PCT
`
`WORLD INTELLECTUAL PROPERTY ORGANIZATION
`Intemational Bureau
`
`
`
`
`INTERNATIONAL APPLICATION PUBLISHED UNDER THE PATENT COOPERATION TREATY (PCT)
`
`
`(51) International Patent Classification © :
`WO 98/49658
`(11) International Publication Number:
`GO7E 19/00, 7/10
`
`
`
`(43) International Publication Date:
`5 November 1998 (05.11.98)
`
`
`
`
`(21) International Application Number: PCT/US98/08806|(81) Designated States: AL, AM, AT, AU, AZ, BA, BB, BG, BR,
`
`
`
`BY, CA, CH, CN, CU, CZ, DE, DK, EE, ES, FI, GB, GE,
`
`
`GH, GM, GW, HU,ID, IL, IS, JP, KE, KG, KP, KR, KZ,
`30 April 1998 (30.04.98)
`LC, LK, LR, LS, LT, LU, LV, MD, MG, MK, MN, MW,
`MX, NO, NZ, PL, PT, RO, RU, SD, SE, SG, SI, SK, SL,
`TJ, TM, TR, TT, UA, UG, US, UZ, VN, YU, ZW, ARIPO
`patent (GH, GM, KE, LS, MW, SD, SZ, UG, ZW), Eurasian
`
`
`patent (AM, AZ, BY, KG, KZ, MD, RU, TJ, TM), European
`
`
`patent (AT, BE, CH, CY, DE, DK, ES, FI, FR, GB, GR,
`
`
`IE, IT, LU, MC, NL, PT, SE), OAPI patent (BF, BJ, CF,
`CG, CI, CM, GA, GN, ML, MR, NE, SN, TD, TG).
`
`
`Published
`
`
`With international search report.
`
`
`Before the expiration of the time limit for amending the
`
`
`claims and to be republished in the event of the receipt of
`
`
`amendments.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` (72) Inventors; and
`
`(22) International Filing Date:
`
`(30) Priority Data:
`60/045,883
`08/951 ,614
`
`30 April 1997 (30.04.97)
`16 October 1997 (16.10.97)
`
`US
`US
`
`(71) Applicant (for all designated States except US): VISA IN-
`TERNATIONAL SERVICE ASSOCIATION [US/US]; 900
`Metro Center Boulevard, Foster City, CA 94404 (US).
`
`(75) Inventors/Applicants (for US only): DAVIS, Virgil, M.
`[US/US]; 1121 Runnymead Drive, Los Altos, CA 94024
`(US), CUTINO, Suzanne, C.
`[US/US];
`431 Arkansas
`Street, San Francisco, CA 94107 (US). BERG, Michael,
`J. {US/US}; 2644 Belmont Canyon Road, Belmont, CA
`940002 (US). CONKLIN, Fredrick, Sidney [US/US], 26
`Alida Court, Oakland, CA 94602 (US). PRINGLE, Steven,
`John [US/US]; 5174 Miles Avenue, Oakland, CA 94618
`(US).
`
`(74) Agent: SCOTT,Jonathan, O.; Beyer & Weaver, LLP, P.O, Box
`61059, Palo Alto, CA 94306 (US).
`
`
`
`
`(54) Tide:
`INTERNET PAYMENT AND LOADING SYSTEM USING SMART CARD
`(57) Abstract
`204
`
`Client
`
`
`Terminal
`
`
`Client Code
`
`NY
`Module
`Card Reader
`
`Module
`210
`
`200
`
`223
`
`226
`
`An architecture and system
`loads and uses a smart card (5) for
`:
`payment of goods and/or services
`purchased on-line over the Internet
`(202). A client module on a client
`terminal (204) controls the inter-
`action with a consumer and inter-
`faces to a card reader (210) which
`accepts the consumer’s smart card
`(5) and allows loading and debit-
`ing of the card. Debiting works in
`conjunction with a merchant server
`(208) and a payment server (206).
`Loading works in conjunction with
`
` a bank server (860) and a load
`
`
`Merchant
`
`Server
`
`Payment Code
`
`Module
`Merchant
`Moviule
`
`232
`
`208
`
`
`
`-
`Pp
`Terminal N
`220
`Security
`
`Card
`216
`
`Cord
`
`server (862). The Internet provides
`the routing functionality between
`the client terminal and the various
`servers. A payment server (206)
`on the Internet includes a computer
`and a security module (or a secu-
`rity card (218) in a terminal (214))
`to handle the transaction, data store
`and collection. A merchant server (208) advertises the goods and/or services offered by a merchant for sale on a web site. The merchant
`contracts with an acquirer to accept smart card payments for goods and/or services purchased over the Internet. A consumeruses his smart
`card (5) at the client terminal (204) in oder to purchase goods and/or services from the remote merchant server (208). The client terminal
`sends a draw request to the payment server. The paymentserver processes, confirms and replies to the merchant server (optionally by way
`of the client terminal). To load value, the client terminal (204) requests a load from a user accountat the bank server (860). A load request
`is sent from the card (5) to the load server (862) which processes, confirms and replies to the bank server (optionally by way of the client
`terminal). The bank transfers loaded funds to the card issuer (108) for later settlement for a merchant from whom the user purchases goods
`with value on the card.
`
`
`
`
`
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`nt
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`FOR THE PURPOSES OF INFORMATION ONLY
`
`Codes used to identify States party to the PCT on the front pages of pamphlets publishing international applications under the PCT.
`Slovenia
`SI
`Lesotho
`LS
`ES
`Albania
`SK
`Slovakia
`LT
`Lithuania
`FI
`Armenia
`SN
`LU
`FR
`Senegal
`Austria
`Luxembourg
`SZ
`Swaziland
`LY
`Latvia
`GA
`Australia
`TD
`Chad
`Monaco
`MC
`GB
`Azerbaijan
`TG
`MD
`GE
`Togo
`Republic of Moldova
`Bosnia and Herzegovina
`MG
`TJ
`Gil
`Tajikistan
`Barbados
`Madagascar
`TM
`Turkmenistan
`GN
`MK
`The former Yugoslav
`Belgium
`TR
`GR
`Burkina Faso
`Turkey
`Republic of Macedonia
`Mali
`HU
`Trinidad and Tobago
`Bulgaria
`Ukraine
`IE
`Benin
`Mongolia
`Mauritania
`IL
`Uganda
`Brazil
`United States of America
`Malawi
`1s
`Belarus
`Uzbekistan
`Mexico
`iT
`Canada
`Viet Nam
`JP
`Niger
`Central African Republic
`Netherlands
`KE
`Yugoslavia
`Congo
`Zimbabwe
`KG
`Norway
`Switzerland
`New Zealand
`KP
`Céte d'Ivoire
`Poland
`Cameroon
`China
`Portugal
`Romania
`Cuba
`Russian Federation
`Czech Republic
`Sudan
`Germany
`Sweden
`Denmark
`Singapore
`Estonia
`
`UA
`UG
`US
`UZ
`VN
`¥U
`ZW
`
`ML
`MN
`MR
`MW
`MX
`NE
`NL
`NO
`NZ
`PL
`
`RO
`RU
`sp
`SE
`8G
`
`Spain
`Finland
`France
`Gabon
`United Kingdom
`Georgia
`Ghana
`Guinea
`Greece
`Hungary
`Ireland
`Tsrael
`Iceland
`Ttaly
`Japan
`Kenya
`Kyrgyzstan
`Democratic People’s
`Republic of Korea
`Republic of Korea
`Kazakstan
`Saint Lucia
`Liechtenstein
`Sri Lanka
`Liberia
`
`KR
`KZ
`LC
`LI
`LK
`LR
`
`
`
`AL
`AM
`AT
`AU
`AZ
`BA
`BB
`BE
`BF
`BG
`BJ
`BR
`BY
`CA
`CF
`CG
`CH
`cl
`CM
`CN
`cu
`CZ
`DE
`DK
`EE
`
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`INTERNET PAYMENT AND LOADING SYSTEM USING SMART CARD
`
`FIELD OF THE INVENTION
`
`The present invention relates generally to a paymentsystem and avalue loading
`system using a computer network. More specifically, the present inventionrelates to a
`payment system and a value loading system for a smart card using an open network suchas
`the Internet.
`
`BACKGROUND OF THE INVENTION
`
`With the explosive growth in open networks (such as the Internet) over the past
`several years andthe rapid increase in the number of consumers with access to the World
`Wide Web,there has beena great deal ofinterest in the developmentofelectronic
`commerce on the Internet. Traditional financial transactions are being transformed,
`
`A variety of service providers have introduced payment schemesto support the
`purchase of goodsorservices on-line in a virtual merchant environment. These approaches
`have used several models based ontraditional payment methodsexisting in the face-to-face
`retail market, including credit/debit cards, checks and cash. However, for a variety of
`reasons, various of these numerous schemes have particular drawbacks.
`
`Currently, a consumer may use his or her traditional credit or debit card to make a
`purchase over the Internet. A consumersimply supplies his card account number whichis
`then transmitted across the Internet to a merchant and the paymenttransaction is completed
`in the traditional mannerfor a credit card. Often, these account numbersare transmitted
`overthe Internet with extremely limitedor no security. Security can be improved through
`use of the “Secure Electronic Transaction” protocol published by Visa International and
`Mastercard in 1996. These transactionsstill require some form of card validation and
`performanceof a balance check. These checks are performed on-line between the
`merchant, an acquirer and an issuing bank, a process which can becometime consuming
`and inefficient when the value of the transaction is low, or when a numberof small value
`transactions will be taking place in a short time span.
`
`The electronic check is modeled on the paper check, butis initiated electronically
`using digital signature and public cryptography. Deposits are gathered by banksvia
`electronic mail and cleared throughexisting channels such as the Automated Clearing
`House (ACH). However, use of such anelectronic check by a consumer has various
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`drawbacks. For one, digital signatures and public encryption necessitate use of a certifying
`authority adding additional entities and “net”trips to the transaction. Also, cardholder
`registration is needed.
`
`Other Internet payment alternatives are modeled on cash transactions and include a
`variety of schemes. With CyberCash, the consumer appendshis credit card numberto an
`electronic invoice received from the merchant, retums the credit card numberto the
`merchant which is then processed and forwarded on to CyberCash whereit is then treated
`like a normalcredit card transaction. However, this technique suffers from some of the
`disadvantages discussed above with respectto traditional credit card transaction on the
`Internet and requires additional work by the merchantin processing the credit card number.
`Debit transactions may also be completed but require a consumer to open a CyberCash
`
`account in advance.
`
`A digital, token-based system for Internet transactions has been implemented by
`DigiCash. With DigiCash, so-called “digital coins” are purchased from DigiCash from a
`prefunded deposit account and stored on the consumer’s hard drive. These digital coins are
`then used for an Internet transaction with a merchant. This scheme has disadvantages in
`that the consumer mustfirst set up a relationship with DigiCash and use a credit card or
`similar instrument to purchase these digital coins, which then must be downloadedto the
`consumer’s computer. This transaction can be time consuming for the consumerandis
`subject to fraud.
`In addition, a merchant mustbeset up to notonly acceptthese digital
`coins, but also to verify their authenticity, to confirm the transaction, and thenfinally to
`forward these numbers on to his bank in orderto finally get paid. One drawback from the
`merchant’s point of view is that muchof the transaction work must be pertormed by the
`merchant.
`
`Another scheme for completing an Internettransaction is offered by First Virtual
`Holding, Inc. First Virtual offers a software solution based upon a unique identification
`numberand electronic mail confirmation. To use this scheme, a consumer opens a special
`account with First Virtual and then receives a confidential identification number. When the
`consumer wishes to purchase a productor service overthe Internet, he or she sends an
`electronic mail message containing the confidential identification numberto the merchant.
`The merchant then sends the numberto First Virtual by electronic mail for verification and
`identification of the customer. First Virtual then confirms with the consumer by electronic
`mail that the consumerdid indeed initiate the transaction and wishes to make the purchase.
`There are drawbacksto this schemein that the consumer must first open a special account
`with First Virtual. Also, the merchant must communicate with First Virtual to identify the
`customer and to identify the customer's credit card account numberthat is identified by the
`confidential identification number.
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`Aside from payment schemesoverthe Internct, a techniquein use for performing a
`financial transaction at a stand-alone terminal uses a smart card. A smart card is typically a
`credit card-sized plastic card that includes a semiconductor chip for holding the digital
`equivalent of cash directly, instead of pointing to an accountor providing credits. When a
`card of this kind is used to make a purchase, the digital equivalent of cash is transferred to
`
`the merchant’s ‘‘cash register’ and then to a financial institution. Stored-value cards are
`either replenishable (value can be reloaded onto the card using a terminal) or non-
`replenishable (the card is decrementedin value for each transaction and thrown away when
`all its value is gone).
`
`Physically, a smart card often resembles a traditional“credit” card having one or
`more semiconductor devices attached to a module embeddedin the card, providing contacts
`to the outside world. The card can interface with a point-of-sale terminal, an ATM,ora
`card reader integrated into a telephone, a computer, a vending machine, or any other
`appliance. A microcontroller semiconductordevice embeddedin “processor” smart card
`allows the card to undertake a range of computational operations, protected storage,
`encryption and decision making. Such a microcontroller typically includes a
`microprocessor, memory, and other functional hardware elements. Various typesof cards
`are described in “The Advanced Card Report: Smart Card Primer”, Kenneth R. Ayer and
`Joseph F. Schuler, The Schuler Consultancy, 1993, which is hereby incorporated by
`reference.
`
`One example of a smart card implemented as a processor card is illustrated in FIG,
`1. Of course, a smart card may be implemented in many ways, and need not necessarily
`include a microprocessoror other features, The smart card may be programmed with
`various types of functionality, such as a stored-value application; credit/debit; loyalty
`programs, etc. For the purposeof this disclosure, card 5 is programmedatleast with a
`stored-value application, and will be referred to as “‘stored-value”card 5.
`
`Stored-value card 5 has an embedded microcontroller 10 that includes a
`microprocessor 12, random access memory (RAM)14, read-only memory (ROM) 16,
`non-volatile memory 18, an encryption module 22, and a card reader interface 24. Other
`features of the microcontroller may be present but are not shown, such as a clock, a
`random number generator, interrupt control, control logic, a charge pump, power
`connections, and interface contacts that allow the card to communicate with the outside
`world.
`
`Microprocessor [2 is any suitable central processing unit for executing commands
`and controlling the device. RAM 14 serves as storage for calculated results and as stack
`memory. ROM 16 stores the operating system,fixed data, standard routines, and look up
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`tables. Non-volatile memory 18 (such as EPROM or EEPROM)servesto store
`information that must notbe lost when the card is disconnected from a powersource but
`that must also be alterable to accommodate data specific to individual cards or any changes
`possible over the card lifetime. This information might include a card identification
`number, a personal identification number, authorization levels, cash balances, credit limits,
`etc. Encryption module 22 is an optional hardware module used for performing a variety
`of encryption algorithms. Card readerinterface 24 includes the software and hardware
`necessary for communication with the outside world, A wide variety of interfaces arc
`possible. By way of example, interface 24 may provide a contactinterface, a close-coupled
`interface, a remote-coupledinterface, or a variety of other interfaces. With a contact
`interface, signals from the microcontroller are routed to a number ofmetal contacts on the
`outside of the card which come in physical contact with similar contacts of a card reader
`device.
`
`One possible use of a stored-value card by a consumeris illustrated in FIG. 2. FIG.
`2 illustrates a block diagram of a customer operated service payment terminal 50, A
`customertypically uses such a service payment terminal in a face-to-face environmentin
`order to purchase goods inastore or directly from the terminalitself. Service payment
`terminal 50 can be an attended device orit can be integrated into a self-service device such
`as a vending machineor public telephone. For example, the service payment terminal may
`be incorporated into a soda machine in order to dispense sodas to a customer in which the
`customerpays by inserting the stored-value card, Or, the service payment terminal may be
`a point-of-sale terminal suchasis foundat a check-out counter where a customerinserts his
`stored-valuc card in order to purchase goods.
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`Service payment terminal 50 includes a router 51, a user interface 52, a card
`handler/reader 54, a security card handler 56, a security card 58, a terminal application 60,
`a data store 64 and a concentration point handler 66. Router 51 is hardware and software
`for routing information betweenfunctional blocks. Userinterface 52 controls the status of
`displays on the terminal and supplies instructions to the user. For example, the user
`interface provides instructions relating to insertion of stored-value card 5 or security card
`58. Also, the user interface provides instructions and/or buttons for the customerto
`interact with terminal application 60 in order to purchase goods and/or services. Card
`handler 54 provides a physical card reader and associated software for accepting and
`communicating with stored-value card 5. Similarly, security card handler 56 providesa
`card reader and associated software for communicating with security card 58.
`In
`conjunction with security card handler 56, security card 58 controls the command sequence
`of the terminal and provides transaction and a batch security.
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`‘Terminalapplication 60 receives commandsand information about the transaction
`andinitiates the actual purchase. In addition,terminal application 60 is responsible forall
`application specific functionality such as guiding the customerthrough the use ofthe
`terminal via a display, and for providing all hardware and software needed to provide the
`user with a good and/orservice onceit has been informed by the security card that an
`appropriate value has been deducted from the stored-value card.
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`Data store 64 controls the storage of purchasetransactions andtotals.
`Concentration point handler 66 controls the sending and receiving of information to and
`from a concentration point. Concentration point 68 is a staging computer that
`communicates with any numberof service payment terminals to collect batches of
`transactions. The concentration point then sends these transaction batchesto a clearing and
`administration system for processing (such as in FIG. 3). Once processed, batch
`acknowledgments, along with other system updates are sentto the terminals via the
`concentration point. The concentration point ensures a successful transfer of data between
`service payment terminals and the clearing and administration system, and prevents
`overloading of the clearing and administration system. The service provider contracts with
`a concentration pointfor collection of the service payments. The concentration point may
`also be an existing central facility such as a telephone company that collects its own
`payments from card telephones.
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`Such a service paymentterminal 50 allows a customerto use a stored-value card for
`the payment of goods and/or services, generates a paymentresult from a transaction, and
`bundles individual paymentresults into a collection for transferto a clearing and
`administration system, which then transfers funds that had been debited from a customer’s
`stored-value card to the merchant whose goods and/or services had been purchased from
`the terminal.
`
`FIG.3 illustrates an environment 100 useful for issuing stored-value cards and
`reconciling transactions performed with such a card. A terminal supplier 102 builds the
`equipmentused by a service provider 104 to provide goods and/or services to customers
`having a stored-value card at a service payment terminal 50. Card Supplier 106 contracts
`with an integrated circuit manufacturer and a card manufacturer for integrated circuits and
`plastic card bodies, then embedsthe integrated circuits into the cards and initializes them
`with a serial number. It then delivers the cards to card issuer 108.
`In conjunction with
`clearing and administration system 110 (such as a system provided by Visa International of
`Foster City, CA), card issuer 108 personalizes new cards and then transfers these cards to
`individuals (cardholders 112), The cardholder may then charge the card with value prior to
`use. Alternatively, the card may come with value already loaded. The cardholder 112 may
`then usethe card at a service paymentterminal 50 to purchase goodsand/orservices from
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`service provider 104. Terminal 50 then debits the value from the card, thus creating a
`service payment.
`
`Periodically,all transactionsare sent in a datafile from terminal 50 via concentration
`point 68 and an acquirer 114 to clearing and batch administration system {10 along with
`accumulated service paymentbatches from other terminals. Based upon this collection
`data, clearing and administration system 110 then receives money from card issucr 108
`which had originally come from cardholder 112. Clearing and administration system 110
`then transfers a lump sum to acquirer 114 using a suitable settlementservice (such as one
`provided by Visa International) to pay the various service providers having a relationship
`with acquirer 114, Based upon the previous collection data, acquirer 114 then transfers an
`appropriate amount of money to each service provider 104 reflecting the value of the goods
`and/or services that that service provider had provided that day to cardholders based upon
`deductions from their stored-value cards.
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`Althoughsuch a service payment terminal described above is useful for the on-site
`purchase of goods by a consumer with a smartcard, it does not permit the purchase of
`goodsand/or services by a customer over a network. Nor does such a terminal permit the
`immediate transfer of electronic information to a consumer’s computer. Service payment
`terminals are typically specially-designed units of hardware and software located at a
`merchantsite. Furthermore, the service payment terminal is designed to integrate into one
`hardware location the functionsof the terminal application (providing goods and/or
`services), a card handler for the stored-value card, andthe transaction management
`embodiedin the security card. Such a design is notsuitable for transactions where a
`customer may wish to perform a transaction from almostany location (including the home
`or office) quickly and easily with a minimum of prearranged set-up and expense,
`Furthermore,although various Internet payment schemes have been suggested, they are not
`oriented toward small value transactions, and do notallow the use of a smart card for
`transactions over the Internet.
`
`Thus, it would be desirable to have an architecture and system that would allow a
`consumerto quickly and easily perform transactions over an open netwark such as the
`Internet using a smart card. It is also desirable to have an architecture and system in which
`a user may use a smart card for both purchases over the Internet as well as purchases at
`existing service paymentterminals.
`
`However, in order to purchase,the card must be loaded with value first. Value can
`be loaded ontoa stored-value card in a variety of ways. Currently, it is inconvenientfor a
`user to load value onto his or her stored-value card. A user must physically travel to a bank
`or otherinstitution that has an automated teller machine (ATM)orothersimilar device in
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`orderto load valuc on to his or her stored-value card. The user can insert money into the
`machine and have a corresponding value put onto the stored-value card, the user can use a
`debit card to deduct value from the user’s accountat the bank for transfer to the card, or a
`
`credit card can be used as the source of funds to be transferred to the stored-value card.
`
`In either case, the user must travel to the bank to load value. Further creating difficulty is
`that not all banks or otherfinancial institutions have such a machine for loading value onto
`
`a user’s stored-value card.
`
`Accordingly, it would aiso be desirable to have a techniqueto allow a userto
`conveniently and easily load value onto a stored-value card.
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`SUMMARY OF THE INVENTION
`
`To achieve the foregoing, and in accordance with the purposes of the present
`invention, an architecture and system is disclosed that enables the use of a smart card for
`payment of goods and/or services purchased on-line over an open network such as the
`Internet. Further, an architecture and system is disclosed that enables a smart card to be
`loaded with value on-line over an open network such as the Internet.
`
`In a first aspect, the present invention provides an electronic commerce payment
`solution offering consumers an on-line equivalent to purchases with cash or coins. It
`extends the notion of a start card to the Internet marketplace, providing an alternative for
`low-value transactions. The present invention facilitates not only the purchase of physical
`goods, but also the purchaseof digital merchandise (such as electronic information).
`
`In one embodimentof the present invention, a client server on a client terminal
`controls the interaction with the consumerandinterfaces to a card reader which accepts the
`consumer’s smart card, which, in one specific embodiment, includes a stored-value
`application. For the purposesof this description, the smart card with a stored-value
`application used in embodimentsof the invention will be simply referred to as a “stored-
`value card.” A payment server on the Internet includes a computer and terminals that
`contain security cards to handle the transaction, data store and collection. Also connected
`to the client terminal and the paymentserver over the Internet is a merchant server
`advertising the goods and/or services offered by a merchant for sale. In one embodiment
`of the invention, the merchant server includes a web site and the merchant has contracted
`with an acquirer to accept stored-value card payments for goods and/orservices purchased
`over the Internet. Thus, a consumer may use his or her stored-value card at a client
`terminal location in order to purchase goods and/or services from a remote merchantserver.
`The Internet provides the routing functionality among the client terminal, merchant server
`
`and paymentserver.
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`From the consumer’s perspective, the present invention operates in a similar
`fashion as using a stored-value card in a real merchant environment. The transaction
`processis similar to the interaction betweena stored-value card and a service payment
`terminalin a face-to-face merchant environment, but with functionality distributed across
`the Internet between the card reading device located where the customer is, the merchant
`server advertising the merchant's wares, and a paymentserver with a security card that
`managesthe transaction. All of these entities may be physically remote from one another
`with router functionality being provided by the Internet. The present invention is easy to
`use. A consumerneed notestablish a new relationship with a bank or other Internet service
`company, nor create a special Internet deposit accountin order to begin purchasing goods
`and/orservices on the Internet. A consumer simply makes use of currently available
`stored-value cards in order to make an Internet purchase.
`
`When browsing merchantstore fronts on the Internet and deciding to purchase goods
`and/or services, the cardholderselects the stored-value card payment option offered by the
`merchant. The cardholder theninserts his or her card into a card reader attached to a
`personal computer (for example). The cardholder’s balance and purchase amount are
`displayed, the cardholder approvesthe purchase, and the amountis deducted from the
`value stored on the stored-value card. The transaction amount is captured by the security
`card or the merchantserver for subsequent batch settlement through a clearing and
`administration system to the issuer and acquirer. In one embodiment, the transaction
`security and authentication for the systemfollows a similar methodology as that used in an
`actual service paymentterminal betweena stored-valuc card andthe security card in the
`terminal. Advantageously, a customer may makeuse of pre-existing stored-value cards for
`purchasesoverthe Internet without any prior arrangementof an account, purchases of
`credits or tokens, or establishmentof a new relationship with a bank or other company.
`
`In addition, once a value has been deducted fromthe stored-value card, the
`
`merchant has been informed, and the security card in the payment server has recorded the
`transaction, an existing clearing and administration system may be used to reconcile the
`transaction and to pay the appropriate parties. Advantageously, a new system and
`methodology for reconciling transactions need not be developed or implemented. A pre-
`existing clearing and administration system may be used whichgreatly simplifies
`implementation of the present invention.
`
`Use of a stored-value card as payment for Internet transactions provides numerous
`advantages. For example, a stored-value card can be used in small transactions where
`credit cards or checks would be unrealistic. Other advantages to the consumerinclude
`enhancing the value of a stored-value card by enabling access to both real and Internet
`merchant environments with a single card. The present invention also allows an
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`anonymous paymentsolution for transactions over open networks, Furthermore, in one
`embodiment ofthe inventionthe stored-value card is implemented on a traditional credit
`card; a single card thus provides paymentsolutions for both low and high value
`transactions.
`
`In addition, use of a stored-value card is extremely advantageous for small dollar
`amount transactions. Often, consumers are reluctant to use, and merchants are reluctant to
`accept, credit card transactions for small dollar amounts. For the consumer and the
`merchant dealing with many of these small transactions can be a bookkeeping headache and
`may not be worth the expense. A merchant may also be unlikely to accept a credit card for
`a small dollar amounttransaction becauseofthe service fees per transaction. By permitting
`the usc of a stored-value card to make purchases overthe Internet for small dollar amounts,
`a merchant may very well be able to begin charging for goods and/orservices that he had
`been providingfor free in the past. One embodimentof the invention works well with
`purchases of under $10.00, although purchases of any amount may be made.
`
`The presentinvention also provides numerous advantages to merchants who wish
`to sell goods and/or services over the Internet. For example,the present invention provides
`a paymentsolution for low-value transactions, enabling merchantsto offer a wider range of
`digital merchandise. A merchantis also provided a methodto recovercosts of services not
`previously charged for, and is provided immediate access to an existing, and rapidly
`growing, cardholder base. Furthermore, the present invention integrates into an existing
`clearing and administration system meaning that the merchant need not implement or
`become familiar with new procedures for reconciliation of transactions.
`
`Furthermore, a merchantneed only make a minimal investmentin time and moneyto
`take advantage of the present invention and to accept payments overthe Internet. The
`merchant need not engage in the development of complex software or accounting
`procedures. Thus, smaller merchants will especially benefit from the present invention.
`By establishing a businessrelationship with an acquirer and incorporating standard
`merchant software, a merchantis ready to begin selling goods and/orservices from his web
`site. Because a smart card with a stored-value application is used, the paymentserver and
`the client termina] perform the details of the transaction and a merchantis relieved from
`having to control and keeptrack of a transaction. Also, the paymentserver andits
`associated security cards manage and pro