ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the January 2004 issue


On Track to Install ID System at Gaza Checkpoint

The Israeli military is about to install, a high-tech identification system at a Gaza checkpoint in an effort to speed up passage of Palestinian workers into Israel. By cutting down the waiting time, it is expected to decrease what could be potentially dangerous friction with Israeli soldiers. The Basel System, developed by Israeli company On Track Innovations (Nasdaq:OTIV), uses two biometric sensors to read the facial dimensions and hand geometry of Palestinian workers crossing through the Erez checkpoint, "It would be the first of its kind in the world," according to Ohad Bashan, director of global marketing at the company.

The Erez checkpoint, at the northern end of the Gaza Strip, is the main crossing point into Israel. Workers have complained bitterly about the long wait during the checking procedure.

Currently, about 10,000 Palestinian laborers pass daily through the narrow passageways of the Erez checkpoint, showing soldiers their laminated identification cards before they travel to construction or agricultural jobs in Israel. If a card is believed to be forged, its owner can be held for hours while it is checked.

The new OTI system is designed to increase security while speeding up the check at the same time. The new system will be tamper proof, Bashan said.

The Basel System "will significantly improve the security, the speed and the relationship between Palestinian workers and the soldiers," Bashan said. "The Palestinians crossing over will not need to be interrogated." Workers will carry contactless smart cards. Their heads and their hands will be scanned to make sure that all information matches before they are let through the checkpoint.

Such a dual biometric system has never been used with the contactless cards before, according to a company spokesman. It is significantly quicker than other systems that check handprints and retinas to identify users. The device takes between four and nine seconds to check each worker.

Israel's Defense Ministry contracted an Israeli office of the U.S.-based company Electronic Data Systems to install a system that would ensure that Palestinians who pose a security risk, would not cross through the checkpoint, Bashan said.

The American EDS company in turn subcontracted with the Israeli-based OTI, which specializes in smart card and contactless technology, that it has tested out in Israeli communities.

The Defense Ministry had requested that the system include two biometric checks to guarantee reliability. U.S. anti-terror funding was used in the development of the Basel System, Bashan said, although he could not say how much money had been invested. Furthermore the company announced a major achievement. MasterCard International has selected its contactless secure microcontroller solution for use in its MasterCard PayPass deployments in the U.S. MasterCard PayPass is a new "contactless" payment program that provides consumers with The Simpler Way to Pay(TM). OTI's affiliation with the project should generate several million dollars' revenue. Consumers simply tap or wave their MasterCard PayPass card on a specially equipped merchant terminal, eliminating the need to swipe a card through a reader.

The new solution is useful for quick payment environments where speed is essential, such as quick service restaurants, gas stations, drug stores, supermarkets and movie theatres.

MasterCard PayPass functions using a secure contactless microprocessor chip and an antenna. Atmel has been selected to supply the secure contactless microcontroller and has partnered with OTI to provide the contactless solution expertise including the operating system, application support and inlay technology.

"OTI has worked with MasterCard on its PayPass program since its inception. MasterCard has successfully integrated our inlay technology with leading U.S. card vendors and these have integrated our reader solutions with multiple point of sale providers to support MasterCard PayPass, said Ohad Bashan, president and CEO of OTI America.

OTI, based in Rosh Pina, is traded on the Nasdaq SmallCap and on the Frankfurt stock exchange. Earlier this month it admitted to widening losses, at both the operating and net level, and a 6% dip in revenues to $4.1 million for the third quarter of 2003. The company blamed the slip on customers delaying key projects. Its operating loss widened 74% compared with the parallel quarter to $1.5 million, and its net loss mounted to $1.8 million, compared with $1.6 million in the same quarter of 2002.

OTI has 200 employees and maintains offices in Cupertino, California.



Reprinted from the Israel High-Tech & Investment Report January 2004

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