Patent ID: 8423415

Claim:
A method for authenticating a payment service being used in a transaction, the method comprising a plurality of steps, each being performed by hardware executing software, wherein the steps include: generating on a payment device a first verification value unique to the transaction, wherein the verification value is generated by: creating a base record comprising: digits for an application transaction counter overlaying the left most digits of a primary account number corresponding to an account upon which the transaction is being conducted, wherein the application transaction counter is incremented for each said transaction; and concatenated to the right most digits of the primary account number: a card security code for the primary account number; and an expiration date for the primary account number; bisecting the base record into a first field and a second field; encrypting the first field using a first encryption key; performing an exclusive-OR (XOR) operation on the encrypted first field and the second field to produce a first result; encrypting the first result using a second encryption key to produce a second result; decrypting the second result using a decryption key to produce a third result; encrypting the third result using a third encryption key to produce a fourth result; sequentially extracting each value between 0 and 9 from the most-significant digit to the least-significant digit of the fourth result to produce a fifth result; sequentially extracting and subtracting hexadecimal A from each value between hexadecimal A and hexadecimal F from the most-significant digit to the least-significant digit of the fourth result to produce a sixth result; concatenating the fifth result and the sixth result to produce a seventh result; and selecting one or more values from the seventh result as the first verification value; communicating a payment record from the payment device to a point of sale terminal, wherein the payment record comprises the first verification value and payment data from the transaction; communicating the payment record from the point of sale ten inal in a magnetic stripe data format to a service provider computer; generating a second verification value on the service provider computer, wherein the second verification value is generated solely from data residing on the service provider computer; and disapproving the transaction when the first verification value does not equal the second verification value.