The present invention relates to a system of payment utilizing prepaid magnetic cards and having sub- stantially unsur ountable safeguards against fraud.

Known systems of payment by means of prepaid magnetic cards, even in their most modern forms, remains relatively susceptible to frauds through a counterfeit and/or alteration of the magnetic cards that may be freely bought by the public. In these systems, the apparatuses used for automatically changing sums due in payment of services or goods be decrementally changing the recorded residual amount that may still be spent on a card presented for payment and which may be represented by stations for reading and writing magnetically recorded data, are one of the "weakest" ring of the system. In fact, the magnetic cards used in these systems, differently from the magnetic cards used for financial transactions (BANCOMAT™, credit cards and the like) that are issued in a personalized manner, do not contain a secret (personal) code. Viceversa, they constitute essentially "bearers'-titles of credit".

The apparatuses for the charging of sums provide for a progressive decrement of the residual spendable sum that is updatedly recorded magnetically on the card, are generally unable to perform also a comparison of the state of a particular card between subsequent uses thereof, neither of verifying the "authority" of the user. Innumerable are the recorded abuses.

A first form of fraudulent manipulation of such magnetic cards, in particular of cards that may be bought for different spendable amounts, as for example prepaid telephone cards, consists in "copying" on the magnetic band of cards that have been bought for a minimum spendable sum, the same magnetic record that is

present on a similar card of the same type but issued for a superior spendable sum. The cards so altered, become "spendable" through the normal automatic charging apparatuses leading to a progressive decrement of the spendable residue for a starting amount larger than the prepaid price.

According to several known systems, the automatic charging apparatuses produce holes in the card presented for payment. Commonly the holes are punched aligned and at regular intervals, in order to provide a visual indication to the user, of the residual amount that can still be spent. Commonly, a new hole is produced through the card as a confirmation of the expenditure of one tenth of the total prepaid sum. For example, the presence of three holes on a card would be indicative that a sum comprised between 30% and 40% of the total value of the card has already been spent, though in an approximate manner. The user may easily assess the availability of more than 60% of the entire sum for which the card was bought and behave consequently. These indicating holes that are produced in the card, according to known systems, do not provide information that may be usefully read, and processed by the charging station, which instead relies exclusively on the magnetically recorded data on the magnetic bands or tracks of the card.

Another aspect of vulnerability of the known system^ utilizing prerecorded "bearer" cards, is represented by the possibility that a stock of cards be stolen. In that case, cards will be freely spendable by the thief. Vis-a-vis with this state of the art, it has now- been found an effective system for preventing that cards kept in stock may be stolen and used by the thiefs and/or that the same cards may be fraudulently manipulated to alter the magnetic records present thereon.

Basically, upon the issuance of a prepaid magnetic card to a user for a determined amount that can successively be spent, the system of the present invention provides for making an alteration of the total amount prepaid, as recorded magnetically on a track of the card, for fraudulently increasing the value of this amount for which the card was bought, physically impossible. Moreover, when using the card to pay for goods or services through automatic read-and- write charging installations, the reading and writimg machine produces holes in the cards, indicative of a certain decrement of the spendable amount, which are disposed on the card in function of a secret algorhyth and the perforations so-produced through the cards in the occcasion of prior uses of the card for paying services or goods, are read and correlated with the magnetically recorded data. The "double" and cross- referenced reading of magnetically recorded data and of optically readable data recorded by way of a series of holes, provides a practically unvulnerable system for controlling the validity of the card being offered for payment.

The annexed figure schematically depicts a magnetic card for progressive decrement of the spendable amount that is used in the system object of the present invention.

According to the system of the invention, the magnetic cards that are held in stock by a retailer or that are loaded in an automatic card-issuing station, have no prerecorded spendable amount on it. On the contrary they may be simple magnetic supports on which the buyer may selectively record the prepaid sum, according to his need. Of course, the system may contemplate a minimum recordable sum (such as to make the issuing of the card economically justifiable) and a maximum recordable sum which may be dictated by safety

criteria, and moreover the automatic issuing of a new card may be made possible exclusively for a series of predefined sums between said lower and upper limit.

The cards used by the system may have a conventional structure, essentially characterized by a magnetic band which may be subdivided in three recordable tracks (track 1, 2 and 3) , as in the example shown in the figure. Alternatively, the system may also utilize cards having a purposely designed structure. A preferred structure will be that of an entirely magnetic card through which, the customary three recordable tracks may be arranged with a reciprocal position and orientation difficult to be identified visually on the card. Of course the three tracks will be automatically "followed" by reading and recording heads of the card issuing installations and of the charging installations for the automatic, progressive decrement of the residual spendable amount recorded on the magnetic card. By referring to the shown example, in a station for the issuing of a new prepaid card, upon the introduc¬ tion of a certain sum of money, the card issuing machine may record, for example on track 1, identifica¬ tion data of the card -and/or the current date, as well as interactive control codes that will interact with a local CPU of card reading/writing, charging installa¬ tions through a certain algorhythm that necessarily will remain as a highly confidential data of the system's operator. Simultaneosuly, on another track, for example on track 3, a certain string representative of the spendable amount of money which has been prepaid by the person that has requested the issuance of a card is recorded. Such a registration of the prepaid spendable sum will extend, starting from one side of the relative magnetic track 3, for a length, indicated by the

segment B in the figure, which is substantially proportional to the prepaid amount.

Beside the magnetic recording of the string represen¬ tative of the prepaid amount on the track 3, a punch will make a hole through the card in a position A cor¬ responding to the position along the magnetic track 3 on which the string of the spendable amount is recorded that coincides with the end of the recorded segment B, whose length is a function of the paid amount. The hole A creates a physical discontinuity along the magnetic track 3, and exclude the possibility of overrecording along the same magnetic track 3 any longer segment corresponding to a sum greater than the amount that has been actually paid when the card was issued. The hole A, which naturally may have any shape and dimension, determines a discontinuity that can hardly be overcome by systems of duplication of a "master" magnetic registration (as readable from a second card purposely bought for a larger amount) corresponding to a larger amount of money than the one already present, on the card.

On the other magnetic track, for example on track 2, the amounts that are progressively spent are recorded. The machines for automatically recording the spent sums on a magnetic card inserted therein until progressively decrementing the residual spendable sum, normally record in a succession along such a dedicated magnetic track the various operations so that the local CPU may establish, through the interactive control codes recorded on track 1, the residual spendable value at the end of any new recording of an expenditure and to record it on the same magnetic track.

According to a preferred embodiment of the system of the invention, each installation for the automatic recording of expenditures paid with the magnetic card, thus determining a progressive reduction of the

residual spendable sum as recorded magnetically on the card, is provided with a punch capable of perforating the card and which is driven to punch a hole C for each tenth spent of the initial spendable amount. Diffe- rently from the known system, the geometrical arrange¬ ment of the holes C that are successively produced by the punch of the charging stations, occurs according to a peculiar scheme which is the result of a certain function of the data of prior recordings of ex- penditures that are magnetically recorded on the relevant track of the card, for example on said magnetic track 2, and preferably also of the identification data of the card that were recorded in said track 1, according to said secret algorhytm recorded on the track 1. The holes may be produced along a single line with irregular intervals among them, as determined by the data processed in accordance with the secret algorhyth recorded on the card, or may also be made along distinct immaginary lines parallel or even not parallel to each other, thus determining a geometrical arrangement of progressively punched holes that is practically impossible to decode.

The relative arrangement of the holes C among each other, provide a biunivocal recording of the same data that are magnetically recorded on the card, at least for what concern the indication of the percentage of the originally spendable amount that has already been spent.

When the card is introduced in a machine for virtually paying a service or goods through a decrement of the residual spendable amount on the prepaid magnetic card, the CPU of the station will carry out a cross-check between the data magnetically recorded on the card (and which in theory could be more easily subject to manipulation) with the percentage of the decrement of the spendable residual sum that has

already occurred and which is recorded in the form of a particular arrangement of the holes that are eventually present on the card and which is determined by the specific algorhyth s and card data that were recorded by the issuing machine. The CPU will reject any card that does not meet such a conformity test between the geometrical arrangement of the holes, as may be determined by optical sensors, and the decrements of the spendable sum that are magnetically recorded on the same card.

It is the practical difficulty of decoding the relative position of the holes C and in the absolute requirement of a perfect coincidence between the information contained in the arrangement of the holes C and the data that are magnetically recorded on the card, that practically vanify any attempt of fraudu¬ lently manipulating the recorded data.

Of course the "number" of holes C that are present on a card may also constitute a useful visual indica- tion for the owner of the card of the residual sum that can still be spent, in a similar way as in known systems.

According to a different embodiment of the inven¬ tion, each station for decrementing the spendable amount in function of the expenditure made by the owner of the card, may be provided with a second punch, simi¬ lar to the one that is present in a recording/issuing station of prepaid cards. The punch will produce a hole of interruption along the same track on which the prepaid sum is recorded (for example on track 1 of .the figure) .

When a card with a certain residual sum that can still be spent is introduced in the machine for recording a new decrement of the spendable sum, so that the residual sum would become smaller than a certain intermediate sum between the maximum limit and the

minimum limit predefined by the system, such a punch will produce a new hole along the track so as to permanently limit the "field" (i.e. the maximum recordable sum) on which the string corresponding to a prepaid spendable sum is recorded. This will add a further safety feature, thus ensuring that even if the anticounterfeiting safe-guard card represented by the biunivocal check between magnetically recorded data and optically recorded data (by means of the arrangement of the holes C) should fail for any reason, the possibility of recording a new whole sum on said track 1, will be limited to the shortened recordable "field" or segment (B) as defined by the position of the hole that had been punched last on the same track.