© Copyright: Ben Livson 1998-2009. All rights reserved.
 

This invention - scratch cash - presents a new secure method for payment of goods and services. This invention details:

• Methods for generating scratch cash
• Wholesale-Retail-Consumer chain for distributing scratch cash
• Interfaces for using scratch cash including web and email enabled devices, bar code readers and telephony.
• Security profile of scratch cash and methods for fraud prevention
• Limits to consumer exposure and how to insure against loss, theft or fraud

The invention advances state of the art by presenting methods to:

• Conduct e-commerce without requiring consumers to acquire any new technology such as digital certificates or smart cards.
• Consumer privacy and anonymity is guaranteed. Consumers do not have to identify themselves to purchase scratch cash.
• Consumers willing to identify can be insured; any lost or stolen scratch cash not used can be cancelled and the consumer can be issued with replacement scratch cash. Consumers with accounts receive periodic statements for transactions.
• Exact change for purchasing is supported by updating the value of a scratch.
• The status and any transactions against a scratch will be available for auditing.
• Scratch cash can be made globally convertible via scratch exchanges.
• Scratch cash minimises interest payments for consumers and merchants alike. Scratch cash by default is prepaid to merchants and direct debit to consumers but the distribution chain may enable credit days.

• Scratch cash has the physical security features of any normal fiscal instrument such as a bank note and but also has a character sequence known only to the consumer and merchant at the time of its use. The probability of being able to forge this sequence is proven to be extremely low.
• Scratch cash production and operational backend have among the lowest cost of all methods of payment that involve physical materials, namely being a paper or polymer card.
• Scratch cash use for vending machines, shops, super markets, and direct payments from consumer over the Internet is presented, and as an additional method of payment for our @Post 'Method for Integrating Internet SMTP Electronic Messaging with Postal Services'.

1. 5,729,594, March1998, Edwin E. Klingman, 'On-line secured financial transaction system through electronic media'.
2. July 1998, Ben Livson, 'Method for Integrating Internet SMTP Electronic Messaging with Postal Services'.
3. United States Patent 5,799,087, August 1998, Sholom S. Rosen, 'Electronic-monetary system'.

1. A new universal method - 'scratch cash' - for secure payment of goods and services to handle multiple payment interfaces selected from the group consisting of any web-enabled device, e-mail client, barcode readers connected to the Internet or (virtual) private network and telephony, whereby a consumer retains complete privacy and anonymity, whereby a consumer may purchase scratch cash from any approved retail outlet, whereby no change is required to the normal wholesale-retail-consumer distribution chain, whereby a consumer is e-commerce enabled without having to purchase any new technology such as certificates or smart card readers, whereby a merchant is secured by scratch cash being by default prepaid, and whereby a consumer's risk is limited to the amount of scratch cash purchased.
2. Scratch cash of claim 1 is protected by a randomly generated character sequence - the scratch - with a probability of fraud being less than b/(m^l) where l=length of scratch sequence typically varying up to 20, m=size of scratch character set typically between 70-80, and b=block size for scratch nominations typically being less than a billion, thus yielding an extremely low probability typically in the order of 10^-20 or smaller for criminals to be able to generate a valid scratch combination. The inventors claim scratch cash as (one of) the most secure methods of payment.

3. Consumers of claim 1 willing to identify can be insured; any lost or stolen scratch cash not already used can be cancelled and the consumer can be issued with replacement scratch cash.

 

4. Retailers and (larger business) consumers of claim 1 will have scratch cash accounts enabling them to receive periodic transaction statements, credit days, and other benefits.
5. Consumers of claim 1 can be issued exact change for a purchase by reducing the monetary value of a scratch sequence. The status and any transactions against a scratch will be available for consumer inquiries and for auditing purposes.
6. Consumers of claim 1 can be offered discounts and prizes.
7. Merchants of claim 1 may offer retailers and larger subscription based consumers credit days for settling their scratch cash purchases whereas by default scratch cash is prepaid.
8. Scratch cash stamps of claim 1 extend Patent Application No. 09/113,344 'Method for Integrating Internet SMTP Electronic Messaging with Postal Services' by enabling a subscription-less method of payment with scratch stamps sold by post offices and other authorised agents the same way as postal stamps are sold.
9. Merchants forming scratch cash exchanges can make scratch cash of claim 1 globally convertible.

ABSTRACT *

References *

Claims *

Background -- Field of Invention *

Background -- Description of the Prior Art *

Objects and Advantages *

Drawing Figures *

Summary *

Detailed Description of the Invention *

Table 1. Minimum Set of Scratch Cash Database Attributes *

This invention simplifies electronic commerce and lowers barriers of entry. Methods are presented for a subscription-less model of e-commerce. The present invention relates to a new method of payment for electronic commerce that uses pre-purchased monetary units, and in particular to a 'scratch cash' card containing a set of sequences which are correlated to pre-purchased units of money, and may be used as such following an identification/validation procedure.

Large segments of the population are still deterred from 'revealing their credit card over the Internet' regardless of whether their concerns are justified or not. Credit cards being multiple use devices can thus be abused for a period until the unauthorised transactions are detected. Transactions on the Internet are especially vulnerable to this type of fraud as the credit card holder has not lost her card and is not aware that purchases are being made in her name.

E-commerce merchants including the major credit-debit card companies are in the process of employing sophisticated technology using Public Key Infrastructure encryption, digital certificates and signatures all subject to rigorous audits to increase people's trust.

People have major privacy concerns about revealing their spending habits, financial exposure, fear of identifying for loss of civil liberties, receiving unsolicited advertising, junk mail, and fear of fraud in the consumer-merchant relationship are magnified by introduction of e-commerce.

This invention establishes a method for people to remain incognito and use prepaid equivalents of cash called scratch cash, thus limiting their exposure. The method is a win-win with merchants benefiting from issuing prepaid scratch cash. The method is highly tamper proof and does not require any sophisticated technology such as smart cards and digital certificates.

Scratch cash can be used to purchase any product or service that has a scratch cash merchant that uses the methods of this patent application.

United States Patent 5,799,087, August 25, 1998, Sholom S. Rosen, 'Electronic-monetary system' offers: " (1) banks or financial institutions that are coupled to a money generator device for generating and issuing to subscribing customers electronic money including electronic currency backed by demand deposits and electronic credit authorizations; (2) correspondent banks that accept and distribute the electronic money; (3) a plurality of transaction devices that are used by subscribers for storing electronic money, for performing money transactions with the on-line systems of the participating banks or for exchanging electronic money with other like transaction devices in off-line transactions …" by " electronic modules each having a processor, a memory, and the capability to create a cryptographically secure channel and transfer and receive electronic notes via said cryptographically secure channel, and where each electronic module stores said electronic notes in its respective said memory …". Again the outcome enables e-commerce by generating, storing and consuming prepaid monetary units but by completely different means and targeted mainly to customers capable of absorbing a HiTech solution.

Several prior art digital money transaction schemes in use are listed and described by U.S. Patent 5,729,594 with the following web-sites proving comprehensive information about Digital Money schemes:

    ______________________________________
    Checkfree     http://www.checkfree.com
Cybercash     http://www.cybercash.com
Digicash      http://www.digicash.com
Ecash         http://www.marktwain.com
First Virtual Holdings
http://www.fv.com
MasterCard    http://www.mastercard.com
NetBill       Tel: (412) 268-2000
    NetCheque/NetCash
http://nii-server.isi.edu:80/info/NetCheque
Netscape Comm http://www.netscape.com/
Open Market, Inc.	http://www.openmarket.com
VeriSign      	http://www.verisign.com
VISA          	http://www.visa.com
Web900        	http://logicom.com
	
          
"Electronic Commerce",PC Magazine May 28, 1996, page 54-60.
    ______________________________________

However, the vast bulk of commerce for many years to come will not be electronic commerce. Traditional commerce, however, is undergoing major enhancements in automation including methods of payment. In particular:

1. A large number of solutions already support prepaid monetary units in the form of cards for payment, for example phone cards or cards used for public transportation. The cards are rapidly evolving into smart cards that allow replenishment of stored value.
2. Shops, in particular supermarkets have all produce bar-coded for quick scanning. Payments are increasingly transferred by EFTPOS.

Postal services are a prime example of old institutions undergoing a true revolution. U.S. Postal Services already has licensed half-a-dozen companies to digital franking and metering over Internet including E-Stamp, StampMarker and Pitney-Bowes. Patent application No. 09/113,344, July, 1998, Ben Livson, 'Method for Integrating Internet SMTP Electronic Messaging with Postal Services advances state of the art by automating the whole process of distribution, print-on demand, insertion, enveloping, franking and metering.

The big challenge for commerce is to manage the successful transition from traditional commerce into e-commerce. This invention presents a bridge from traditional commerce to e-commerce transparent to many consumers and for others already using email or web-devices by natural means not involving use of credit cards - the fear and barriers of entry are reduced or removed to many for using electronic commerce. Consumers are exempt from purchasing or using any new technology and no learning curve is required.

Credit card transactions over the Internet have been slow to increase with the volume of connected users. The reason is that there is a perception, rightly or wrongly, that the user’s credit card number could land into the hands of a criminal and therefore expose the credit card holder. The potential exposure is an unknown.

There is also a subconscious knowledge by the purchaser that the credit card transaction is traceable. This is both good and bad. People like to use cash because of the anonymity of the transaction, however they also like statements detailing transaction for accounting and taxation benefits.

New methods of e-commerce are emerging which do not address these issues. Certificate based distributions are difficult because they require a clear 100 point identification of the end-user. Setting up this infrastructure is only available to multinational corporations and government bodies for processes and validation.

The business model for scratch cash closely follows that of the postal system for the surface delivery of articles, ie. a stamp, which is pre-payment for a service is sold over the counter and manually voided any reuse of that service. Technology has opened the door to upgrading the manual voiding process to an electronic voiding process, which adds value to other areas.

The value proposition of scratch cash follows:

1. Ensures consumer privacy and anonymity.
2. Ensures payment to the merchant - scratch cash is prepaid before it can be used.
3. Limits consumer exposure to scratch cash purchased.
4. Is easier and less expensive to produce than banknotes or smart cards.

Figure 1 shows a Front Side of a $30.00 card ($300.00 total).

Figure 2 shows a Rear Side of a $30.00 card (10 scratches = $300.00 total)

Figure 3 shows scratch cash context diagram

Figure 4 shows scratch cash end to end process tree

Figure 5 shows the consumer and merchant processes for scratch cash purchase

Figure 6 shows the process for scratch cash generation

Figure 7 highlights scratch cash account processes

Table 1 describes a minimum set of scratch cash database attributes

This invention presents a completely new method, scratch cash, for payment of goods and services. Scratch cash is a paper/polymer card showing the merchant site, monetary value of each scratch, and the hidden scratch surface has a bar code and a corresponding character sequence as the key to using the value. This invention describes how scratch money is generated, its chain of distribution, usage, security profile and fraud prevention measures. This invention is a break-through for e-commerce enabling consumers to conduct secure e-commerce without requiring any additional technology such as certificates or smart cards, and without requiring consumers to reveal their identity. Consumers using smart cash maintain their privacy and anonymity, and avoid risks such as using credit cards for e-commerce.

It is a paper/polymer card sold in a retail market, similar to that of phone-cards and postal stamps. The card is issued in any number of denominations from 20c to $100.00 or higher multiples similar to but not necessarily the same as bank note denominations. The face of the card is marketed with "collectible" type images, such as that of a phone card.

Higher value denominations carry a hologram, water marking or other techniques to make forgery harder. The main defense against fraud, however, is the character sequence of scratch cash. The probability formulated below for being able to generate a correct scratch sequence is extremely low, thus making scratch cash as tamper proof as the best bank note or electronic certificate technology but yet being significantly cheaper and simpler to manufacture and distribute.

The rear of the card contains multiple scratch lottery style boxes, generally 10 on each card. These boxes contain a unique sequence of alphanumeric, upper and lower case characters and an equivalent three-dimensional barcode containing this unique character sequence. The card would also contain merchant ID, card ID and a merchant web-site URL:

Figure 1: Example Front Side of a $30.00 card ($300.00 total).

Figure 2: Example Rear Side of a $30.00 card (10 scratches = $300.00 total).

Note: 1^st number scratched and exposed for use.

Consumers purchase scratch cash card cards over the counter at places such as newsagents, Post Offices etc. The unique sequence of characters is covered by the removable (scratch) material and is therefore hidden.

Patent Application No. 09/113,344 'Method for Integrating Internet SMTP Electronic Messaging with Postal Services' enables integration with scratch cash stamps. Postal Services will be able to sell scratch cash stamps over the counter the same way any other stamp is sold. Scratch cash extends the subscription based billing methods listed by patent application No. 09/113,344 to include subscription-less billing that is conceptually akin to a postal stamp, and thus a lot easier for postal services to implement.

For example: An Internet email user who wishes to send an email through the Australian postal system enters the email address as postal-address@post.au.

This email is routed to the post's hybrid messaging system where the address is interpreted, analysed and electronically re-routed to the printing centre for hybrid mail nearest to the destination address, it is then printed and enveloped in one pass and delivered to the addressee through the standard postal service.

The scratch stamp is used to pay for this service. This information is then analysed by the postal service systems to validate the unique character sequence and subsequently flags the scratch value as used. Once used this character sequence will not be available (for a retention period).

How can one use scratch cash for payment of hybrid messaging to convert email into postal letter services? There are two scenarios:

1. The easier scenario is when a web-interface is used. The web will assist in enforcing addresses to translate into a valid Delivery Point Identifier DPID and will have a rate calculator that provides the user with the lowest cost combination of scratch cash required. For example a 6-page black and white printout might cost $1.50. The user is instructed to peel off a $1 scratch cash stamp and 50c scratch cash stamp and enter the scratch combinations into the web-form.
2. Email-interface will support scratch cash included the message body. The format will be of the form: #scratch₁[.scratch₂…scratch_n]# where the $1 and 50c scratch cash stamps may be input in whatever order.
   The hybrid mail envelop will get the email address and display name if the postal address translates into a valid Delivery Point Identifier (DPID). If so, then the scratch cash stamps are automatically marked as used in the database. However, if the address does not translate into DPID, the user is sent a notification of addressing failure and the scratch cash can be reused.

Scratch sequences cannot be part of the e-mail headers as headers are transmitted in the clear whereas the body and attachments of a secure S-MIME message can be encrypted.

Hybrid messaging can return exact change by allocating a residual scratch value scratch for the difference. This is a saving to consumers and eliminates waste with traditional stamps. The consumer benefits further by having to pay only for valid addresses unlike traditional mail where a stamp cannot be reused if the letter is not properly addressed.

The above method of placing scratch sequences in the body of a secure structured message enables payment of any goods or services. The merchant establishes the additional information required in such secure structured messages for payment.

The printed scratch sequence is used by the purchaser for payment of electronic services such as an Internet e-commerce transaction. The consumer connects to the web page of an organisation who has registered as a scratch cash merchant.

The consumer selects the goods from the virtual store and enters the scratch card number to pay for the goods. Where the value of the goods comes to an unusual amount, say $125.50 the web page would inform the user that they would need to enter more than one scratch sequence to make up to the total value. Once submitted, the web site would electronically refer the character sequence(s) entered, into the card suppliers system, including their merchant ID. The scratch cash system would validate the codes, nullify those character sequences and credit the web merchant’s account with the value. The merchant would then be deliver the goods to the consumer.

The web site merchant could do some pre-submit checks on the code to aid the end-user in obtaining the correct sequences to enter. The $125.50 would require at a minimum the consumer to enter 4 sequences ($100, $20, $5 and 50c).
This greatly improves security, as all four sequences would need to be correctly validated for the transaction to succeed. Where a transaction failed with one bad sequence (typo) the transaction would not proceed and the other sequences would not be marked as used. Web kiosks could include a card bar code reader, to simplify the process to the consumer. Any change can be returned to the consumer by issuing residual scratch cash value.

Scratch cash in this example is used for payment of goods such as those provided at vending machines, shops and super markets. A modified bar code would automatically scan the next available character sequence. This is transmitted to the central database using the Internet or a (virtual) private network where the transaction is either validated or denied. If valid the scratch sequences would have to be either scratched or otherwise marked as used so that the consumer has a record of it being used.

The unique character sequence is generated randomly at the card production printing time; each generated sequence of characters is captured and input automatically into a transaction database.

Resilience against fraud by hackers trying randomly to generate valid sequences depends on three factors:

1. Length of scratch sequence (l)
2. Size of scratch character set (m)
3. Block size for nominations (b)

The maximum length of scratch sequence is not limited but in practise l<=20 for being able to manually enter a sequence via web-enabled device. Longer sequences are feasible for Internet connected bar code reader applications. The maximum size of the scratch character set for manual input is m<=84-characters including numbers 0-9, capitals A-Z, small letters a-z and some 22 allowable special characters ~,`,!,@,#,$,%,^,&.*,(,),_,+,=,[,],{,},|,<,,>,.,?,/,:,;,",' based on the standard US 104-keyboard for PCs.

In practise for manual input the character set will be restricted to m=75-odd characters eliminating characters that consumers are not used to or could be mistaken for others. The criterion is for characters to be readily recognised to avoid confused consumers.

For example, assume the scratch provider randomly generates for each nomination, a block of b= billion 10⁹ valid scratch combinations up to m=15 characters long from a character set m=75, then the probability of randomly being able to generate a valid combination is b out of m^l, in our example 10⁹ out of 75¹⁵=13363461010158061981201171875 =~ 10²⁸.

Thus, the probability of guessing a combination is infinitesimally small 10^-19.

The back office will block any IP-address attempting invalid entry more than, say ten times, thus making fraud by randomly generated sequences virtually impossible.

The whole ASCII character set with m=255 and of practically unlimited length l can be supported if the scratch sequences are provided electronically eg. on magnetic media such as a floppy disk or by secure email. Such sequences can be 'cut and paste' or read by an application into the browser instead of manual entry. The merchant database of valid scratch sequences assists the consumer by informing whether a sequence is accepted for use, rejected as already used or invalid.

Compare this to credit card fraud where the character set is numbers only m=10 and size l=16 but in fact l=12 because the first four credit card numbers are provider-country-bank specific. It is easy to see why credit card fraud over the Internet when e-commerce relies on the credit number and valid until month (48 combinations) is trivial compared to the exceptionally fraud resistant scratch cash.

The inventors believe that scratch money is harder to defraud than any other means of payments including bank notes and e-commerce by electronic certificates on smart cards.

You need the following to implement scratch cash:

1. Character set definition utility that allows new character sets to be defined in addition to the default ones specified in the invention.
2. A parameterised random number generator. The parameters scratch value nomination for the run, include block size b for the number of scratch sequences to be generated, maximum sequence length, and character set for generation.
3. A database to store the generated scratch sequences
4. A facility to print out scratch cash
5. Retail network to sell scratch cash. Scratch cash follows the same prepaid model as stamps and phone cards, and are sold exactly the same way.
6. An audit trail of scratch cash issued, used and the corresponding transactions.
7. Once a scratch cash sequence is used it is marked as used in the database - thus, scratch cash can be used once and only once but may have a lower residual value as change from a purchase. Consumers may inquire status of a valid scratch and the associated transactions. Scratch cash account owners will get regular statements.
8. Adjust scratch cash value to return exact change to the consumer. Alternatively, issue 'real' cash as change for vending machines and shops.
9. Merchant sites are subject to audits and financial controls. The sites must use encrypted sessions and segregate the web-site by firewall(s) from the scratch cash database.

We proceed to describe a minimum set of scratch cash database attributes.

The above in no way is intended to constrain the way a merchants scratch database is designed or integrated with the merchant's backend e-commerce systems.

Fraud is always a risk to both consumer and merchant. The consumer's risk is being sold fake scratch cash or a merchant not honouring valid scratch cash. The consumer's risk is, of course, limited to the amount of scratch cash purchased.

The patent technology will be licensed only to blue chips in the banking and finance, telecommunications, major retail chains etc. and audited by the top firms. Thus, the likelihood of a merchant becoming insolvent or acting fraudulently is very small. Insurance schemes can be set to insure a consumer's scratch cash to a nominated amount.

The other consumer risk is for a third party impostor selling scratch cash. The merchant web-sites will have a list of licensed retailers. In most cases the authorised retailers are known anyway. Thus, for example, you can buy scratch stamps only from post offices and authorised postal agents.

Scratch cash will be protected by the latest technology such as holograms and bar coding that make fraud very difficult and expensive. Also, all scratch transactions are recorded, thus enabling efficient fraud detection.

Merchants are prepaid for valid scratch cash. The only way a merchant can be defrauded is by the criminal feeding valid scratch combinations. As discussed above the likelihood of this is extremely low. It is in fact easier to forge a bank note.

Retailers and larger business consumers with accounts may request the merchants to cancel cash cards in the vent of fraud or theft and be reissued with replacement scratch cash if not already used.

The primary user interfaces for scratch cash payments are:

1. Web browser - can be a PC or any web-enabled device such as Web TV or PDA that has a web interface.

NB. All merchant site sessions are SSL-encrypted. Digital scratch is just a random sequence of characters, thus making fraud extremely hard even if hackers manage to break SSL.

2. Email client for scratch stamps.
3. Barcode readers and markers for super markets, shops and vending machines connected to the Internet or to the backend (virtual) private networks.
4. Telephony. A reduced character set of numbers and capital letters is required for telephony based scratch cash application. A longer scratch sequence and encrypted voice over IP (the encryption won't extend to the local subscriber loop for plain old telephony) are required for best security. However, any standard telephone handset can be used.

The use of scratch cash can be extended by authorised scratch cash merchants joining a Scratch Cash Exchange(s) the members of which accept each other's scratch cash and consolidate their accounts periodically. The exchanges will allow scratch cash to become a globally convertible payment system.

The user interfaces will enable the consumer to select a merchant followed by scratch sequences for the purchases.

It will be understood that, whilst a very specific embodiment has been described, numerous other variations and modifications of the invention will become apparent to persons skilled in the art. For example, it is an obvious variation of the present invention to substitute various sequences for the alphanumeric symbols in the embodiment presented here. Non-limiting examples of such character sequences include the standard 'ASCII' character set available on most computer keyboards, foreign language 2-byte symbols, and other such symbols. Also, numerous methods of keeping the sequences secret until desired can be conceptualised. As non-limiting examples of methods to obtain secrecy sequences may have to be decoded before use with only the consumer having the decoding key, thus allowing the sequence to be visible i.e. 'scratched'. Similarly, the sequences on the scratch card may be visible but require interpretation/decoding by means of a scanning device. Indeed the invention need not require the scratch card sequence to be visible to the human eye at all, but may consist of indicia identifiable to some device. All such variations should be considered to fall within the spirit and scope of the invention as broadly described here.

The scratch cash invention is a universal method for secure payment of goods and services. Consumer privacy and anonymity is as high as with bank notes. Consumer risk is limited to the scratch cash purchased. Scratch cash security is as good or better than any other form of payment. Distribution of scratch cash is part of the normal wholesale to retail to consumer chain and unlike many e-commerce solutions does not require changing existing distribution chains.

Scratch catch does not require consumers to purchase any new technology. Any device such as a PC supporting web or email interfaces, or any facility with bar code card readers and any standard telephone can be used as interface.

Scratch cash protects not only consumers but also merchants. Scratch cash by default is prepaid unless the merchant or the retailer has agreed to credit days when selling scratch cash.

Consumers with scratch cash enjoy all the benefits of e-commerce being able to purchase directly from the manufacturer of goods or supplier of services.

Scratch cash is one of the least expensive forms of payment. Consumers are not subject to the high interest payments of credit cards, and are not exposed to credit card fraud. Merchants benefit from distribution costs significantly lower than merchant payments to credit card companies.

Holding scratch cash is physically safer to consumers than holding onto bank notes. Consumers willing to identify themselves may purchase insurance for a small premium against theft or fraud. Such consumers benefit from the merchant being able to cancel unused scratch cash and issue replacement scratch cash if a consumer has lost her scratch cash or has been subject to theft or robbery.

Scratch cash minimises the cost of purchases by the consumer receiving a residual scratch cash value as change for the exact amount due.

Scratch cash enjoys all the benefits of e-commerce with the merchant being able to reward a consumer by offering prizes or discounts.

Scratch cash is a whole new payment paradigm that offers all the benefits of e-commerce to consumers without any new intimidating technology. Consumers are exempt from the hardship of identifying themselves to obtain electronic certificates or smart cards. Consumers are provided with a highly flexible method of payment, with risk capped or completely eliminated by taking insurance.