1. Field of the Invention
The present invention relates generally to transaction systems and methods for verifying a consumer engaged in a transaction with a merchant in order to authorize both the consumer as well as the transaction and, in particular, to a computer-implemented method, system and apparatus for dynamically verifying a consumer engaged in a transaction with a merchant and authorization of this transaction.
2. Description of Related Art
In order to enable convenient purchases of goods and services by consumers, the financial service industry has developed many alternative payment methods that allow a consumer to engage in a transaction and receive goods and services on credit. For example, such alternative payment methods may include checks, ATM or debit cards, credit cards, charge cards, etc. prior to the birth of virtual commerce, as discussed below, such payment options provide an adequate convenience and transactional security to consumers and merchants in the market place. While transactional security may include the security offered by a payment method to the consumer that the purchase event will not result in a breach of personal information or that the consumer is a victim of identity theft, transactional security also offers the merchant or seller the security that fraud will not be perpetrated.
Virtual commerce and the growth of the Internet as a medium for commerce have placed pressure on the payment options discussed above on both the convenience and transactional security by the credit issuer. For example, credit cards may be convenient to the consumer, but are subject to fraudulent use via theft of the account number, expiration date and address of the consumer. This, in turn, places the credit issuer at risk of offering credit to an uncreditworthy consumer, being the subject of consumer fraud or providing authorization to a merchant to provide services or ship goods to a fraudulent source.
Currently available payment options include significant shortcomings when applied to remote purchasers, such as purchases where the buyer and the seller (that is, the merchant) are not physically proximate during the transaction. Further, regardless of the proximity of the consumer and the merchant, merchants and credit issuers alike continue to battle the problem of fraudulent purchases. Each new payment option and every new sales channel (in-store, telephone, mail and Internet) have, in turn, spawned innovation on the part of consumers willing to perpetrate fraud in order to obtain goods and services without paying for them.
In recent years, the birth of the Internet commerce industry and the continued growth in mail order and telephone order commerce have pushed the credit card to the forefront of these battles. Typically, merchants are forced to rely on credit cards because it is currently their only option in the remote purchase environment. However, regardless of the type of credit offered, low transactional security is offered to both merchants and consumers. This leads to significant cost for the consumers and the merchants, such as the consumer cost including the impairment of their credit record, the inconvenience of changing all of their credit card accounts and the financial cost in resolving the situation. Merchant costs may include the mitigation of fraud losses, including the cost in incremental labor, hardware and software to implement additional security checks in their sales/order entry software, higher transaction processing expense in the form of discount rates for credit cards and NSF fees for checks and higher fraud charge-offs for undetected fraudulent purchases.
With the continuing speed and ability of a consumer to gain credit, whether at a point-of-sale or through the use of an existing account, identity theft and fraud are on the increase. Fortunately, those that perpetrate this fraud and theft typically target specific consumers, such as the elderly, and engage in specified and easily-recognizable patterns, such as elevated purchase costs at otherwise lower-end shopping facilities in a compressed period of time. Further, many fraud perpetrators and thieves have a specific pattern of buying that is easily assessed by a third party.
Presently, merchants attempt to properly identify a consumer using a credit card or other credit account at the point-of-sale. However, as is easily evident in today's marketplace, merchants are often more interested in providing a consumer with quick and efficient service with little hassle regarding the consumer's identity. Further, merchants do not have the data available to them at the point-of-sale for making an appropriate identification of a consumer or otherwise detecting a fraudulent purchase. While some merchants do use external databases to verify a consumer and authorize the transaction, these databases include errors, have limited information, have data omissions and further include data that may be compromised by an external source. Therefore, there remains a need for a more dynamic verification process for both verifying the consumer and authorizing the transaction prior to final acquisition of the goods and/or services by the consumer.