VerifySmart's Technology comes at a watershed moment in the global financial community, when astronomical credit and debit card fraud losses make headlines with alarming regularity. While most financial institutions are hesitant to post actual credit and debit card fraud loss numbers, the figures are staggering as far back as 2005, when an FBI report indicated that credit card fraud represented the majority of the $315 billion US financial fraud loss for that year. A recent European study reported that more than 22 million adults fell victim to credit card fraud in 2006.

Financial institutions and consumers alike hoped that the recently introduced, so-called Chip and PIN technology, first introduced in the UK, would drastically reduce credit and debit card fraud, but a 2008 APACS (Association of Payment Clearing Services) report indicates a loss prevention gain of just 0.02%, after Chip and PIN technology was adopted (0.14% fraud losses as a percentage of card turnover pre Chip and PIN, versus 0.12% post Chip and PIN).

An unwelcome sidebar disadvantage of Chip and PIN, VISA, and other currently available so-called credit and debit card fraud prevention and detection technologies is the assumption of 'total card holder liability' made by many financial institutions. That is, the widespread practice, by banks and other financial institutions, of assigning loss liability to the cardholder on the assumption that the cardholder either wrote down or otherwise disclosed their PIN number and are therefore liable and accountable for the loss. The apparent growing lack of faith in Chip and PIN and other card fraud prevention technologies is evident in the fine print.

One of Canada's oldest banks introduces its faith in the new Pin and CHIP technology policy to credit card customers in writing as follows: "If a cardholder fails to comply with any obligation in the section entitled personal identification number (PIN) and someone other than the cardholder makes any PIN-based transactions on the Visa account, the cardholder will be liable for those transactions and any interest, fees and losses incurred...." The same national bank outlines debit card liability in their cardholder agreement: ""Contributing to unauthorized use: if someone uses your bank card or PIN without your authority but your actions (or inaction) contributed to that unauthorized use, you are responsible for all losses...."

All popular and available credit and debit card fraud prevention and detection systems have a single element in common, and that is the single element. Once a credit or debit card has been stolen, a seasoned criminal or fraud expert can quite easily breach required securities, assume an identity, and successfully execute several commercial transactions - at the expense of the card holder (fraud and theft insurance notwithstanding).

VerifySmart's Technology adds a second, hacker-safe layer of protection, and several levels of reassurance for consumers and financial institutions alike, by involving a second element, and with that second element, a secure 'double-check' to the transaction process.

How VerifySmart(TM) Technology Works

In smart contrast to Chip and PIN, VerifySmart(TM) provides a complete solution to lost or stolen cards, identity theft and cloned cards while putting control of the transactions directly in the hands of the card owner. VerifySmart(TM) has developed key technology that is simple yet effective. The cornerstone is an authentication model that decouples the verification and PIN process from the physical card or transaction medium offering the industry a new and proven fraud reduction mechanism.

VerifySmart's key benefit is a two-part authentication whereby a second source (mobile phone or PDA and a PIN) of identification which cannot be forged, is required to complete the transaction.

VerifySmart's credit and debit card fraud detection and prevention technology is patent and patent-pending (PCT approved) in 29 countries ranked by strategic importance and wireless penetration rates.

In addition, using VerifySmart's credit and debit card fraud detection and prevention technology, card transactions and other applications, such as internet transactions can be verified without requiring the banks and merchants to invest in new equipment and without major modifications to legacy systems.

VerifySmart(TM) Technology provides for verification through the end client's mobile device, such as a cell phone, with the transaction completely under the control of the card holder at all times. The process is simple and secure, uses technology that consumers and businesses alike are familiar with, does not require new hardware and only takes seconds to complete. VerifySmart's methodology uses a two factor system to verify both the transaction and unique owner credentials in real time creating a security model that is effectively impossible to breach.

VerifySmart's debit and credit card processing occurs in less than ten seconds, as follows:

• The merchant (or ATM machine) swipes the customer's card in the normal manner.
  
• The debit signal transmits to the bank but before entering the bank's system it is directed by VerifySmart(TM) to the card holder's mobile phone;
  
• The card holder's mobile device is unique as to its phone number and identity code so the transmission is secure to that one device;
  
• The card holder receives a cell phone message that a transaction is in progress with their card for a named merchant and asks for authorization;
  
• The card holder then enters their unique PIN number to authorize the transaction or refuses the transaction (if they do not acknowledge with their PIN the transaction will fail);
  
• Upon receiving the authentication signal from the owner, the VerifySmart(TM) system allows the signal to complete its journey to the bank and the merchant receives the 'all clear'.