(19) United States
`(12) Patent Application Publication (10) Pub. No.: US 2005/0021399 A1
`
`Postrel
`(43) Pub. Date:
`Jan. 27, 2005
`
`US 20050021399A1
`
`(54) METHOD AND SYSTEM FOR ISSUING,
`AGGREGATING AND REDEEMING POINTS
`BASED ON MERCHANT TRANSACTIONS
`
`(76)
`
`Inventor: Richard Postrel, Miami Beach, FL
`(US)
`
`Correspondence Address:
`Anthony R. Barkume
`20 Gateway Lane
`Manorville, NY 11949 (US)
`
`(21) Appl. NO’:
`.
`.
`(22) Flled'
`
`10/791’149
`
`Mar. 1’ 2004
`Related U S Application Data
`I
`I
`(63) Continuation-in-part of application No. 10/608 736
`filed on Jun. 27 2003 now Pat. No. 6 820 061 which
`is a continuatioh of application No. 0,9/60,2 22,2 filed
`on Jun. 23, 2000’ now Pat. No. 6,594,640.
`
`(60)
`
`provisional application No. 60/140,603, filed on Jun.
`23, 1999.
`
`PublicatiOn Classification
`
`Int. Cl.7 ..................................................... G06F 17/60
`(51)
`(52) US. Cl.
`................................................................ 705/14
`
`(57)
`
`ABSTRACT
`.
`.
`.
`A loyalty or reward pomt system that utlhzes the pre-
`existing infrastructure of a typical credit card network. In
`one embodiment, a user makes a purchase at a merchant of
`a product using a credit card. The merchant contacts the
`acquiring bank (which may be any type of financial insti-
`tution but is referred to generically herein as a bank) with
`which it has contracted for credit card network services, and
`as known in the art, will get an approval or decline message
`after the acquiring bank contacts the issuing bank of the
`credit card used by the purchaser. Assuming that the pur-
`chase transaction is approved, the user is awarded loyalty
`points from the merchant based on the amount of the
`purchase (e.g. 100 points for a $100 purchase). A central
`server resides on the credit card network and tracks the
`transaction between the merchant, the acquiring bank, and
`the issuing bank. A reward account is maintained on the
`central server on behalf of the merchant and the user, and the
`number of reward points in the user’s account for that
`merchant is increased accordingly. In an alternative embodi-
`ment, the user’s reward points are logged in an account
`maintained by the acquiring bank on behalf of the merchant
`(with which it has a contractual relationship) and the user.
`The user may redeem the reward points earned from the
`transaction with the merchant at a later time, or may redeem
`the points with another merchant on the credit card network,
`or may aggregate those reward points with those of other
`merchants into a central exchange account, and then redeem
`the aggregated points for goods or services from any
`approved merchant on the network, depending on the con-
`figuration of the system.
`
`
`-
`
`. Airline
`
`Reward Server
`
`
`
`'User Computer
`
`ASKELADDEN 1003
`
`ASKELADDEN 1003
`
`

`

`Patent Application Publication Jan. 27, 2005 Sheet 1 0f 12
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`US 2005/0021399 A1
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`Patent Application Publication Jan. 27, 2005 Sheet 2 0f 12
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`Patent Application Publication Jan. 27, 2005 Sheet 6 0f 12
`
`US 2005/0021399 A1
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`604
`
`GO TO 8
`
`0
`
`600
`
`REWARDS FROM TRADING SERVER
`
`602
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`ACCOUNT
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`TRADmG SERVER CONTACTS
`REWARD SERVER
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`REWARDS FOR-USER.
`
`'
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`SELECTS REWARDS
`TO BE REDEEMED'
`
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`USER‘SACCOUNT BALANCE BY
`
`
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`REWARD SERVERSENDS
`CONSIDERA‘UON T0
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`TRADING SERVER
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`CONSIDERATION
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`620
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`TRADING SERVER INCREASES USER
`ACCQUNT BY EQUIVALENT VALUE
`
`, FIG 6
`-
`
`

`

`Patent Application Publication Jan. 27, 2005 Sheet 7 0f 12
`
`US 2005/0021399 A1
`
`
`
`‘ USER REQUEST TO
`
`700
`
`PURCHASEJTEM AT
`
`708
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`MERCHANT SiTE
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`PAY mm POINTS
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`FROM MERCHANT SERVER
`TO TRADING SERVER
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`704
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`DOES USER
`
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`
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`
`
`POINTS?
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`NO
`
`
`
`TRADING SERVER REDUCES THE
`USERS ACCOUNT BALANCE BY
`
`
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`AMOUNT TO BE RECEIVED
`
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`CONSIDERATION 1T0
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`MERCHANT
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`MERCHANT RECEIVES
`CONSIDERATION
`
`MERCHANT ALLOWS
`TRANSACTION
`
`718
`
`720
`
`F! G .7
`
`'
`
`

`

`Patent Application Publication Jan. 27, 2005 Sheet 8 0f 12
`
`US 2005/0021399 A1
`
`
`REWARD SERVER CONTACTS
`
`
`MERCHANT CONTACTS TRADING
`TRADING SERVER WITH OFFER
`SERVER WITH OFFER TO BE
`
`
`
`~TO REDEEM
`DISTRIBUTED T0 MEMBERS
`
`
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`902
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`TRADING SERVER'RECORDS
`» OFFER LIMITED CONVERSION
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`RATE 2N DATABASE
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`RECORDS OFFER IN
`
`DATABASE
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`
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`REWARD SERVER
`CONTACTS USER WITH
`
`908
`
`OFFER TO REDEEM
`
`6
`
`USER Accesses TRADING
`
`‘
`CAPTUREUSER
`PREFERENCE DATA
`(HOBBIES; INTERESTS,
`REWARD PROGRAMS.-ETC)
`
`
`
`_
`
`
`
`
`
`
`I USER SELECTS armor:
`TO CREATE USER ACCOUNT
`'
`
`~ CAPTURE REDEMPTION
`RULES
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`
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`FIG.8 ,
`
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`
`

`

`Patent Application Publication Jan. 27, 2005 Sheet 9 0f 12
`
`US 2005/0021399 A1
`
`MERCHANT.
`
`FIG11
`
`;ACQUIRINGj’
`
`‘BANK-
`
` A
`
`

`

`Patent Application Publication Jan. 27, 2005 Sheet 10 0f 12
`
`US 2005/0021399 A1
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`Patent Application Publication Jan. 27, 2005 Sheet 12 0f 12
`
`US 2005/0021399 A1
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`

`US 2005/0021399 A1
`
`Jan. 27, 2005
`
`METHOD AND SYSTEM FOR ISSUING,
`AGGREGATING AND REDEEMING POINTS
`BASED ON MERCHANT TRANSACTIONS
`
`[0001] This application is a continuation-in-part applica-
`tion of co-pending application Ser. No. 10/608,736, filed on
`Jun. 27, 2003, which is a continuation of application Ser. No.
`09/602,222, filed Jun. 23, 2000, now US. Pat. No. 6,593,
`640, which is based on and claims filing priority of co-
`pending US. provisional patent application Ser. No. 60/140,
`603, filed on Jun. 23, 1999.
`
`BACKGROUND OF THE INVENTION
`
`[0002] This invention relates to loyalty points programs,
`and in particular to such programs that allow merchants to
`award loyalty points to users wherein the merchants utilize
`the pre-existing infrastructure of a credit card network for
`awarding loyalty points, maintaining account information of
`users, aggregating loyalty points from various merchant-
`based loyalty accounts, and redeeming such loyalty points
`for products and services selected by the users.
`
`in order to attract and retain
`In the prior art,
`[0003]
`business customers, airlines, hotels, car rental companies,
`chain retailers,
`telecom providers, etc. have historically
`introduced frequent use programs that offer awards of loy-
`alty or reward points (e.g. frequent flyer miles) or other such
`incentives schemes based on the distance traveled or pur-
`chases made by that customer. Competition has forced
`airlines to modify the manner
`in which mileage was
`acquired to include travel related purchases by consumers.
`For example, the dollar-based cost of a ticket purchased may
`be awarded as mileage to a client account. Within the past
`several years, banks that issue credit cards or other retailers
`and e-tailers have co-branded credit cards in the name of the
`
`airlines and the credit card company where each dollar spent
`using the card is recorded as a mile of travel or point in the
`award program. These cards may additionally award bonus
`miles in coordination with user purchases of preferred
`products or flights during preferred times.
`
`[0004] With regard to FIG. 1, a model of the frequent flyer
`systems of the prior art is presented. Two different airlines
`servers are shown surrounded by their related marketing
`partners. In order to lure more business travelers, the airlines
`have established marketing agreements with travel related
`companies to provide the business traveler with a more
`robust way to generate rewards in the form of frequent flyer
`miles. These marketing arrangements or associations have
`typically involved credit card companies, phone companies,
`hotel chains and car rental companies. Any purchases made
`through these co-branded partners were then awarded to the
`user periodically. Bonus miles or points may additionally be
`accumulated based on the user’s actions in response to offers
`made by the airline or in coordination with the partner
`company. For example, phone companies purchase reward
`points or miles and then offer them to their customers based
`on the customer’s agreement
`to switch to their phone
`service. These points are obtained by the partner companies
`by purchasing them from the issuing entity for redistribution
`as an incentive to utilize their particular goods and/or
`services. FIG. 2 shows some sample co-branded cards that
`are representative of marketing agreements between TWA,
`Sprint, and Mastercard. In order to receive these benefits, the
`user must sign up with each of the partner companies
`
`separately and provide the frequent flyer account number
`that is to receive the credited reward points or miles. Auser
`either making phone calls or purchases in accordance with
`the agreements made with each of these partners will first
`accumulate a value on the partner’s system which in turn is
`periodically updated on the airline’s reward server to reflect
`the value earned during that period. FIG. 3 is representative
`of a typical user account that shows various earnings in the
`system transferred in from any of the co-branded partners.
`The records of the table in FIG. 3 identify the source of the
`rewards, the dates they were recorded and the number of
`miles associated with that transaction. The user can view the
`
`accumulated miles by accessing the airline’s reward server
`or by tracking the individual value reported to the user
`through the various bills the user receives from each of the
`co-branded partners. In any event, the user is faced with an
`extremely difficult
`if not practically impossible task of
`manually coordinating all of his reward accounts to deter-
`mine how many points may reside in each account, how to
`redeem points in each account, etc.
`
`[0005] Large scale merchants such as chain hotels, chain
`rental cars, and various airlines are able to implement their
`own loyalty or reward points schemes since they have the
`infrastructure in place to maintain user
`loyalty point
`accounts. Thus, these large entitles are able to build brand
`loyalty via their own loyalty schemes. They are able to
`operate independently by awarding their own loyalty points
`and redeeming the loyalty points by offering their own
`products and services. A typical example is when a user
`earns 35,000 American Airlines points and trades them in for
`a free flight or upgrade, or when a user earns Hilton Honors
`points by staying at a Hilton hotel, and redeems them for free
`lodging at a Hilton hotel.
`
`[0006] Mid-size and smaller merchants are often unable to
`implement their own loyalty programs due to the high cost
`of the infrastructure required, including server computers
`that maintain user loyalty accounts and administration costs.
`For example, a small independent restaurant or pizzeria may
`want to award loyalty points and allow users to redeem
`accumulated points for free or discounted meals, but is
`unable to do so due to the aforementioned high costs
`involved. As mentioned above, some companies have
`resorted to purchasing loyalty points from larger companies
`and then distributing them to their customers, but this does
`not help build brand loyalty for that company (e.g. MCI
`gives a customer 5,000 American Airlines points to change
`to their service, the customer is not getting MCI-branded
`points).
`
`It is therefore desired to have a loyalty or reward
`[0007]
`point program that allows any merchant, regardless of its
`size, to award their own branded loyalty points and allow
`users to redeem them for their own products or services in
`order to build brand loyalty for that merchant. It is also
`desired to allow users to selectively redeem their reward
`points at other merchants that are part of the network.
`
`[0008] Although the building of brand loyalty by mer-
`chants of any size and stature is critical, it is also recognized
`that users may end up with many loyalty point accounts,
`each having relatively small numbers of points. It may take
`awhile for a user to build a meaningful sum of points with
`any one merchant, although there are great advantages to
`both the consumer as well as the merchant in doing so. It is
`
`

`

`US 2005/0021399 A1
`
`Jan. 27, 2005
`
`therefore desired to provide a loyalty point system that
`allows users to aggregate loyalty points earned from these
`various merchants into a central exchange account, wherein
`the aggregated loyalty points may be advantageously used to
`purchase goods or services from any merchant in the system.
`
`SUMMARY OF THE INVENTION
`
`invention implements a loyalty or
`[0009] The present
`reward point system that utilizes the pre-eXisting infrastruc-
`ture of a typical credit card network, such as the VISA or
`MASTERCARD credit card networks. In one embodiment,
`a user makes a purchase at a merchant of a product using a
`credit card. The merchant contacts the acquiring bank
`(which may be any type of financial
`institution but
`is
`referred to generically herein as a bank) with which it has
`contracted for credit card network services, and as known in
`the art, will get an approval or decline message after the
`acquiring bank contacts the issuing bank of the credit card
`used by the purchaser. Assuming that the purchase transac-
`tion is approved, the user is awarded loyalty points from the
`merchant based on the amount of the purchase (e.g. 100
`points for a $100 purchase). A central server resides on the
`credit card network and tracks the transaction between the
`
`merchant, the acquiring bank, and/or the issuing bank. A
`reward account is maintained on the central server on behalf
`of the merchant and the user, and the number of reward
`points in the user’s account for that merchant is increased
`accordingly. In an alternative embodiment, the user’s reward
`points are logged in a reward account maintained by the
`acquiring bank on behalf of the merchant (with which it has
`a contractual relationship) and the user.
`
`[0010] The user may redeem the reward points earned
`from the transaction with the merchant at a later time, or may
`redeem the points with another merchant on the credit card
`network, or may aggregate those reward points with those of
`other merchants into a central exchange account, and then
`redeem the aggregated points for goods or services from any
`approved merchant on the network, depending on the con-
`figuration of the system.
`
`[0011] As a result, merchants are able to award loyalty or
`reward points based on purchases made by users without
`having to implement their own infrastructure; i.e. by using
`the pre-eXisting infrastructure of the credit card network
`with which they have a contractual relationship.
`
`BRIEF DESCRIPTION OF THE DRAWING
`
`[0012] FIG. 1 is representative of the prior art marketing
`arrangements used in reward programs;
`
`[0013] FIG. 2 is a representation of the co-branded part-
`ners in a prior art award program;
`
`[0014] FIG. 3. is a sample of the prior art reward summary
`from an airline frequent fiyer system;
`
`[0015] FIG. 4 is a block diagram of the components of the
`present invention;
`
`[0016] FIG. 5 is a block diagram of the system compo-
`nents of the present invention;
`
`[0017] FIG. 6 is a data flow diagram of the process for a
`user to redeem rewards;
`
`[0018] FIG. 7 is a data flow diagram of the user request for
`purchase of an item at a merchant site;
`
`[0019] FIG. 8 is a data flow diagram of the user account
`creation process on the trading server;
`
`[0020] FIG. 9 is a data flow diagram of the offer process
`by a reward program or by a merchant;
`
`[0021] FIG. 10 is a data flow diagram of the process
`where a user may be redirected from a reward program to the
`trading server of the present invention;
`
`[0022] FIG. 11 is an illustration of the process flow in a
`typical credit card transaction that occurs over a credit card
`network;
`
`[0023] FIG. 12 is an illustration of a database structure for
`the maintenance of merchant-issued loyalty points by a
`central server computer in accordance with one aspect of the
`present invention;
`
`[0024] FIG. 13 illustrates the aggregation of reward points
`from various acquiring bank loyalty accounts; and
`
`[0025] FIG. 14 is an illustration of a database structure for
`the maintenance of merchant-issued loyalty points by an
`acquiring bank in accordance with another aspect of the
`present invention.
`
`DETAILED DESCRIPTION OF THE
`PREFERRED EMBODIMENT
`
`[0026] FIG. 11 illustrates a typical prior art credit card
`network and a credit card transaction between a user and a
`
`merchant. The credit card network is comprised of thou-
`sands of member banks, wherein a member bank may be an
`issuing bank or an acquiring bank (or it may fulfill the role
`of both issuer and acquirer). A consumer or user has a
`contractual relationship with an issuing bank, which will
`issue the user a credit card such as a VISA card based on
`
`finance terms agreed to between the user and the issuing
`bank. The user will present the credit card when he desires
`to make a purchase transaction with a merchant (flow 1). The
`merchant has a contractual relationship with an acquiring
`bank, which will agree to pay the merchant after the trans-
`action is approved. When the user presents his credit card to
`the merchant, the merchant will contact its acquiring bank
`and request approval of the transaction via the credit card
`network (flow 2). This is typically done by the merchant
`swiping the credit card into a POS (point of sale) terminal,
`but it may be done manually (i.e. over the telephone) as well.
`In addition, e-commerce sales over a global computer net-
`work such as the Internet or an interactive television system
`may be used under this system. Once the acquiring bank has
`received a transaction request from the merchant, it deter-
`mines the issuing bank of the credit card (from the credit
`card information) and then contacts the issuing bank for
`approval (flow 3). The issuing bank and the acquiring bank
`are a part of the credit card network, which may have tens
`of thousand of such member banks. The infrastructure of the
`
`credit card network allows for transactions between acquir-
`ing banks and issuing banks as described herein as is well
`known in the art.
`
`a transaction
`[0027] Once the issuing bank receives
`request from the acquiring bank, it determines if that user
`has enough credit to allow the purchase. If the purchase is
`deemed to be allowed by the issuing bank,
`it sends an
`approval message to the acquiring bank (flow 4), and the
`acquiring bank in turn sends an approval message back to
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`Jan. 27, 2005
`
`the merchant (flow 5). The purchase transaction may then
`occur. The issuing bank will pay the acquiring bank the
`amount (i.e. the requested purchase price) minus an inter-
`change fee (e.g. 1.4% of the price). The acquiring bank will
`pay the merchant the amount received from the issuing bank
`minus its own fee (e.g. 0.6%). Thus,
`the merchant will
`receive the purchase price minus the entire merchant dis-
`count of 2%. For a $100 sale, the merchant will receive $98,
`the issuing bank retaining $1.40, while the acquiring bank
`retains 60 cents.
`
`[0028] The issuing bank will request payment of the full
`purchase price from the purchaser, typically in a credit card
`statement
`that
`is issued monthly (flow 6). The risk of
`collection of the purchase price from the consumer is borne
`by the issuing bank. The user will pay the issuing bank (flow
`7), often on a revolving basis with interest attached.
`
`[0029] This type of credit card network thus provides for
`a merchant to need only one contractual relationship—that
`with the acquiring bank (and/or the credit card network
`operator). The merchant is not required to seek payment
`from the thousands of issuing banks directly—that task is
`performed as a result of the network architecture. Likewise,
`the consumer need have only one contractual relationship—
`that with the issuing bank. The consumer is not required to
`promise payment
`to the thousands of acquiring banks
`directly—that task is performed as a result of the network
`architecture. These types of credit card networks currently
`enables over two trillion dollars to be exchanged per year as
`a result of credit card purchases, and the present day
`economy would not operate as it does without such net-
`works.
`
`[0030] The present invention leverages this pre-existing
`credit card network and the relationships between member
`banks to provide for loyalty point accounts and transactions
`not possible in the prior art due to their high costs if operated
`independently as done by large entities such as airlines and
`hotel chains. In this embodiment, the merchant is desirous of
`awarding loyalty or reward points to a purchaser for the
`purchase of its products or services. The merchant wants to
`award loyalty points that are directly branded by that mer-
`chant, rather than having to purchase loyalty points from a
`larger entity such as an airline and distribute them to their
`customer as in the prior art. In a preferred embodiment, a
`central server computer will monitor transactions over the
`network between acquiring banks and issuing banks and
`determine if loyalty points are to be logged into an account
`at the central server based upon information contained in the
`exchanged data. In another embodiment, the merchant will
`leverage the account with the acquiring bank that it already
`has a contractual relationship with for purposes of the credit
`card network by instructing the acquiring bank, as part of the
`credit card purchase transaction previously described, that
`the purchaser who presented the credit card should receive
`loyalty or reward points based on the transaction at a
`predetermined rate, such as one point per dollar spent. In
`either embodiment, for example, for a $100 purchase, the
`purchaser will receive 100 points in an account under his
`name (or other identification indicia—likely his credit card
`account number). The merchant may inform the purchaser
`that he has received 100 of that merchant’s loyalty points
`based on the transaction. In fact, the merchant will likely
`advertise that he is awarding loyalty points under his brand
`for purchases made at his store. For example, the Smith
`
`Pizzeria will advertise that a $100 purchase will yield 100
`“Smith Pizza Points” for a purchaser. The merchant here is
`able to provide this feature without having to establish an
`expensive infrastructure (i.e. sever computers, administra-
`tors, etc.) as in the prior art. Likewise, it is able to award its
`own branded loyalty points as not seen before in the prior art
`(rather
`than simply distributing airline points or hotel
`points). In addition, the system may be configured so that the
`credit card network operator that operates the central server
`(e.g. VISA or MASTERCARD) is co-branded with the local
`merchant awarding the loyalty points. Thus,
`the loyalty
`points may be referred to as “Smith’s Pizza/VISA Points”,
`or
`“BLOCKBUSTER/VISA Points”,
`or
`“GAP/VISA
`Points”, etc.
`
`is thus able to leverage its pre-
`[0031] The merchant
`existing contractual relationship with the acquiring bank and
`the credit card network, and either the central server (in one
`embodiment) or the acquiring bank (in another embodiment)
`will keep track of the loyalty points awarded by the mer-
`chant to all of its customers. Similarly, hundreds or thou-
`sands of similar accounts with other merchants will be kept
`track of in the same manner.
`
`[0032] The maintaining of these merchant loyalty points
`may be undertaken by storing user and merchant account
`information in a database associated with the central server
`
`as shown in FIG. 12. Thus, FIG. 12 illustrates a simple
`database format wherein each merchant and user under that
`
`merchant has a record which indicates how many points are
`in the account, as well as other optional information (such as
`par value of points, restriction on use, etc.) The format of the
`storage of the information is unimportant and may take
`many forms as well know in the art of relational and other
`types of databases. A simple transaction log may keep
`information on each transaction processed by the acquiring
`and issuing banks; this log may be easily modified to include
`loyalty point information as well. Thus, there may be a setup
`fee charged by the credit card network operator to initiate the
`loyalty program for a merchant, as well as transaction fees
`that provide for a small percentage of revenue to the credit
`card network operator for each transaction made by the
`central server.
`
`[0033] Preferably, the user is able to view his loyalty point
`account balance by logging into a web site run by the central
`server. Optionally, the merchant may have a link on its web
`site so that the user can check his account, or there may be
`a redirection to the central server web site, etc. The user may
`also be able to place a telephone call and, using well know
`techniques for acquiring information via DTMF tones or
`audible instructions, obtain account information. The pur-
`chaser need not even know that the account is being held for
`him by the central server since the central server will operate
`in the “back office” aspect of this invention, thus rendering
`the specific procedures transparent to the user and providing
`a great ease of use of the system.
`
`[0034] Thus, a purchaser may build up many similar
`loyalty accounts simply by using his credit card for making
`purchases as he has done so in the past. The system may be
`configured to not even require a separate “frequent use”
`account number to be entered at the POS, since this is many
`time cumbersome for a user. Experience teaches that many
`users do not even bother with obtaining frequent use or
`loyalty points (i.e. from major entities such as Hilton Hotels)
`
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`

`US 2005/0021399 A1
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`Jan. 27, 2005
`
`since the time and effort in opening a separate account,
`remembering the account number or carrying a separate
`membership card, remembering their PIN, etc.
`is simply
`unmanageable. The acquiring bank may simply tie in the
`loyalty account data to the user’s credit card number and a
`merchant ID setup for each merchant.
`
`[0035] Although some issuing banks have their own
`reward point program (such as MBNA’s MASTERCARD),
`these programs award points to a user based on their credit
`card use at a merchant, but the loyalty program inures to the
`benefit of the issuing bank, and not the merchants them-
`selves. That is, a user gets MBNA points and obtains the
`account information on his MBNA statement, but there is no
`branding or loyalty based on a transaction with a given
`merchant as in the present invention. Moreover, the present
`invention provides for redemption of points and aggregation
`of points in a manner not possible with a prior art issuing
`bank loyalty program (the items that can be obtained with
`issuing bank points are quite limited and often render the
`benefits meaningless).
`
`[0036] Under this invention, each purchaser/cardholder
`enjoys the benefits of being an independent account holder,
`earning loyalty points with every merchant that elects to
`participate under the system. Likewise, each cardholder may
`execute a transaction wherein points are purchased from the
`network operator, an acquiring bank, an issuing bank or a
`merchant, at a discount rate that will provide transaction fees
`for the points issuer/distributor accordingly. The purchased
`points may be redeemed, or they may be given to others as
`a gift, or sold to others, etc. The points have a par value that
`may increase or decrease. The system may be configured so
`that there are no restrictions on their transfer) i.e. so that they
`are fungible and fully transferable).
`
`[0037] Although the present invention has been described
`with respect to the use of a credit card, the invention will
`operate in the same manner with the use of debit cards or
`check cards that are becoming popular today. That is, the
`methodologies employed do not vary significantly when a
`debit card is used (except that the purchaser’s account is
`debited immediately by the issuing bank rather than billing
`the purchaser later on) rather than a credit card. The present
`invention includes the use of such debit cards modified as
`
`may be required to operate with the same advantages as
`herein described.
`
`[0038] Likewise, the present invention may be advanta-
`geously adapted to provide merchant-based loyalty points
`based on cash transactions as well as the aforementioned
`credit card and debit card transactions. Cash transactions
`
`still make up a substantial portion of purchases, and it would
`be beneficial for a merchant to provide loyalty points to
`purchasers using cash in addition to those using credit or
`debit cards. This will further increase loyalty to that mer-
`chant. In this case, the purchaser would still have to present
`some identification such as his credit card (if the credit card
`number is being used for unique identification of the pur-
`chaser and indicating his loyalty account with the central
`server). Thus, for example, if a purchaser pays $50 in cash
`for an item at a store and presents his credit card, the credit
`card may be swiped at the POS for the sole purpose of
`awarding him 50 reward points at the acquiring bank server.
`
`debit cards, a “dummy” card may be issued that takes the
`shape and form of a credit card, along with branding by the
`issuer, and which may have the logo of the credit card
`network imprinted thereon, but which is not tied to a credit
`account or a debit account of the user. The card is used to
`
`link the user to a loyalty points account in the same manner
`that an actual credit or debit card is linked. (In addition,
`when the user wishes to redeem his loyalty points, the points
`may be utilized for a purchase by presenting the card and
`swiping it into the POS terminal in a manner similar to a
`credit presentation.)
`
`In the present invention, reward points accounts for
`[0040]
`a user shopping at a merchant may be opened and awarded
`automatically, or the system may require an enrollment
`process by the merchant, in which the merchant has the
`opportunity to capture relevant demographic and other data
`regarding the users.
`
`[0041] Once the purchaser has earned loyalty points with
`this invention, he or she may choose to redeem his loyalty
`points in any one of various manners. In one embodiment,
`the purchaser will execute a purchase transaction with the
`merchant directly, and indicate that he wishes to utilize his
`loyalty points to pay for the item in full or in part. For
`example, the purchaser may want to use 5,000 of his Smith
`Pizzeria reward points (worth one cent per point) to reduce
`the purchase price of a meal for his family from $75 to $25.
`He indicates this to the merchant at the point of sale (which
`may be over a web site or physically at the restaurant). In the
`event that he presents his credit card to make his partial
`payment, then the same approval process takes place as
`de