Since 1972, MagTek has been a leading manufacturer of electronic devices and systems for the reliable issuance, reading, transmission and security of cards, checks, PINs and other identification documents. Leading with innovation and engineering excellence, MagTek is known for quality and dependability. Its products include secure card readers, check scanners, PIN pads and distributed credential issuing systems. These products are used worldwide by financial institutions, retailers, hotels, law enforcement agencies and other organizations to provide secure and efficient electronic payment and identification transactions.
PYMNTS.com recently asked MagTek’s Chief Security Officer Tom Patterson to answer a few questions about how his company is driving innovation at the point-of-sale with advances in security.
Describe your POS innovation and why it was so innovative when it was launched.
What was the motivation for your innovation? What problem are you solving for merchants and end users?
Merchants are losing billions of dollars a year to counterfeit cards, and being charged even more money now to help secure their systems. MagTek is working with the banks and merchants to ensure that any new system includes authentication, which is the only countermeasure that significantly lowers the daily fraud costs of merchants.
What did you go to get both sides of your platform on board, so merchants and end users?
As most people know, the hardest thing to change in a system is end user behavior. Billions of people make trillions of transactions a year by using the cards in their wallet to swipe and make purchases. The biggest thing MagTek did for the end-users is to change nothing. They use the same cards, and swipe the same way, but are no longer susceptible to fraudulent charges and financial identity theft.
For the merchants, MagneSafe’s card authentication capability means real bottom line savings for every merchant that has lost money or merchandise to a counterfeit card. Also, since MagneSafe stops the fraudulent charges from ever even entering the payment system, merchants no longer have to fight over chargebacks and pay the fees and interest involved with fighting fraudulent charges. The merchants are big winners with authentication.
What about that process was more difficult than you imagined? Less difficult?
Everyone likes the idea of adding card authentication to the security mix. Our solution makes it easier than the others as it leaves the cards the same, the consumer behavior the same, the checkout process the same, and only requires a single backend authentication process to be added, for which we’ve launched Magensa.net to provide that service in ANSI standard response times. The hardest part is breaking through the chicken & egg issue, by getting the card issuers and processors to share the ‘reference’ magnetic fingerprint (MagnePrint), so that the merchants will have something to check against. But I’m happy to report that we now have agreements to create the first 100 million card MagnePrints, and expect even greater adoption in the near future now that the system is fully operational.
What is the biggest threat to your innovation?
I’ve had many bank and payment industry executives tell me that the four billion plus dollars a year lost to counterfeit card fraud is an ‘acceptable loss.’ This type of thinking does not gibe with the thin margins many retailers are living on, or take into account the harmful ramifications of gangs, organized crime, and global terrorists who use our stolen cards to finance their operations. But after a full discussion of the facts, we’re finding most agree with our effort to wipe out counterfeit card fraud once and for all. So the biggest threat is industry’s ignorance of the facts, so MagTek is pleased to participate in this PYMNTS.com forum.
Fast forward two years from now, select one of the following and tell us why. Your innovation will be (a) industry standard (b) well established niche play (c) too early to tell.
A. Industry Standard — The MagTek led Coalition to Wipe Out Counterfeit Card Fraud (www.NoCardFraud.com ) has set a limit of 2 years for industry-wide adoption and roll out. We have a very clear path toward making card authentication an industry standard, and saving both banks and merchants billions of dollars a year.
Complete this sentence: The next big innovation at the POS is _____, and we will see it happen in _____.
The next big innovation at the POS is authenticating the card and we will see it happen in 2010.
In general, what do you think is the next big thing in payments, i.e. what’s next?
I look forward to a world where my preferred form of payment in the real world (swiping my card), is also the standard for making purchases online. When computer and phone manufacturers add a MagneSafe reader, consumers will have the safest and most trusted way to pay in all aspects of their life — without any major changes required!
Tom Patterson is the Chief Security Officer (CSO) for MagTek, Inc., the leading transaction technology provider to the financial industry around the world. Immediately prior to joining MagTek as CSO, Tom founded a public/private security outreach in concert with the Obama administration called National Security Grid, that aims to better secure the ‘critical million’ small businesses across America through coordination with FBI and intelligence community resources. Tom has had a long career in security, having worked on security for a space shuttle flight (STS-37), the maiden launch of a nuclear aircraft carrier (CVN-73), built industry leading security products (Net/Assure, CyberGuard firewall, TradeWave PKI), worked with the White House in the Middle East, run Deloitte’s security business in Europe, Middle East, and Africa, was CSO at America’s largest R&D consortium (MCC), built a startup internet company (Command) to $50 million in revenue, and served as IBM’s Chief Strategist for Electronic Commerce. More info here.
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