Innovating from the start

MagTek is a well-known name in the payments industry, having manufactured card readers since 1972. From the start, the company has emphasized innovation and focused on offering one of the world's first effective mag stripe readers. Today, it continues to innovate, particularly in the area of data security. "We have been in the magnetic stripe card business for almost 40 years and helped to establish this industry from the start," said Andy Deignan, Vice President of Global Marketing and Strategy at MagTek. "Magnetic stripes were becoming more mainstream, and we wanted to build a device that processed transactions more accurately and faster. Many of the alternatives were very expensive."

In 1969, when ATMs were arriving on the scene, Tom McGeary and Lou Struett, who founded MagTek in 1972, could see a future in mag stripe technology. So they joined a company with significant venture capital hoping to help it capitalize on the new payment technology. Within a couple of years, the company dissolved, and the two men decided to form their own company.

Over the years, as the ways in which customers can make electronic payments have evolved, so have MagTek's products and services. From POS terminals to card readers for smart phones, and from mag stripe cards to smart cards, MagTek has continually looked for ways to expand its products and services.

Recognized as a leading provider of electronic transaction technology, MagTek has sales offices throughout the United States, Europe, and Asia, with independent distributors in over 40 countries. Being privately owned allows the company to set its own agenda for research, collaboration and development. MagTek noted that this has enabled it to add products and systems used for issuing and personalizing bank cards, entering PINs, and reading and scanning checks.

According to MagTek, its products and components are in use today at branch banks and thousands of POS locations around the world. They're also incorporated into kiosks and ATMs, as well as restaurant and hospitality equipment.

Multiple levels of security

In addition to manufacturing various types of hardware, MagTek has focused on developing ways to secure transaction data - to the point that it has also become known as a provider of anti-fraud solutions.

The company introduced MagneSafe, a digital identification and authentication technology, in 2006. The MagneSafe I-65, is used in ATMs, vending machines and self-service kiosks. It can read both mag stripe and smart card data.

MagneSafe offers a layered approach to transaction security that consists of four key pillars to validate and protect the entire transaction and each of its components: open encryption standards such as Triple Data Encryption Standard and Derived Unique Key Per Transaction (DUKPT), secure tokenization, authentication and dynamic data.

MagneSafe exceeds all 14 points of Visa Inc.'s 2009 published best practices for data field encryption, according to MagTek. In addition, the technology was recognized by Pricewaterhouse Coopers in Emerging Technology Research, a September 2009 report to the PCI Security Standards Council, as the only solution to combine all five of the following technologies: dynamic payment card data, magnetic stripe imaging, end-to-end encryption, tokenization and virtual terminals.

MagTek reported that MagneSafe has enabled it to create the industry's first secure card reader authenticators (SCRAs). SCRAs provide end-to-end encryption, which occurs within the reader.

The reader also has tokenization formatting capabilities. Encryption and tokenization help protect cardholder data at rest and in transit, as well as at various points through the payment infrastructure. As the name suggests, SCRAs not only provide data security, but they can also detect counterfeit cards.

A key feature of MagneSafe is MagnePrint card authentication, another patented technology that identifies counterfeit payment cards at the point of swipe, thus preventing fraud on the spot. MagnePrint was discovered by researchers at Washington University in St. Louis. MagTek is the sole licensee of MagnePrint and has invested heavily to commercialize the technology for worldwide deployment.

When this technology is employed, the magnetic stripe on the back of a credit or debit card combines billions of magnetic particles scattered in a random pattern. The particles (and their inherent pattern) are permanently sealed in when the card is made, creating a unique "fingerprint."

With MagnePrint, when a legitimate card is swiped for the first time, the reader captures the card's unique fingerprint and stores it in the host database, which also reviews and accepts or rejects card transactions. If the card's data is stolen and then copied, the MagnePrint technology detects the counterfeit version, and the transaction is declined.

The technology behind MagnePrint has been developed to fit within industry standard magnetic read heads found in all POS terminals.

MagnePrint secured devices include card readers, card-issuing equipment and encrypting PIN pads, all of which are available as components, or licenses, for incorporation into any manufacturer's products, including ATMs, gas pump terminals and POS devices.

According to the company, MagnePrint also has the potential to detect counterfeit driver's licenses and credit, debit, stored-value, identity, health care and physical access cards. It is also available for home use to improve e-commerce security and privacy on the Internet.

A headache eliminator

In 2010, MagTek released QwickPAY, a system for secure mobile POS transactions. QwickPAY uses a combination of a MagneSafe-enabled reader called the iDynamo, coupled with an application, to enable payments on the most prevalent types of personal computers and smart phones.

According to MagTek, QwickPAY can lower the cost of card acceptance by as much as 30 percent by offering authentic card-present transactions.

This reduces the scope of Payment Card Industry (PCI) Data Security Standard (DSS) compliance, limits the number of chargebacks and provides the capacity to decline counterfeit cards in real time.

MagTek's partners, including Sage Payment Solutions, appreciate MagTek's multilayer approach to security. Suzanne Ugast, Director of Marketing for Sage Payment Solutions, said, "MagTek's secure line of readers have allowed us to stay focused on serving our customers, and that makes them a valuable partner to Sage Payment Solutions.

"Their MagneSafe readers, in particular, make transactions more secure at the point of entry, which is critical for our merchants in their pursuit to become and remain PCI compliant."

The company's partners also acknowledge how easy MagTek's solutions are to implement. "We looked at several options and chose MagTek's IPAD product and MagneSafe solution to support our end-to-end encryption and transaction security strategy and rollout," said Dave Baldwin, President of Value Pay Services LLC, which manages Subway's Cash Card program. "MagTek's solution was the easiest to implement, primarily because they employ industry standard encryption and key management programs."

Potential to save billions

For the company's leaders - Annmarie "Mimi" Hart, President and Chief Executive Officer; Lou Struett, Executive Vice President; and Sarah Irato, Senior Vice President Sales and Marketing - security remains a passion and priority.

"We are fanatical about security and fraud prevention," Hart said. "I am proud to say that MagTek is the only company that offers secure readers that emit dynamic data with every swipe and have counterfeit detection built inside the head.

"While others focus on compliance and single layer encryption, we use four layers of security, all of which use dynamic data. It's the power of dynamic data that allows you to wipe out fraud and take the worry out of data breaches."

According to the company's website, $4 billion is lost each year in counterfeit card fraud. In an open letter published on MagTek's website, Hart asserted that encryption, by itself, is not enough to ensure security and fraud prevention because it doesn't address the problem of cloned cards.

"True consumer protection demands that the payment community authenticate the payment card and the data on it," Hart said.

"If fraudsters cannot use the pirated data, the fun and profit are removed from the equation along with the incentive to steal it. Dynamic authentication does just that. It makes stolen data useless to criminals. Encryption, while useful, cannot carry the day."

Hart believes that with the means to determine both a card's authenticity and the account data's integrity, fraud can be stopped in its tracks.

MagTek has launched a crusade, dubbed Campaign to Wipe Out Counterfeit Card Fraud, urging the payments industry to bring a higher level of security to transaction processing.

"We just need the banks to capture the magnetic fingerprint of their cards, and the merchants to capture the magnetic fingerprint of the cards they swipe, and for real-time secure check to be performed, to simply compare the two," the company's website states. "By adopting this system as an industry, we make payments safer for consumers, while better protecting our critical infrastructure from foreign threats."

With a history of pushing the security solutions envelope, MagTek aims to stay ahead of the game, extend the life of its products and enhance the long-term value of its customers' technology investments. And those sound like worthy goals.

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