Fraud and ID Theft: Are One-Time Password Bank Cards the Answer?

By Dennis Brestovansky, president and CEO of Aveso Displays

Over the past few years, fraud and theft of corporate and consumer information have escalated dramatically, reaching devastating proportions worldwide. It's becoming a far too frequent fact of financial life.To be sure, the cost savings are significant when using electronic bank channels for transactions (instead of customers going into a bank or store), but so are the risks. The risk of fraud or theft has increased commensurately, leaving every financial institution vulnerable.

Most fraud tends to target customer account numbers and personal information in efforts to secure unauthorized access to an individual's funds. As fraud techniques evolve, customers lose confidence in their banking institutions, while the banks find themselves mired in rising administrative costs, limiting potential innovation, or their deployment of new and more secure electronic systems.

Simply put, the banking industry must quickly evolve its security practices to thwart unscrupulous fraud, and that evolution can only come by dramatically updating security methods to stronger, more current forms of authentication.

Restoring Trust

One of the most successful and widespread securities developed to combat the devastation caused by data theft is One-Time Password (OTP) technology. It adds an extra layer of protection that can help stem the tide of fraud and has created a half-billion-dollar industry, led by companies like RSA, VASCO and Versign.

Though widely successful, first-generation OTP technology in the form of tokens and fobs is in a state of flux. Many individuals believe that security tokens will be replaced with bank cards with OTP technology embedded in them for an extra layer of security.

According to Ariel Avitan, information security expert with Frost & Sullivan, in 2008 the total number of security tokens sold was about 65 million units. Out of these, bank cards with OTP were approximately 15 to 20 million units.

"While bank cards with OTP are a small percentage of the total units produced today, our forecasts show the number will grow significantly in the coming years," explains Avitan. "Utilizing hot lamination processes, the industry standard for producing high-quality, long-lasting cards, these new convenient OTP cards offer flexible displays suitable for high volume, cost-sensitive mass consumer manufacturing."

Why OTP?

There are for four primary factors fueling the growing demand for OTP cards.

First, for financial institutions the total cost of ownership for OTP cards is very attractive. OTP cards with flexible displays can be mass-produced, affording the same quality as contemporary credit cards and with a comparable lifespan of three or more years. And OTP cards with high contrast flexible displays are easier to read and less likely to be broken than LCD-based tokens. Finally, it is also more economical for the banks to issue cards than OTP tokens or fobs.

The second reason for the growing demand for OTP cards is simply that cards are much more convenient for consumers to carry and use. Bulky tokens or fobs are more likely to be lost than cards which easily fit into one's purse or wallet.

Third, consumers want security and therefore OTP cards are more likely to be top of wallet. Users are more likely to use a card that provides them with better security than one that's significantly more prone to fraud or theft.

Finally, OTP cards offer financial institutions better marketing opportunities. Today's fobs and tokens offer no viable real estate for a company to apply brands, logos, phone numbers or other instructional information. OTP cards, like those issued by PayPal, provide high corporate visibility to the financial institutions issuing them.

Consider PayPal

While PayPal will not disclose the number of OTP cards it has issued, Mike Vergara, director of consumer protections for PayPal, shared that the users of PayPal's Security Key have expressed a high level of satisfaction in using these cards as well as encouraged other eBay and PayPal community members to adopt them.

According to Vergara, "Security Key provides customers additional protection for online account transfers and bill payments, while allowing customers to make larger value account transfers, and authorizes individual new payees." Furthermore, the PayPal logo is placed on the physical cards and packaging.

Clearly widespread consumer adoption of OTP cards will take time. However, just as the iPhone has overtaken other smartphones with its ease of use and new levels of communication, we believe hot-laminated OTP-enabled flexible cards will overtake tokens presenting a tremendous opportunity for card manufacturers and financial institutions around the world.

Dennis Brestovansky is president and CEO of Aveso Displays, the leading provider of flexible display components suitable for high volume, cost-sensitive mass consumer applications.