Card activation at point of distribution

Details Card activation at point of distribution Card activation at point of distribution

1998-12-18

2001-10-02

Stamber, Eric W. (Department: 2162)

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Finance

Reexamination Certificate

active

06298336

ABSTRACT:

FIELD OF THE INVENTION
The present invention relates generally to smart cards. More specifically, the present invention relates to a technique for activating smart cards at a point of distribution or some time thereafter.
BACKGROUND OF THE INVENTION
Smart cards that have the ability to store value within memory on the card are often referred to as “stored value cards”. Stored value cards may be either disposable or reloadable. Disposable stored value cards in particular are subject to theft because of the value they hold. Once a disposable card has been loaded with value it can be used as cash in many locations; therefore, there is a concern that the cards would be stolen once they are loaded with value.
In one scenario, cards are loaded with value and personalized by a card supplier. Once personalized and loaded with value they are “live” and are vulnerable from theft from that point on. For example, these cards are vulnerable to theft during shipment from the supplier to the issuer, while being stored at an issuer location, while present in a card dispensing machine, or at any other time before the cards are legitimately sold to a customer. If cards are sold over-the-counter rather than in a machine, they are also at risk of theft before being sold. Previous techniques to combat card theft are both expensive and time consuming.
Many card suppliers and issuers rely upon insurance to cover the costs of stolen cards. This additional insurance against card theft can be expensive and is a cost a card issuer would rather do without. To directly prevent card theft, physical security techniques have been used to protect loaded stored value cards from being stolen. For example, loaded cards might be transported in armored trucks, stored in locked vaults, etc., while making their way from a card supplier to an issuer and eventually to a legitimate customer. The costs associated with this secure transport and storage can be quite high. Further increasing these costs is the fact that there are relatively few card manufacturers in existence. Thus, loaded cards must often be transported long distances (overseas or across continents) before reaching a final region for distribution. Aside from the direct costs for the secure equipment needed to transport these cards, there are also costs associated with the manpower needed to guard these cards while being transported or stored.
While loaded stored value cards may be sold over-the-counter by an entity instead of being sold in a card dispensing machine, the control and inventory issues with over-the-counter sales can also be quite expensive. Selling cards from a machine would appear to be a cleaner and simpler solution, although expensive, secure machines are required for stored value cards that are already loaded with value. Moreover, a card dispensing machine holding hundreds of stored value cards is a temptation for a thief as each card may hold hundreds of dollars worth of value. In certain countries, stored value cards for use in telephones are sold openly on the street in machines that are particularly prone to theft.
Therefore, a technique is desirable that would not only help prevent the theft of stored value cards, but also would minimize the loss to an issuer should a card be stolen. It would further be desirable for such a technique to reduce the costs associated with stored value card security.
SUMMARY OF THE INVENTION
To achieve the foregoing, and in accordance with the purpose of the present invention, a system for the secure activation of stored value cards at a point of distribution to customers is disclosed that provides greater security for stored value cards and reduces the costs associated with protecting these cards.
In one embodiment of the invention, each card has a standard user mode and a security user mode. In the standard user mode the card is activated and ready for use. In the security user mode the card is not active and cannot be used in a payment terminal to make a purchase. Cards are personalized by a card supplier in either the standard user mode or in the security user mode. If shipped by the card supplier in the security user mode, the card cannot be used until it is legitimately activated in a card dispensing machine immediately prior to its sale to a purchasing customer. Advantageously, if cards are lost or stolen during any point in the transport or storage before they are activated, the card cannot be used and no loss in value occurs.
In a particular embodiment of the invention, a security code must be presented to the card before the card becomes activated. Advantageously, the security code is generated in a secure manner by a card dispensing machine or other device only under authorization by an issuer prior to the sale of the card to a customer. It is believed that cost savings per card using this technique is between $0.05 and $0.75 per card.
In another embodiment of the invention, an activation control counter (ACC) is stored within an activation secure application module (ASAM) within the card dispensing machine. The ACC is decremented for every attempt at activation of a card, successful or otherwise. The ACC limits exposure to fraud and to theft by limiting the number of times that cards may be attempted to be activated.
In a further embodiment, ASAMs are maintained in the field (i.e., within card dispensing machines) obviating the need to return an ASAM to a central location for maintenance, or the need to bring a computer to a dispensing machine. A field secure application module (FSAM) is created at the activation manager and is able to update a limited number of ASAMs. Preferably, a hierarchy of keys is used within a control secure application module (CSAM), the FSAMs and ASAMs to ensure security.


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IQ tests for smart cards; Morrall, Katherine; Bank Marketing v29n3 pp: 18-25, Mar. 1997.*
The expanding world of the smart card; Schlumberger 1996 Annual Report: Smart card, 1996.

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