System and method for merchant risk management
AssigneeIntuit Inc.
InventorLarry J. Thomas
Life of this patent
Estimating the term…
Abstract
Systems and methods for quantifying and managing financial risks related to a processing agent or transaction acquiror's relationship to a merchant are described. Factor analysis may be utilized to determine one or more principal components from data associated with merchant credit transactions, and such principal components may be utilized in the calculation of cumulative distribution functions and the generation of probability values, which may be averaged and compared with predetermined thresholds to provide a quantitative basis for determining whether a risk management event related to one or more particular merchants should be triggered. Net estimated forward-looking liabilities for particular merchants and groups of merchants may be quantitatively assessed and acted upon.
Claims25
A computerized method for quantifying merchant credit risk, the computerized method comprising:
- a computer performing factor analysis on a historical dataset to extract one or more principal components related to a critical variable associated with merchant credit risk;
- the computer calculating a cumulative distribution function for each of the one or more principal components comprising one or more probability values;
- the computer averaging the principal component probability values for a merchant;
- and
- the computer comparing the averaged principal component probability values for the merchant with a predetermined decision threshold value to determine whether a risk management event related to the merchant should be triggered.
A system for quantifying merchant risk, comprising:
- a. a central processor;
- and
- b. a database containing credit-transaction-related data;
- wherein the central processor is configured to:
- populate the database with updated data on a daily basis based upon electronic interaction with remotely-located merchant credit terminals;
- assemble data from the database in the form of a current quantitative data and historical quantitative data;
- perform factor analysis on the historical quantative dataset to extract one or more principal components related to a critical variable associated with merchant credit risk;
- calculate a cumulative distribution function for each of the one or more principal components comprising one or more probability values, average the principal component values, and compute a predetermined decision threshold using the historical quantitative data based on a loss function;
- compute and then average the principal component probability values for a merchant utilizing the current quantative dataset;
- and
- compare the averaged principal component probability values for the merchant with the predetermined decision threshold value to determine whether a risk management event related to the merchant should be triggered.
Dependencies are inferred from the claim text.