Alternative processing network for custom rewards transactions

A merchant-funded rewards (MFR) payment system comprising:

• a point-of-sale (POS) terminal, said POS terminal that enables a customer to purchase one or more products from a merchant, said products comprising goods and/or services;
• a payment instrument, said payment instrument that enables the customer to initiate a credit transaction at the POS terminal for said purchase, the credit transaction comprising:
• a financial entity that is an issuer, said issuer that extends payment credit to the customer for a purchase and collects a monetary sum from the customer as compensation for the payment credit;
• a duality of processing networks, each processing network that:
• enables the merchant to communicate to the issuer a request for authorization of the credit transaction;
• enables the issuer to communicate to the merchant a response to the authorization request, said response either granting or denying the authorization;
• and
• settles the credit transaction, said settlement comprising debiting the issuer a first monetary amount, crediting at least a part of the first monetary amount to the merchant as a second monetary amount, the difference between the second monetary amount and the purchase price of the products in the credit transaction being a transaction cost;
• said duality of procesing networks comprising:
• a default processing network, said default processing network that comprises an acquirer bank and a transaction intermediary, said acquirer that processes the transaction on behalf of the merchant, and said transaction intermediary that enables communication between the acquirer and the issuer;
• an alternative processing network, said alternative processing network that enables direct communication and settling between the merchant and the issuer, wherein the merchant and the issuer are different entities and the transaction cost associated with the default processing network is higher than the transaction cost associated with the alternative processing network;
• a first track of transaction rewards associated with a default reward program funded by the issuer of the payment instrument and implemented via the default processing network;
• and
• a second track of transaction rewards associated with an MFR program and implemented via the alternative processing network, the second track rewards associated with the same payment instrument as the first track rewards;
• wherein:
• the transaction rewards are provided to the customer upon using the payment instrument for a purchase;
• the transaction rewards are associated with a first value received by the customer and a second value corresponding to the cost to the issuer or the merchant in providing the transaction reward the first value higher than the second value;
• and
• the transaction cost associated with the alternative processing network is reduced by an issuer-funded rebate, the amount of the issuer-funded rebate based at least in part on the cost of the second track rewards to the merchant;
• a merchant computer system comprising at least one processor and configured to formulate an MFR offer to the customer, the offer comprising a qualifying payment instrument, a qualifying POS terminal and the reward terms;
• and
• at least one notifying device configured to display the MFR offer to the customer and receive a selection of the offer from the customer, said selection comprising opting-in to the MFR program;
• wherein customer selection of the MFR offer:
• terminates enrollment of the payment instrument in the default rewards program for an initiated credit transaction;
• and
• reroutes the processing of the initiated credit transaction, said rerouting comprising disassociating the credit transaction from being processed on the default processing network and processing the credit transaction on the alternative processing network;
• triggers the enrollment of the payment instrument in the alternative transaction processing network;
• notifies, via the alternative transaction processing network, the merchant of the customer's selection of the MFR offer;
• and
• completion of the initiated credit transaction by an opted-in customer with the enrolled payment instrument at a qualifying POS terminal enables the customer to receive the MFR.

A method of electronically processing credit card payments, the method comprising:

• formulating, on a merchant computer system processor, a set of merchant-funded rewards (MFR) to offer to a customer, said offer comprising a qualifying payment instrument, a qualifying point-of-sale (POS) terminal, and terms of the reward, wherein the qualifying payment instrument is pre-enrolled in a default reward program funded by the issuer of the payment instrument and implemented by a default processing network;
• notifying the customer of the MFR offer via a notifying device;
• receiving a request from a customer to opt-in to the MFR;
• in response to receiving the request:
• linking the qualifying payment instrument of the customer to the MFR offer;
• terminating the enrollment of the qualifying payment instrument in the default reward program;
• and
• triggering enrollment of the qualifying payment instrument in an alternative transaction processing network;
• receiving an authorization request from the merchant to process a transaction initiated by the qualifying payment instrument at the qualifying POS terminal;
• and
• in response to receiving the authorization request from the merchant:
• detecting that the payment instrument is linked to the MFR offer;
• rerouting the processing of the transaction from the default processing network to the alternative processing network, said default processing network that comprises an acquirer bank and a transaction mediator, said transaction mediator that enables communication and monetary exchanges between the merchant-side acquirer and the customer-side issuer to settle the transaction, and said alternative processing network that comprises a direct connection between the merchant and the issuer, said direct connection enabling communication and monetary exchanges to settle the transaction, wherein both the default processing network and alternative processing network impose a fee on the merchant for processing the transaction and the fee imposed by the alternative processing network is reduced by an issuer-funded rebate corresponding to the cost of the MFR offer to the merchant;
• notifying, via the alternative processing network, the merchant of the customer's request to opt-in to the MFR;
• and
• processing the transaction, using the qualifying payment instrument, on the alternative processing network.