WO1997036267A1

WO1997036267A1 - Automated system and method for positive check authorization

Info

Publication number: WO1997036267A1
Application number: PCT/US1997/005038
Authority: WO
Inventors: Wade L. Funk
Original assignee: Electronic Data Systems Corporation
Priority date: 1996-03-28
Filing date: 1997-03-27
Publication date: 1997-10-02
Also published as: ZA972768B; CA2250683A1; AU2552197A

Abstract

An automated positive check authorization system includes an input device (200, 202) for receiving a check amount and checking account information pre-printed on a check drawing on a checking account presented in a transaction at the time of check presentment. The checking account information and check amount are electronically transmitted to a check verifier (204), which receives the check amount and checking account information from the input device (200, 202) and searches a checking account database (206) for a current balance in the checking account. An approval or decline message is issued in response to a comparison between the check amount and the current balance in the checking account. A decline message is also issued if there is a stop payment instruction on the check.

Description

AUTOMATED SYSTEM AND METHOD FOR POSITIVE CHECK AUTHORIZATION

TECHNICAL FIELD OF THE INVENTTOKT

This invention is related in general to the field of document handling systems. More particularly, the invention is related to an automated system and method for positive check authorization.

BA cn OTTNT OF HE INVENTION

Check approval systems in use today do not have access to the presenter bank for positive authorization of the transaction by verifying the account balance. Therefore, at presentment, it is not known whether the checking account has adequate funds to cover the amount on the check. Further, it is nearly impossible to determine whether a check is fraudulently used at the time when it is presented. The typical check processing procedure is shown in FIGURE 1 and begins, for example, at a retailer or poin - of-sale. The cashier enters all the purchases and the register provides a total. The customer writes out a check for a specific dollar amount and presents it as payment for the amount owed, as shown in block 100. Most often, the only check verification is a "bad check" list, which records checking accounts which have a history of under-funded checks drawn thereon. The retailer may check its internally-maintained "bad check" list or with a check authorization service. If the account has not been black listed, then the checking account owner may leave the retailer with the goods that were purchased. At the end of the day, the total of all checks received that day are totaled to compare with the register total. The register totals are combined to form a store total. The checks are then deposited with the retailer's bank.

Some retailers have facilities to encode the transaction amounts on the checks before the checks are sent to the bank. Otherwise, the bank encodes the amounts on the checks and charges the retailer a fee for this service, as shown in block 102. The encoding process is performed manually, with an operator physically handling each check, viewing the amount, and then keying it on the face of the check. The encoding speed per operator is typically 1,200 to 1,400 checks per hour. The encoded checks are then tallied and compared with the total or. the deposit ticket. This process is commonly termed "proofing. " The encoded checks are then shipped to a central processing location for the "capturing" step, as shown in block 104. High speed reader/sorters process the checks by reading and sorting the checks according to information printed on the MICR (magnetic ink character recognition) line located at the bottom of the check. The MICR information on the check includes the bank number, account number, check serial number, in addition to the encoded check amount. The checks are read and sorted by bank or some other designation according to the transit and routing information also present in the MICR line. Approximately 1 to 1.5* of checks are rejected because the MICR line information is not readable. The rejected checks are manually handled and corrected. A balance of credits and debits is then computed. The sorted checks and a cash letter listing each check and their amounts are then sent in a collection and transit process to the institutions owning the accounts that the checks are drawn on.

The transit process delivers the checks to the bank having the accounts the checks are drawn on, at which place another capturing process commonly termed "inclearing" is performed, as shown in block 106. Inclearing ensures that the checks are actually drawing on that bank's accounts, the amounts are encoded on the checks, the correct settlement amount is given to the other banks, and that the correct amount is finally settled or posted out of the customer's account, as shown in block 108. The checks may then be optionally returned to the checking account owner, as shown in block 110. The period of time starting from tendering check at the point-of-sale, bank teller, or automated teller machine (ATM) to the time the check is finally funded by the money in the customer's account is called the "float" period. Typically, the float period may be up to two to three days during which one institution or another is at risk of holding a check drawing from an account that may not have adequate funds. Checks are presented and accepted as payment without validation or verification that funds are available in the account. Because checks are rarely collected or funded by the presenter's institution on the same day as presentment and typically require one or more days to complete collection and funding, any fraudulent check use is usually not discovered in a timely manner. This needlessly subjects check receivers to the risk of nonpayment for services rendered or sales made because of insufficient funds and/or fraudulent use of checks. As a result, collection is a very costly process for banks and businesses.

SUMMARY OF THF INVENTION

Accordingly, there is a need for a system and method for positive check authorization at the time a check is deposited or tendered as payment. In accordance with the present invention, automated positive check authorization system and method are provided which eliminates or substantially reduces the disadvantages associated with prior practices.

In one aspect of the invention, the automated positive check authorization system includes an input device for receiving a check amount and checking account information presented in a transaction, a database having checking account numbers and corresponding balances, and a check verifier receiving the check amount and checking account information from the input device and searching the database for a current balance in response to the transmitted checking account information. The check verifier further issues an approval or decline message in response to a comparison between the check amount and the current balance in the checking account.

In another aspect of the invention, a method for automated positive check authorization includes the steps of receiving checking account information and a check amount on a check drawing on a checking account, searching a database for a current balance in response to the received checking account information, comparing the current balance with the received check amount, and then issuing an approval or decline in response to the comparison. In yet another aspect of the invention, an automated positive check authorization system includes a check verifier electronically receiving a check amount and checking account information read, at the time of presentment, from a check drawing on a checking account. The check verifier searches a checking account database for a current balance in the checking account in response to the received checking account information, and electronically issues an approval or decline message in response to a comparison between the check amount and the current balance so that the check may be accepted or refused at the time of presentment.

BETEF DESCRIPTION OF THF DRAWINGS

For a better understanding of the present invention, reference may be made to the accompanying drawings, in which: FIGURE 1 is a simplified diagram of a typical back office check processing process;

FIGURE 2 is a simplified block diagram of a positive check authorization system and method therefor constructed according to the teachings of the present invention; FIGURE 3 is a representation of a check; and

FIGURE 4 is a flowchart of an automated positive check authorization process according to the teachings of the present invention.

DETAILED DESCRIPTION OF THE INVENTION

The preferred embodiment (s) of the present invention is (are) illustrated in FIGURES 2-4, like reference numerals being used to refer to like and corresponding parts of the various drawings.

FIGURES 2 and 4 are a block diagram and a flowchart of positive check authorization system and method therefor, respectively, and both are referenced below. Although the discussion below is in the context of a point-of-sale transaction, the check authorization system and method of the present invention are equally applicable to other scenarios where a check is presented as payment or for deposit into an account. As shown in block 402, a transaction amount becomes available as purchases are summed and a total obtained. At the time the check is tendered as payment at a point-of-sale, a MICR reader 200 may be used to read the MICR line information on the check, as shown in block 404. FIGURE 3 shows a graphical representation of a personal check 300, where the bank number 304, account number 306, and check serial number 308 are shown on the MICR line. Bank number 304 is also commonly termed the transit and routing number. If a device is not available to read the MICR information, the information may be manually keyed or entered. MICR readers 200 are commercially available and have been in use for reading this pre-printed information on checks.

At the same time, the check amount 302 is entered electronically onto a device 202 by the person receiving the check via a numerical keypad, for example. Alternatively, the register total may be accepted as the check amount and no manual entry is necessary. The MICR information as well as the check amount are received by a check verifier 204 and used as search keys in one or more checking account databases 206, as shown in block 406. Checking account database 206 iε searched to find the current balance and/or any stop payment instructions. Checking account database (s) 206 may reside at the site of one or more banks or servicers who are contracted to perform the check authorization service. Alternatively, check verifier 204 is able to select the checking account database 206 that contains information on the check currently being presented based on the received checking account information, such as the transit and routing information. A lookup table (not shown) may be used to determine which database 206 should be accessed to verify the check.

Although MICR reader 200 and check amount entry device 202 are shown in FIGURE 2 as separate entities, they may be implemented by an integrated device 203 that performs functions of both devices. Further, MICR reader 200 and check amount entry device 202 may also be integrated with a cash register for point-of-sale applications. Check verifier 204 is represented as a block in FIGURE 2, but may in fact encompass reader 200, input device 202, and/or checking account database 206. Further, check verifier 204 may be co-located with reader 200 and input device 202 or with checking account database 206. The connection that enables the check information to be transmitted from the point-of-sale for searching check account database 206 may be made through a switched telephony network or a dedicated line. This transmission of check information is made electronically at the time of the check presentment prior to the acceptance of the check as payment. Checking account database 206 contains the checking account numbers, the current account balances, and any other necessary information related to the checking accounts at the institution. Additional information may include whether a stop payment has been issued for specific check serial number(s) or whether an account has been closed. Checking account database 206 is connected to the banking institution 208, which supplies the account information. Checking account database 206 may be maintained by the bank or a servicer contracted to perform the service of positive check authorization and/or check processing.

The check data transmitted from the point-of-sale is used to search database 206 for the current balance in the account (block 408) , and the check amount is used to compare with the current balance to determine whether sufficient funds are available to cover the check (block 410) . Dependent on the amount and balance comparison and whether a stop payment has been issued (block 412) , an approval or decline is issued for the current proposed transaction, as shown in block 414, and is electronically transmitted to the point-of-sale for visual display 210. The approval or decline may be in the form of a unique code, which may be used to relay additional information about the check, such as the check was stolen or lost.

The retailer may then refuse the check payment if the transaction is declined. A transaction that has been approved and the check accepted for payment may then result in a memo post being made against the account to adjust the current available account balance, as shown in block 416.

The accepted check may then be deposited for presentment for final funding as in normal check processing procedures.

In this manner, a check that is tendered for payment or deposit is accepted only if there are adequate funds in the checking account to cover the amount of the check. Businesses and banks are assured that they will receive credit for the checks they accept from their customers. Further, fraudulent use of checks that have been stolen or lost are discovered at the time the check is presented, not two days later when there is no remedy. It may be seen that the use of automated positive check authorization system and method will effectively reduce fraudulent use of checks.

According to one embodiment of the present invention, an automated positive check authorization system and method includes a check verifier electronically receiving a check amount and a checking account information read, at the time of presentment, from a check drawing on a checking account, searching a checking account database for a current balance in the checking account in response to the electronically received checking account information, and electronically issuing an approval or decline message in response to a comparison between the check amount and the current balance so that the check may be accepted or refused at the time of presentment. The positive check authorization system and method may further comprise at least a numerical keypad for entering a check amount at the time of check presentment. The positive check authorization system and method may further include a MICR reader for reading, at the time of check presentment, a MICR line data printed on the check. The MICR reader may be coupled to the check verifier via a telecommunications line. Moreover, the numerical keypad may be coupled to the check verifier via a telecommunications line.

Although the present invention and its advantages have been described in detail, it should be understood that various changes, substitutions and alterations can be made therein without departing from the spirit and scope of the invention as defined by the appended claims.

Claims

WHAT Tfi ΓT. TMED isr

₁. An automated positive check authorization system, comprising: an input device for receiving pre-prir.teά checking account information and a check amount of a check drawing on a checking account; a database having current balances for checking accounts of a banking institution; and a check verifier receiving said check amount and checking account information from said input device and searching said database for a current balance in response to said transmitted checking account information, said check verifier issuing an approval or decline message in response to a comparison between said check amount and said current balance in said checking account.

2. The positive check authorization system, as set forth in claim 1, wherein said input device comprises a MICR reader for reading a MICR line data printed on said check.

3. The positive check authorization system, as set forth in claim l, wherein said input device comprises at least a numerical keypad for entering a check amount.

4. The positive check authorization system, as set forth in claim 1, wherein said pre-printed checking account ^"information includes a routing and transit number and a checking account number.

5. The positive check authorization system, as set forth in claim 1, wherein said pre-printed checking account information includes a check serial number.

6. The positive check authorization system, as set forth in claim 1, wherein said input device is coupled to said check verifier via a telecommunications line.

7. A method for automated positive check authorization, comprising the steps of: receiving checking account information and a check amount on a check drawing on a checking account ; searching a database for a current balance in response to said received checking account information; comparing said current balance with said check amount; and issuing an approval or decline in response to said comparison.

β. The positive check authorization method, as set forth in claim 7, wherein said checking account information receiving step comprises the step of reading a MICR line data pre-printed on said check at the time of check presentment.

9. The positive check authorization method, as set forth in claim 7, wherein said checking account information receiving" step includes the step cf receiving a routing and transit number and a checking account number.

10. The positive check authorization method, as set forth in claim 7, wherein said checking account information receiving step includes the step of receiving a check serial number.

11. The positive check authorization method, as set forth in claim 7, wherein said checking account information receiving step comprises the step of entering said check amount written on said check at the time of check presentment.

12. The positive check authorization method, as set forth in claim 7, further comprising the steps of: reading a MICR line data pre-printed on said check; and electronically transmitting said MICR line data to a check verifier at the time of check presentment.

13. The positive check authorization method, as set forth in claim 8, further comprising the steps of: entering a check amount written on said check; and electronically transmitting said MICR line data to a check verifier at the time of check presentment.

14. The positive check authorization method, as set forth in claim 9, further comprising: searching said database for stop payment instruction on one or more check serial numbers in a said checking account; and wherein said approval or decline issuing step comprises the step of issuing a decline in response to a stop payment instruction issued specifying said check serial number of said checking account.

15. The positive check authorization method, as set forth in claim 7, further comprising the step of electronically transmitting said issued approval or decline to a display device where said check was presented at the time of check presentment so that said check may be accepted or refused.

16. An automated positive check authorization system, comprising: a check verifier electronically receiving a check amount and checking account information read, at the time of presentment, from a check drawing on a checking account, searching a checking account database for a current balance in said checking account in response to said electronically received checking account information, and electronically issuing an approval or decline message in response to a comparison between said check amount and said current balance so^' that said check may be accepted or refused at the time of presentment.

17. The positive check authorization system, as set forth in claim 19, further comprising a MICR reader for reading, at the time of check presentment, a MICR line data printed on said check.

18. The positive check authorization system, as set forth in claims 1 or 16, wherein said check verifier is coupled to said database via telecommunications line.

19. The positive check authorization system, as set forth in claims 1 or 16, wherein said database further comprises stop payment information on one or more check serial numbers in a specific checking account.

20. The positive check authorization system, as set forth in claims 1 or 16, wherein said database is connected to at least one banking institution including one owning said checking account via a telecommunications line.