The unveiling of the Visa Travel Money card in early December gave new life to a security technique that many card industry observers had assumed was dead and buried.
The security method, called holomagnetics, had even been rejected by Visa International, which decided instead to put its antifraud resources into cards with computer chips in them -- the socalled smart cards.
On the Travel Money card, which allows customers to draw funds at any Visa automated teller machine from a prepaid account, the holomagnetic technology stands out as an eye-catching version of the familiar magnetic stripe on credit and debit cards.
Visa officials conceded that the colorful holographic overlay on the stripe is merely "a bit of a sales gimmick."
But it is serious business to the manufacturer of holomagnetics, United States Banknote Corp. The company refuses to give up on the idea, saying holomagnetics can bolster card security over the years in which the industry makes the gradual transition from magnetic stripes to chips.
Visa has kept U.S. Banknote's hopes alive by choosing holomagnetics for the Travel Money card. It is, in fact, the first banking industry application of the technology.
Before the chip card gained its current momentum, card technologists focused on the problem of making the magnetic stripe more secure. At one point Visa was testing both U.S. Banknote's holomagnetic stripe and Thorn EMI's competing Watermark technology, but later decided to make the leap to smart cards.
U.S. Banknote contends that the stripe, which bankers readily agree is too easily skimmed or counterfeited, will survive long enough to require more attention to security than it is getting.
"There's a lot of life left in the magnetic stripe, so we need to find a way to secure it," said Wasy D'Cruz, executive vice president of U.S. Banknote Corp. in Horsham, Pa. "Chip cards are going to take a while, maybe longer than 10 years" to be fully established.
Mr. D'Cruz is admittedly biased. His company developed and is championing holomagnetic technology, and its subsidiary, American Bank Note Holographics, worked with Visa on the Travel Money card.
Although he said the hologram on the Visa Travel Money card is simply a "visually interesting differentiating feature," he believes deeply in the merits of holomagnetic technology.
The holomagnetic stripe includes holographic optical features that cannot be copied by any conventional techniques, said Mr. D'Cruz.
He added that readability rates have been improved greatly since tests in early 1992. Critics panned the technology then, and they still have reservations.
"Developing holomagnetics is like trying to figure out how to make a better horseshoe, and the world doesn't need a better horseshoe," said Jerome Svigals, an electronic banking consultant and smart-card advocate based in Redwood City, Calif.
"The magnetic stripe -- even with a hologram -- cannot cope with new applications, and it doesn't address bad debt, which makes up 90% of credit card losses," Mr. Svigals added. "The magnetic stripe just doesn't have enough capacity. It can't cut it anymore."
Visa and MasterCard, while encouraged by their members to find ways to eliminate fraud and counterfeiting, are putting their research dollars behind technologies that can be readily transferred from stripe to chip.
For example, Visa just completed a pilot with 15 North American banks to apply neural network technology to the identification of fraudulent transactions.
Visa's neural system collects the worldwide transaction data and establishes predictable patterns of use for each card numbers.
Whenever a transaction falls outside the pattern, Visa alerts the issuing bank, which then has the opportunity to contact the cardholder and put a stop to suspicious or fraudulent activity.
"The name of the game in fraud is to get as close to the time of the fraud as possible," said Catherine A. Basch, a Visa senior vice president. "We send out fraud alerts eight times a day. With other technologies, you may not find out about fraud until the cardholder receives the monthly statement."
In its yearlong neural network pilot, Visa estimates it saved the 15 participating banks more than $30 million. The association plans to roll out the service to all U.S. members in 1995.
Both Visa and MasterCard officials said they continue to monitor new developments in other security technologies, like holomagnetics. For now at least, neither association is actively pursuing such technology.
"Losses from fraud have been steadily dropping; we're getting it under control," said MasterCard's Joel Lisker. "We feel we have the technologies in place to control it. Now we're concentrating on the chip."
