RESEARCH SUGGESTS SMART CARD SECURITY FLAW

MORRISTOWN, N.J. -- A new study by Bell Communications Research here raised questions about the security of smart cards -- and raised eyebrows among food retailers considering the technology.

However, the soon-to-be published theoretical research points to a possible chink in the armor that may allow counterfeiting.

Smart cards' supposed tamper-proof security feature is one reason the state of Ohio committed to a smart-card based electronic benefits transfer program. The state maintains the cards will prevent fraud in the distribution of food stamps and other benefits including Aid to Families with Dependent Children and possibly Women, Infants and Children disbursements.

Retailers nationwide are also viewing smart cards as a possible alternative to paper gift certificates.

Bell Communications researchers contend that the computer chips embedded in smart cards can be forced to make a calculation error which could be used to disable the data-scrambling software in the cards and open the door to counterfeiting.

At least one retailer told SN he was unconcerned by the research findings and believes smart cards will prove to be a secure form of electronic payment.

"I'm quite delighted people are looking at the theoretical problems of any new media of monetary exchange so those problems can be addressed and overcome," said a financial executive at a leading chain.

However, "It certainly isn't the time to grab the women and children and hide them in the basement because the phony smart cards are coming."