Citicorp to Test Electronic Solution To Verifying Customer Signatures

Nearing a long-awaited breakthrough in technology for identifying customers, Citicorp will test a device that electronically captures the signatures of people who use credit cards.

The system, which Citicorp is planning to announce this week at a technology conference for retailers, will initially speed the resolution of errors and disputes over charges.

But longer term, credit card experts say the system can authenticate signatures as they are written by customers at retail points of sale.

The process, known as dynamic signature verification, measures movements of a signature and compares them against a master copy. It is nearing feasibility after more than a decade of research and development at major computer companies.

High Consumer Acceptability

Banks and credit card companies regard signature verification as more reliable and foolproof -- and more acceptable to consumers -- than the personal identification numbers currently used with automated teller machines and debit cards. The cost of storing and comparing the signature data, however, has been prohibitive.

Citicorp's initial step will be to store signatures, which have been the principal physical security check on credit cards, and use them in resolving so-called chargeback disputes. With signatures on file, retailers and card-issuing banks could save millions of dollars a year in back-office costs incurred when trying to trace disputed sales drafts, industry executives say.

With the identity-verification function added, retailers and card issuers will be drawn to the extra measure of security, assuming it is cost-effective. Experts say all retailers will be using such devices at the point of sale within 10 years.

Quality of Identity

"The objective is to link the cardholder to the card, so that the issuer and the retailer know that people using the cards are who they say they are," said Peter T. Dunn, managing director at Edgar, Dunn & Conover Inc., San Francisco.

"It's as much of an internal quality-of-service issue as it is a competitive issue for Citicorp," said Mr. Dunn, a consultant active in the card technology field. "This lets them say to their merchant community that they're working on everything to enhance their services," said Mr. Dunn.

Citicorp's Establishment Services unit, which processes card sales for retailers, is the third-largest provider of merchant credit card services in the country. Citibank is the largest issuer of bank credit cards.

Quicker Dispute Resolution

The potential savings in resolving disputes, as well as the future security application, would be big pluses for Citicorp on both the consumer and merchant sides of the business.

"It automates the retrieval process and that will save the industry a lot of money," said David Robertson, president of The Nilson Report, a credit card industry newsletter based in Los Angeles.

Citicorp plans to place the devices in a number of Gap stores around the country, sources said. Instead of the familiar paper sales draft, credit card users will sign a form that appears on a special display screen. The screen automatically translates the signature into the digital form than can be stored electronically.

In the signature-capture system that Citicorp developed with NCR Corp. the credit card form with the sale and customer information appears on a liquid crystal display linked to the POS terminal. The display captures the image and the signature and saves it. The system costs around $1,500.

Test to Be Announced

Citicorp and NCR plan to announce the test at a conference in Chicago sponsored by the National Retail Federation. Citicorp and NCR executives were unavailable for comment on Monday.

Using electronic images of signatures and receipts could cut weeks off the resolution of chargebacks, which occur when customers dispute charges on their statement. The process can cost up to $25 per transaction as retailers and bankers sift through files to locate the original sales receipt.

To aid in cutting time and costs, MasterCard International has developed a personal-computer-based system that stores images of sales drafts. MasterCard members are required to install the chargeback system.

Electronic Capture's Slow Start

Citicorp is among the first major merchant servicers and credit card issuers to test signature capture technology at merchant locations. American Express Travel Related Services Co. tested electronic signature capture at Bloomingdale's in New York last year. The company plans another test with a large department store in the Southeast later this year.

Visa U.S.A. has experimented with signature capture, but is not currently involved in any merchant tests.

American Express and other credit card executives say the technology promises to improve security and speed processing of card transactions. But they expressed reservations about whether the benefits of the system will offset the costs.

|Sense for the Retailer'

"It has to make financial sense for the retailer," said Albert Irato, senior vice president at American Express. "American Express is looking at it very carefully from the end user's perspective."

"It's an interesting technology, but it may be a little bit too early for it," said Paul Steger, a merchant processing executive at Comerica Bank, Detroit. "It's a little like taking a sledgehammer to kill an ant."

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