There are many payment systems in use today. The simplest is good hard currency. In such, one makes a transaction and, in return for the goods or services, provides hard currency (e.g. money, cash, paper, coin, etc.) sufficient to cover the cost of the transaction. This method has been in use for thousands of years and still works well today with some notable exceptions. Hard currency is not good for very large transactions such as the purchase of a vehicle, home or business. Even for smaller transactions, a person having or carrying hard currency is subject to theft of that currency. It is difficult to make remote transactions using hard currency. For example, making a transaction over the phone or over the Internet requires payment before shipment of the goods, so the hard currency has to be shipped to the seller and is subject to theft along the way.
To facilitate safer movement of currency, the banking industry initiated the use of checks. It is rumored that the Romans invented checking in the 4th century, but the first wide-spread use of checks was likely in Holland around the 16th century. A check is written against a checking account with a bank, provide to the recipient in lieu of hard currency and the recipient redeems the check at their bank for hard currency or as a credit to their own account. Checks provided ways for people to pay large amounts and to pay over great distances. Checks became the de facto standard for paying bills in the mail. Still, checks slowed down transactions because the recipient was not guaranteed that the payment was made until the check cleared the banking systems and the check amount was deducted from the payee's account, often taking 3-6 days. Also, many situations do not permit payment by check because there is no guarantee that the check will clear unless the payee is known by the recipient or unless the check is certified (e.g., the bank has already withdrawn the funds from the payee's account).
To improve customer loyalty, in the early 1900s, some oil companies and department stores issued their own proprietary credit cards that could only be used at their gas station or stores. This was the beginning of credit cards. Around 1950, the Diners Club card was invented and used mainly for travel and entertainment. The first “plastic” credit card was the American Express card in the late 1950s. In those days, paper transactions were made with the charge card and later cleared through the issuer of the card and billed to the individual making the charge. Today, many people have several charge cards and almost every transaction is made electronically, appearing on the payee's account within one day of the transaction. The credit card provides a relatively safe form of payment since the holder's liability is limited for false transactions, works at great distances and, if the bill is paid quickly, has little expense for the card holder (the merchants are usually charged a fee for each transaction). One problem with credit cards is, if a thief obtains enough information to make charges on your credit card, it is often difficult to notify your bank, change your account number and resume normal activities. Another problem with credit cards is that they provide credit to the card holder and, often, the card holder makes more purchases, getting themselves into debt without having the means to get out of that debt.
Another similar payment device created for those who can't control spending with credit cards is the debit card which is similar to the credit card, except each transaction is immediately deducted from the holder's account. Therefore, if the holder has insufficient funds to make a certain transaction, the transaction is refused.
Other various systems have been in place to expedite transactions made over the Internet. In the early years of the Internet, it was not wise to provide your credit card number to a remote retailer and often, after such a transaction, “hackers” would know your credit card number and make unauthorized transactions, requiring the card holder to notify the issuing company, change all of their records and, in rare cases, pay a minimum fee. To overcome this issue, a system called Paypal was created, particularly for use with an on-line auction system called eBay. Paypal enabled prompt payment for goods and services without providing a credit card number and worked very well for Internet purchase, but was not extensible to many transactions where a credit card is useful such as paying for goods at a retail establishment.
Today, many people do not leave home without a wallet that is usually full of credit cards and a small amount of money, and a cellular phone, a cell phone. Although it is not always evident that a person is carrying a wallet, you can usually see their cell phone as the call people while in the car, walk around airports and malls talking to people, sending text messages. For some classes of society, almost every member has a cell phone starting at age seven or eight. It has been estimated that nine out of ten adults have a cell phone.
Since the cell phone is now so prevalent and because of the rapid increase of the cell phones processing, input and display capability, the cell phone has started to displace the credit card in certain transactional situations. For example, Starbucks coffee shops has deployed a system in which the users prepay into an account through PayPal or a credit card, then load an application (App) onto their smart cell phone. The cell phone then replaces the user's plastic card, displaying a bar code that represents the user's account number. Anyone finding someone's cell phone can access the account and make purchases. After a purchase, the app displays the bar code and it is scanned by a bar code scanner that communicates the account number to the register and the account is verified, checked for sufficient balance, debited and the transaction is complete.
Another service called FaceCash requires the user to create an account and fund the account (e.g. deposit money) and this works like a debit card from your cellular phone. A bar code with your account number is displayed on your cell phone display and is scanned by the retailer. After scanning, the retailer is shown an image of the user of the account for facial validation. Once validated, the retailer enters the transaction amount and that amount is deducted from the user's account and credited to the retailer. This is similar to a debit card with an image of the holder of the card. FaceCash provides the account number (through a scan of the bar code) to the retailer. Once the retailer has the account number, there seems to be nothing to prevent the retailer or a hacker from over charging or fraudulently charging the account.
These systems do not provide a complete, secure, cell phone based transactional service. What is needed is a system that will deliver utilize existing technology devices for transferring funds in a secure system.
USPTO Backgrounds
USPTO Backgrounds