The card would look like a credit card but would include a half-inch wide strip containing a digitised version of the face of the card's owner and key personal details.
Swiping the strip through a special reader allows it to convert the digital code back into an image and readable text. For extra security, this digital code can be scrambled so it can be deciphered only by an authorised reader unit.
Its developers, a company called DataStrip, from Esher, Surrey, say the strip system has huge anti-fraud potential, not just in tackling benefit fraud, but also in rendering passports and visa documents more difficult to forge.
The system might be used at airports to link passengers and luggage, or as a quick reference for accident victims. Information could have two levels of access - one for use only by paramedics, such as blood groups, with more detailed medical information accessible only to hospital staff. Eventually, the strip might include other details such as the pattern of veins on a wrist.
John Watt, chief executive of DataStrip, was reluctant to describe the system as a cheap and cheerful version of a 'smartcard' - the plastic cards with a miniature computer chip currently under test as an alternative way to pay on some city-centre bus routes - but he said his strip card system can carry almost as much data as a smartcard at a fraction of the cost.
The trick is in the compression technique used to squash data on to the three-inch strip. Current techniques can squeeze the code needed to build up an image down to 20 per cent of its original volume and still produce a recognisable picture. DataStrip's engineers have compressed this still further, so the code takes up only 3 per cent of its original volume.
Information in this digitised form can be photocopied and faxed, allowing companies to exchange business statistics in a compressed, secure form. The developers believe the system should also pose fewer problems for civil liberties campaigners wary of smartcards because they claim it is relatively easy to change the information stored in the card's memory. Once the data strip is printed, whether on to paper, card or plastic, it should be difficult to tamper with.
The approach should also prove more robust than a smartcard, whose chip can be physically damaged. If embedded into the plastic of a card, the data cannot be removed, DataStrip claims, even if attacked with a penknife.