A company formed two years ago to combat debit card fraud has gotten a financial shot in the arm from five major automated teller machine networks.

Led by Star in the West and NYCE in the East, the networks provided a cash infusion to Card Alert Services Inc. that reflects growing concern about counterfeiting and other types of fraud.

The cash came in a private placement of undisclosed size, but it was seen as a big boost for Arlington, Va.-based Card Alert Services.

Fifty banks had already signed onto the company's efforts to bring to debit cards the technical sophistication that has been applied to credit card fraud.

Along with Star System Inc. of San Diego and NYCE Corp. of Woodcliff Lake, N.J., the investors are Cash Station Inc. of Chicago, Southeast Switch Inc., the Florida-based company that runs the Honor network, and CU Cooperative Systems Inc., a credit union organization.

Card Alert Services was the brainchild of former executives of MAC, the ATM network owned by Electronic Payment Services Inc. of Wilmington, Del.

"We're helping manage the long-term risk against a major compromise of on-line card numbers and personal identification numbers," said Card Alert chairman Douglas D. Anderson.

While no catastrophic debit frauds have come to light, and the problem does not yet cost a billion dollars as it does on the credit side, U.S. banking executives are increasingly wary of outbreaks.

Bankers recognize debit payments are growing in popularity, but they don't generate income comparable to that which has helped credit card companies cope.

"If fraud escalates, and we don't have the ability to check it, it will damage consumer confidence" in electronic banking, said William G. Raymond, senior vice president of interstate retail distribution at BankAmerica Corp., one of Card Alert's early supporters.

The antidote, as has been used successfully with credit cards, is neural networks, an artificial intelligence technology suited to surveying vast volumes of transaction data to discern fraudulent patterns.

Mr. Raymond said the industry needs this "fraud detection and prevention insurance policy...desperately."

Noting his bank's proximity to Silicon Valley and its computer-crime underbelly, he said, "We have seen millions of dollars of losses associated with various kinds of electronic banking fraud. The methods get more technically savvy all the time, and harder to detect and prevent."

Mr. Anderson, a former chief executive of Electronic Payment Services, formed Card Alert with another MAC organization veteran, president Richard H. Urban. Their clients include NationsBank Corp., First Union Corp., First Chicago NBD Corp., Wachovia Corp., and four of the five EPS owners: CoreStates Financial Corp., Banc One Corp., PNC Bank Corp., and National City Corp.

Banks pay according to their portfolio size for access to Card Alert technology and to share information.

It serves as "a clearing house" to aid in early detection, said Steve Cole, chief executive of Cash Station Inc.

First Chicago has been in testing with Card Alert for two months. "We haven't caught any big frauds yet," said Thomas Tremain, vice president, electronic banking. "But I guess that's a good thing."

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