Method and apparatus for securing credit card transactions

Claims

What is claimed is:

1. A credit card apparatus comprising:

a memory means for storing data;

an encryption algorithm stored in said credit card for encrypting data, said algorithm being complementary to a de-encryption algorithm stored in an authorization computer;

a first transaction sequence number stored in said memory means, said transaction sequence number corresponding to a second transaction sequence number stored in the computer;

a display means;

a processing means for processing said encryption algorithm and said first transaction sequence number to produce a verification number, which is visually displayed in said display means, for conveyance to the computer which computes a transaction sequence number using the de-encryption algorithm and which tests the correspondence of the computed transaction sequence number with the second transaction sequence number for determining whether a given credit card transaction is to be authorized; and

said processing means changes said first transaction sequence number, and stores the changed first transaction sequence number in said memory means.

2. The apparatus as in claim 1, further comprising an activation means for activating said processing means to produce a verification number.

3. The apparatus as in claim 2, wherein said activation means includes an activation pad which requires the entry of an identification code in order to activate said processing means to produce the verification number.

4. The apparatus as in claim 1, wherein said encryption algorithm encodes said first transaction sequence number when processed by said processing means.

5. A computer for authorizing a credit card transaction comprising:

a memory means for storing data;

a de-encryption algorithm stored in said computer for de-encrypting a verification number produced by a credit card using an encryption algorithm;

a first transaction sequence number stored in said memory means, said first transaction sequence number corresponding to a second transaction sequence number stored in a credit card;

a processing means for processing said de-encryption algorithm and the verification number to produce a computed transaction sequence number, said processing means also being for testing the correspondence of the computed said processing means. number with said transaction sequence number to determine whether a given credit card transaction is to be authorized; and

said processing means changes said first transaction sequence number, provided the given credit card transaction is authorized, and stores the changed first transaction sequence number in said memory means.

6. The computer as in claim 5, wherein said computer authorizes a given credit card transaction on the basis of whether the computed transaction sequence number corresponds to said first transaction sequence number.

7. The computer as in claim 6, wherein said computer determines correspondence on the basis of the computed transaction sequence number falling within a predetermined range of said first transaction sequence number.

8. The computer as in claim 7, wherein said computer resets said first transaction sequence number to be equal to the computed transaction sequence number if, with said computer determining whether a given credit card transaction is to be authorized, the computed transaction sequence number is not equal to said first transaction sequence number, and the computed transaction sequence number falls within said predetermined range.

9. The computer as in claim 6, wherein said computer determines correspondence on the basis of the computed transaction sequence number falling within a predetermined range of said first transaction sequence number, said predetermined range being divided into a first and second portion.

10. The computer as in claim 9, wherein said computer automatically authorizes a transaction if the computed transaction sequence number falls within said first portion of said predetermined range.

11. The computer as in claim 10, wherein said computer invokes an additional authorization sequence if the computed transaction sequence number falls within said second portion of said predetermined range.

12. The computer as in claim 5, wherein said de-encryption algorithm encodes said first transaction sequence number when processed by said processing means.

13. A system for verifying a credit card transaction comprising:

a credit card including:

a first memory means for storing data;

an encryption algorithm stored in said credit card for encrypting data;

a first transaction sequence number stored in said memory means;

a display means;

a first processing means for processing said encryption algorithm and said first transaction sequence number to produce a verification number for visual display in said display means, said first processing means changes said first transaction sequence number, and stores the changed first transaction sequence number in said first memory means; and

a computer means including:

a second memory means for storing data;

a de-encryption algorithm stored in said computer, said de-encryption algorithm being the complement of said encryption algorithm;

a second transaction sequence number stored in said second memory means; and

a second processing means for processing said de-encryption algorithm and said verification number to produce a computed transaction sequence number, said second processing means also being for testing the correspondence of said computed transaction sequence number with said second transaction sequence number, and said second processing means changes said second transaction sequence number, provided the given credit card transaction is authorized, and stores the changed second transaction sequence number in said second memory means.

14. The system as in claim 13, wherein said first and second transaction sequence numbers correspond to one another at the time said credit card is issued.

15. The system as in claim 14, wherein said computer authorizes credit card transactions on the basis of whether the computed transaction sequence number corresponds to said second transaction sequence number.

16. The system as in claim 15, wherein said computer determines correspondence on the basis of the computed transaction sequence number falling within a predetermined range of said second transaction sequence number.

17. The system as in claim 16, wherein said predetermined range is divided into a first and second portion, and said computer automatically authorizes a given transaction if the computed transaction sequence number falls within said first portion of said predetermined range, and invokes a separate authorization sequence if the computed transaction sequence number falls within said second portion of said predetermined range.

18. The system as in claim 17, wherein said second transaction sequence number is reset to be equal to the computed transaction sequence number if, with said computer determining whether a given credit card transaction is to be authorized, the computed transaction sequence number is not equal to said second transaction sequence number, and the transaction is authorized.

19. The system as in claim 13, wherein said encryption and de-encryption algorithms encode and decode said first and second transaction sequence numbers when processed by said first and second processing means, respectively.

20. The system as in claim 13, further comprising an activation means for activating said first processing means to produce a verification number.

21. The system as in claim 20, wherein said activation means includes an activation pad on said credit card for the entry of an identification code in order to activate said processing means to produce a verification number.

22. The system as in claim 13, wherein said first processing means further includes a random number generator for producing said first transaction sequence number.

23. The system as in claim 22, wherein said random number generator generates a random number which is stored in said first memory means as the initial said first transaction sequence number, and wherein with said computer determining the authorization of a first transaction relating to said card after said card was issued, said computer automatically resets said second transaction sequence number to be equal to the computed transaction sequence number.

24. The system as in claim 13, wherein said first and second processing means change their respective first and second transaction sequence numbers by incrementation.

25. The system as in claim 24, wherein said first and second transaction sequence numbers are incremented by the same number.

26. A method of authorizing a credit card transaction comprising the steps of:

requiring the provision of identification information to an authorization computer;

using the identification information to access a file in the computer containing a de-encryption algorithm and a first transaction sequence number, the de-encryption algorithm being complementary to an encryption algorithm stored in a credit card, and the first transaction sequence number corresponding to a second transaction sequence number stored in the credit card;

requiring the provision of a verification number, produced by the credit card using the second transaction sequence number and the encryption algorithm;

processing the verification number with a processing means in the computer to produce a computed transaction sequence number;

testing the correspondence of the computed transaction sequence number to the first transaction sequence number to determine whether a given credit card transaction is authorized; and

changing the first transaction sequence number if the given credit card transaction is authorized.

27. The method as in claim 26, further comprising the step of:

authorizing a given credit card transaction if the computed transaction sequence number corresponds to the first transaction sequence number.

28. The method as in claim 27, wherein during said authorizing step correspondence is determined on the basis of whether the computed transaction sequence number falls within a predetermined range of the first transaction sequence number.

29. The method as in claim 28, wherein the predetermined range is divided into a first and second portion, and the computer automatically authorizes a given credit card transaction provided the computed transaction sequence number falls within the first portion of the predetermined range.

30. The method as in claim 29, wherein the computer invokes a separate authorization sequence provided the computed transaction sequence number falls within the second portion of the predetermined range.

31. The method as in claim 27, further comprising the step of:

resetting the first transaction sequence number to be equal to the computed transaction sequence number if, with the computer determining whether a given credit card transaction is to be authorized, the computed transaction sequence number is not equal to the first transaction sequence number, and the transaction is authorized.

32. The method as in claim 26, wherein during said changing step the first transaction sequence number is incremented by a predetermined number.

33. The method as in claim 32, wherein the predetermined number by which said first transaction sequence number is incremented is equal to a number by which the processing means in the credit card increments the second transaction sequence number after the production of the verification number.

FIELD OF THE INVENTION

This invention relates to a method and apparatus for securing a transaction conducted by means of a credit card.

BACKGROUND OF THE INVENTION

The use of credit cards for many types of transactions is already commonplace, and is steadily increasing as society moves progressively to a cashless monetary system. The proliferation of the use of credit cards, however, has been met with a corresponding proliferation in the methods by which unscrupulous persons may use credit card information to engage in fraud or theft.

For example, one typical credit card transaction involves a person who uses a telephone credit card to make a telephone call at a public telephone. The transaction sequence usually requires the user to first dial an access number to make contact with a long distance carrier. The access number is generally, publicly available, since it is distributed to all subscribers to the carrier's service and is sometimes even displayed in the public telephone area. After receiving a confirmation signal, the caller then enters a customer specific, account number, which is made up of a series of numerals often printed on the credit card for ease of user access. Unlike the access number which is public, the account number should be kept secret by the card owner, given that it is used by the carrier to determine if a valid account number has been presented when the service request is initiated. Of even greater importance to the card holder, the account number usually identifies the account to which the requested telephone service will be billed.

Understanding that someone who has the telephone account number can use that number to place unauthorized calls, a practice has grown up by which thieves have devised different methods by which they gain access to the account numbers of legitimate card holders. One such practice is referred to as "shoulder surfing", whereby the thief watches, sometimes by means of binoculars, and memorizes the customer unique, account number entered by a legitimate card holder. Modern, public telephone areas in airports, train stations, shopping malls, and the like, make the true card owners particularly vulnerable to this practice given that the design of many public telephone areas typically permit members of the public to freely move around and behind the caller. Thus, someone in a publicly accessible area could have a clear view of the account number on the card or entered on the telephone key pad during the transaction, especially if the caller inadvertently neglects to guard the secrecy of the account number.

Yet another example of the means by which a thief may gain access to a legitimate card holder's account number may involve a typical credit card purchase from a retailer. During such a transaction, the card holder's account number is exposed to the retailer's clerk processing the transaction. Additionally, if the transaction is conducted with the card holder present in person, there is typically paperwork, such as a hard copy receipt, which is generated during the transaction and which contains the account number. Frequently, carbon paper inserts, which are between the receipt paperwork, are discarded in an unsecured manner after the card holder provides an authorization signature, even though those carbon paper inserts may contain the account number of the customer.

Thus, an unscrupulous clerk could later attempt to use the account number to engage in fraudulent transactions. Alternatively, another party who gains access to the discarded carbon paper could likewise attempt to use the account number to engage in a fraudulent transaction. And finally, a so called `shoulder surfer` could observe the transaction and obtain the account number.

What is needed is a method and apparatus by which credit card transactions can be made more secure against fraud and theft. To the extent that credit cards are mass produced, the security approach must be adapted for implementation on a wide scale, which also suggests that it must not be prohibitively expensive. The approach must take account of existing transaction equipment which is available now and in the near future. For example, most public telephone systems have touch tone key pads, but relatively few have the newer technology, card readers which read an electronic strip on the credit card. Likewise, home telephone systems, which can be used for conducting credit card transactions, are highly unlikely to include a card reader system. Finally, the security approach must be reasonably simple to use by the card holder, as significant increases in the complexity of use will reduce the desirability of the security system.

SUMMARY OF THE INVENTION

This invention relates to the apparatus and method of authorizing credit card transactions. One embodiment of the invention includes a system which is made up of an authorization computer and a credit card that work in conjunction to enhance the security of credit card transactions.

More particularly, the system includes a smart credit card which includes a processor, a memory and a liquid crystal display. The credit card is used to produce a unique verification number by processing a transaction sequence number with an encryption algorithm. The verification number is then displayed in the display device, and can be transmitted to the authorization computer along with a customer identifying account number.

The computer, which is used for authorizing the credit card transactions of the customers of the credit card issuer, uses the account number to access an account file for the credit card customer. That account file has general account data for the given customer, as well as a transaction sequence number, which corresponds to the transaction sequence number stored in the credit card. Additionally, the account file includes a de-encryption algorithm, which is complementary to the encryption algorithm of the credit card, such that the computer can use the de-encryption algorithm together with the verification number to produce a computed transaction sequence number.

The computed transaction sequence number is compared to the transaction sequence number stored in the computer to determine whether the two numbers correspond to one another. If they do, then the computer will authorize the transaction, if they do not then the transaction will be rejected.

Both transaction sequence numbers, the one in the card and the one in the computer are changed, preferably by incrementation, after the authorized transaction so that a different verification number is generated and used in the authorization of each different credit card transaction. Thus, the verification number used in one given transaction will not be useful in a subsequent transaction. Therefore, even if someone were to see the verification number used in one transaction, they would not be able to use it in a subsequent transaction.

Yet other embodiments of the invention include the credit card that is used in the system, the computer that is used in the system, and the process of authorizing credit card transactions using the system.

Objects, features, and advantages of the invention will be further appreciated and better understood upon consideration of the following detailed description of the preferred embodiment, presented in conjunction with the accompanying drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a front view of an embodiment of a "smart (credit) card" in accordance with the present invention.

FIG. 2A is a partly sectioned, front view of the smart card of FIG. 1, showing internal elements of the card in block diagram form and a switch which activates the processing operations of the card.

FIG. 2B provides an alternate embodiment of the card of FIG. 2A, having the switch replaced by a keypad for entering an authorization number to activate the processing operations of the card.

FIG. 3 is a flow diagram showing the process by which the card of FIG. 1 produces a verification number.

FIG. 4 is a block diagram of the card of FIGS. 1 and 2, a station which is linked to a computer, and also an operator for entering information at the station.

FIG. 5 is a flow diagram showing the process by which a card holder's account is established.

FIG. 6 is a flow diagram showing the process by which the card and computer of FIG. 4 are used to enhance the security of a credit card transaction.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

Referring first to FIG. 1, an embodiment of a credit card 20 in accordance with the present invention is shown. More particularly, credit card 20 is a so-called "smart card". In some respects, card 20 is quite similar to a common credit card, insofar as it has a plastic housing with the same dimensions as a traditional credit card. Additionally, it has a magnetic strip on its back (not shown) to enable card 20 to be read by a typical card reader.

As will be detailed below, a "smart card" is more sophisticated than a traditional credit card, insofar as it contains processing capabilities. Thus, card 20 can be used as a credit card for all of the transactions requiring a traditional credit card, but it has additional capabilities which enable it to be used to increase the security of credit card transactions.

In the front view of card 20 of FIG. 1, card 20 includes the card holder's name 22 and the card holder's account number 24. Name 22 and account number 24 may be punched or stamped onto card 20 in raised numbering which is typically found on traditional credit cards. The inclusion of electronic circuitry within card 20 may affect the manner in which name 22 and account number 24 are placed on card 20, it being necessary to assure that the traditional punching or stamping method does not damage the electronic circuitry of card 20. Thus, name 22 and account number 24 may be placed on the card in any manner that is adapted for a smart card having internal electronic componentry. Also, as mentioned above, account number 24 may be stored on a magnetic strip on the back of card 20, so that account number 24 can be read by a card reader in the usual manner of a regular credit card.

As discussed below, account number 24 is card holder unique and is used by the issuer of the card to identify a particular card holder's account. The identity of the card holder's account is necessary for billing the card holder for goods or services charged against that account number.

In addition to account number 24, FIG. 1 shows card 20 to further include activation switch 26. Switch 26 is an electronic switch which activates card 20 for the purpose of having card 20 process a transaction sequence number and produce a verification number, not shown on FIG. 1, but shown on FIG. 2A. In one embodiment, switch 26 may be an on/off switch which starts the processing by card 20. In yet other embodiments, there may be a separate on/off switch, which is shown on FIG. 1 in a dashed line and has reference number 28. The advantage of having a one switch 28 for turning card 20 on, and a separate switch 26 for signalling to the