High-tech check on 'John Hancock' Computer can read signatures and may trash paper waste.

For the shopper, it's just a nuisance: the messy, multi-page forms that must be signed and separated -- with copies for everyone and a messy carbon for no one -- each time a credit card is used.

But for industry, the paper-clogged system used in credit card transactions is a major expense. Millions of slips of paper must be tracked and stored and then retrieved each time a bill is questioned.


"It's a pain in the neck," said a spokesman for Citicorp., the nation's largest credit card issuer, with 30 million cardholders.

But Capital Security Systems Inc., a Columbia security company, thinks it has a solution that, if tests prove successful, could greatly simplify credit card use and ease that pain in the neck of credit card companies. It also could mean tens of millions of dollars for Capital Security.


The heart of the system is a book-size electronic pad and an attached pen. When someone signs his name on the digitalized pad with the electromagnetic pen, the signature is broken down into various characteristics that can be read by a computer. This allows the signature to be stored, transmitted, and even verified to prevent fraud.

Capital Security, through its Digital Signature unit, has entered into pilot agreements to test the system next year.

The system allows customers to charge their purchases by presenting their card and signing on the pad. The computer will add information from the cash register and spit out a receipt -- with a facsimile of the signature -- for the customer to take. Electronic copies are kept by the store and transmitted to the credit card issuers.

"Everyone says that is 'Star Wars' stuff. Well, Star Wars is here," said Donald E. Perkins, the president of Capital Security and Digital Signature.

Perkins said the pad and pen unit will sell for about $300 when mass produced and bought in volume.

The company estimates that $4 billion is spent each year in the United States on handling charge receipts. Moreover, consumers challenge about half of one percent of all charges and credit card companies are unable to produce the necessary receipts in about one-third of those cases, Perkins said.

Original signatures are usually preferred in legal disputes, but the law recognizes electronically produced copies as a "next best" alternative that is binding, he said.

Citicorp is testing a similar system, made by a competing company.


"It's a terrific idea," Citicorp spokesman Bill Aheran said of the paperless charge systems.

"The basic benefit is that it speeds up the whole process," Aheran said. One of the chief complaints of credit card users is that it takes so long to get a charge form filled out and have the charge authorized, he said.

Moreover, Perkins said, his system can reduce the billions of dollars of credit card fraud committed each year. With extra software, Sign/On can verify if a signature is genuine. It does this by encoding 13 characteristics of a signature, from the way and speed the letters are formed to the shape of the letters.

The system will even update the "master" signature in its file each time it is used, allowing for changes in people's handwriting over time.

The security industry is full of verification systems, some based on signatures and others based on everything from the pattern of blood vessels in an individual's eye to the geometry of his hand, said James P. Holmes, a senior staffer with the Sandia National Laboratories in Albuquerque, N.M.

Sandia, which tests security systems for private industry and government agencies, has tested Sign/On.


"It seems to work pretty well. . . . The chances are better than 99 percent that you can't get in," Holmes said.

Eye scans and fingerprint tests may be harder to beat, but they can be awkward and expensive systems to administer, he said. The financial world recognizes and is comfortable with signatures, he said.

Of the companies making such systems, Holmes said, "Digital is probably one of the more established and has one of the most solid and tested products in the industry."

Perkins bought Digital a few years ago and has high hopes for Sign/On. A pilot test is under way with the IRS to allow people who file their tax returns electronically to use Sign/On to file their signatures (currently, a taxpayer must file a paper form with a signature along with the electronic tax forms).

Eventually, the United States probably will adopt the "smart cards" now making inroads in Europe, Perkins said. Such systems use a single card, with a computer chip and record of a customer's charge accounts, in place of separate charge cards.

Capital Security finished its last fiscal year in March with a profit of about $200,000 on revenues of $6 million, Perkins said. If Sign/On is as successful as he hopes, those revenues could jump to $50 million to $100 million in the next five years, he said. The company now has 77 employees, 42 of them in Maryland and the rest in offices in Pennsylvania, Virginia, North and South Carolina, and Florida.