, each person has a
portable device 8 and an associated account with the merchant and
optionally banking institution 4 to enable a multiplicity of
transactions to occur via node device 10, without depleting the
asset base of banking institution 4 (when optionally secured) while
permitting financial transactions.
[0130] FIG. 3 shows a component design for portable device 8, in
accordance with a preferred embodiment thereof. In particular,
processor 26 is provided with digital input/output ("I/O") support
26 A for interfacing with optional security interface 30 (like a
biometric or other device), wireless communication interface 40
(for Bluetooth.RTM., for example), power management 38 for
controlling power usage and supply, battery 36 and optional wired
communication interface 42 (like an IEEE 1394, USB, or the like).
On the other hand, processor 26 also engages display 28 for
interfacing with the user, operator interface 29 (like a wheel,
pushbuttons, keypad, and the like) and memory 32. In this manner
portable device 8 is rendered fully operational. It should be
appreciated that display 28 is an "on demand" feature of portable
device 8, permitting the customer, through the operator interface
29, to not only immediately know the account balance, but to see
the list of transactions that have occurred. In this manner, the
heretofore long felt need of the Federal Reserve to provide
transactional information to the consumer and merchant (a/k/a
"sponsoring company") with or without the bank, is resolved.
[0131] FIG. 4 shows a component design for node device 10, having
similarly named components to that shown in FIG. 3. It should be
appreciated that while the selection of individual components for
portable device 8 require consideration of power consumption in
order to enable a more efficient use of battery 36, in node device
10, it is assumed that power supply 36A is employed which can be
wired to a 110 v wall current hence rendering power consumption of
less concern. In FIG. 4, there is shown processor 26B, digital I/O
support 26C, power management 38A, wired communication interface
with bank 42A, and portable device interface 44, which, function in
accordance with the indicated naming. Likewise, processor 26B
engages display 28A for interface with the operator via operator
interface 29A which can be a keyboard, and memory 32A. It should be
appreciated that memory in portable device 8 as well as node device
10 renders the account and transactional information concomitant
with that stored in banking institution 4 (FIG. 2).
[0132] FIG. 5 shows a flow chart (schemata) for the protocol of
portable device 8 to node device 10. The flow commences with
power-save mode 46 (and ends at the same point). If radio frequency
activation occurs (as in automatic, close proximity to node device
10, thereby automatically engaging), power on occurs at step 50.
Likewise, if button activation is selected at step 52 for portable
device 8, power on occurs at step 50, and validation of biometric
information occurs at step 52. It should be appreciated that other
forms of validation can be employed, including entry of a code. In
either respect, once power is on, the network is established to
receive discovery packets at step 51. Thereupon packets are sent at
step 54, reply packets are awaited at step 56, received at step 58,
and protocol start messages are sent at step 60. Server information
and public keys are thereupon received at step 62, with a reception
of encryption start packet at step 64, and reception of transaction
information in encrypted form at step 66. Client encryption keys
are engaged at step 68, encryption package sent started at step 72,
and a waiting for button step occurs at step 79. At this point,
validation occurs at step 74 (if not theretofore), account
information, user identification and data, in encrypted form, are
sent at step 76, reply is awaited at step 78, transaction
acknowledgment received at step 80, display is updated with the
transaction results at step 82, and LED is lit at 84 indicating a
completed transaction at step 84, the network is closed at step 86,
and the device return to power-save mode at step 46.
[0133] FIGS. 6, 7, 8, 9 and 10 show exploded perspective views of
portable device 8 with the components laid thereupon, conforming
with the numbers indicated above. In this preferred embodiment, 26
is a processor with memory, 40 a Bluetooth.RTM. chip, 38 a power
management chip, 26A a digital I/O chip, 28 a display (in this
instance LCD), with optional biometric interface to 34A a button
(mouse-type), 34C an LED, 42 a USB interface, 34 B a thumbwheel,
36A power inlet for charging the battery, 36B a battery connector,
and 36 a battery.
[0134] While there have been shown, described and pointed out
fundamental novel features of the invention as applied to preferred
embodiments thereof, it will be understood that various omissions
and substitutions and changes in the form and details of the device
illustrated and in its operation may be made by those skilled in
the art without departing from the spirit of the invention. It is
the intention, therefore, to be limited only as indicated by the
scope of the claims appended hereto.
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