MasterCard to use magnetic "fingerprints" to combat card fraud

NEW DELHI, India -- MasterCard believes it has made a major breakthrough in the battle against counterfeting of credit cards with a new technology, dubbed Magneprint, according to a report in the Times of India.

Here's how it works: Magneprints will be scattered in random patterns (similar to a fingerprint) in the card's magnetic stripe. If data from the card is skimmed and used to create a counterfeit card, ATMs and point-of-sale terminals will be able to detect that the bogus card does not have the unique Magneprint in its stripe.

Joel Lisker, who heads the security and risk management at MasterCard International, said, ''This is the best solution we have for the biggest problem faced in the industry."

According to Lisker, MasterCard's pilot at 150 locations in Kuala Lumpur, Malaysia has yielded a reduction in counterfeiting.

MasterCard plans to globally launch Magneprint technology in phases over the next 3 to 6 months, according to the Times. While MasterCard said it is prepared to share the open architecture technology, Visa is not expected to join this initiative.

Industry watchers say Visa is contemplating a move toward chip-based technology to combat fraud, according to the Times. Visa officials did not comment on the company's fraud strategy.

MasterCard officials admit that chip-based card technology is the most appropriate solution for the future, but they said an interim technology is necessary because mag stripe cards will exist for some time to come.

MasterCard is betting on mag stripe and chip-cards co-existing for some time. ''It is better to have a complimentary solution to make up for the weakest link in the chain,'' Lisker said.

''The initiative by MasterCard is good. It's is premature to comment on how it will work. Chip-based technology is the future, but people will continue to use magstripe cards,'' said Vijay S Mehta, chief consultant of the Udaipur-based Credit Card & Management Consultancy.

Each MasterCard issuing bank will have to invest $140,000 in order to use Magneprint. The cost will cover new systems to capture and store the new data, which is already being put on cards.

Four banks in Malaysia, including Citibank and HSBC, are currently testing Magneprint.

Global counterfeit card losses are believed to be about $4 billion annually.

MasterCard is also developing a voice verification technology for customers using credit cards on the Internet. ''Voice verification is emerging as a possible solution. When you speak words, a score will be generated. The issuer will look at the score, collect Magneprint and decide to accept or reject a transaction on the Net,'' said a senior MasterCard official.