A Magnetic Mug Shot On Your Credit Card?

Like many good ideas, it came like a bolt from the blue. Driving to work in late 1992, Eastman Kodak Co. mathematician Lawrence A. Ray heard a radio news report about credit-card fraud. He thought: Why not encode a picture of the cardholder on the card's magnetic strip? Unlike photos, the digitized image would be hard to alter. When the card was swiped through a reader, the image would pop up on the clerk's screen.

The idea worked. In late March, Kodak announced that its scientists had compressed a human facial image two-hundredfold, down to an incredibly tiny 50 bytes, just small enough to fit into the unused storage space on a credit card's magnetic strip. Two blue-chip partners, Citicorp and IBM, plan to test Kodak's system with customers, probably this summer. Kodak hasn't set a world record for compression--the Houston Advanced Research Center recently demonstrated three-hundredfold compression, using mathematical constructs called wavelets. HARC has licensed it to Ball Corp. for satellite images. Still, Kodak's is closer to commercialization, according to Richard F. Doherty, director of Envisioneering Group, a Seaford (N.Y.) imaging consultancy. Says Doherty: "It's a true breakthrough."

NOSE NO. 17. The system provides two levels of security. A salesclerk can catch obvious fraud by comparing the picture on the checkout terminal's screen against the person who presents it. Beyond that, a series of bits derived from the portrait, called a verification code, is sent to the bank along with the usual data, such as the sale amount. If the code doesn't match what the bank's computer expects, the transaction is rejected. The code changes with each transaction, a big advance on current static codes that can be easily forged. Result: Even if a clever thief managed to fool a clerk by encoding his own portrait on the strip, he would still be caught by the bank computer. "It's like a door with interconnecting locks," says Ray. "It won't open without both keys."

Kodak won't reveal details about the compression technology because its patents are pending. But Ray says his team started with a big edge over other techniques because it was dealing with just one type of image: a face. It would have two eyes, a nose, a mouth, hair, and so forth, thus limiting the information needed.

Kodak's method starts with a low-resolution image of about 10,000 bytes. Then, says Ray, it squeezes it, using "a very clever police-sketch type of algorithm." Without giving away important details, Ray says the algorithm breaks down the image into small portions and then finds ones that match, so the overall face can be represented more compactly. Of course, it's more complex than that, and Kodak has developed software that blends features to deliver a more lifelike portrait.

Kodak's technology has other advantages, too: Some new point-of-sale terminals can be converted to use it for as little as $500. Photos could be taken at bank branches or gathered from motor vehicle departments. It's less intrusive than scanning fingerprints or retinas and more fraud-proof than electronic signature pads.

SMART-CARD SWITCH. But a photo-security system works only for face-to-face transactions, currently just 60% of all sales on the Visa International network and shrinking. What's more, both Visa and MasterCard International Inc. plan to phase out magnetic-strip cards in the next decade, switching to smart cards with computer chips that can store far more information. It's not clear that many banks or retailers will spend money converting to Kodak technology that could soon be obsolete.

Visa also reports that credit-card fraud on its global network has shrunk about 20% in each of the last two years, thanks to new security measures, such as software that detects aberrant spending patterns for an individual card. And banks and retailers don't know how customers will react to having their picture so widely used. "The Kodak system is an interesting technology," says Peter R. Hill, Visa's senior vice-president for payment technologies. "But...it's not clear what degree of acceptance it will have."

Still, IBM executives believe that smart cards, which cost more, won't be widespread in the U.S. for years. "This technology could certainly have a good run before smart cards become pervasive," says Warren J. Ayer Jr., the IBM executive in charge of the Kodak relationship.

Kodak has its own smart-card play, developing its technology with France's Gemplus, the leading maker of smart cards. The technology also can squelch check fraud by putting digitized images onto ordinary checks, using a stamp-sized bar code that looks like a checkerboard. Other possibilities: Employee I.D. cards and government welfare cards and checks. If Kodak is right, your image could soon be popping up on computer screens all over the place.

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