Cardholder Identification

When an online retailer receives a telephone call from a consumer ordering merchandise and paying for it with a credit card, how does the retailer know that the card really belongs to the caller? For that matter, how does the real cardholder know that his or her card number is being used? They don't.

Europay and SmartTrust Ltd. have developed a system based on a consumer's mobile phone to prevent, or at least frustrate, such scams. An online retailer who receives an order by phone, PC or other device will send an SMS (short message service) to the cardholder's mobile phone describing the goods to be purchased. If the transaction is authentic, the cardholder sends an electronic signature confirmation back to the merchant. With that electronic signature, the card-issuing bank is assured that the transaction is legitimate and the merchant knows that it will be paid. All of this technology is contained in the mobile phone's SIM card (subscriber identification module). According to the article in European Card Review, the SIM card "enables the consumer to send a digital signature and the issuing bank to authenticate the cardholder."

To provide some perspective of the size of this market, it should be noted that Europay International, based in Belgium, had 68.8 million credit cards in circulation at the end of 2000, up 15 percent from the previous year. The dominance of debit cards in Europe is shown by the fact that Europay had 202.6 million debit cards outstanding at the end of 2000, up 14 percent from the previous year. (Data from CardLine)