Personal identification encryptor and method

A method and apparatus for allowing a user to select and encrypt a Personal Identification Number (PIN) from a remote location without requiring clear transfer of the user-selected PIN and the account number during a single communication is disclosed. The preferred embodiment includes a host computer connected by a modem to a telephone line, along with appropriate communication software, and a security module connected to the host via a secure communication path. The security module generates an encrypted PIN using the user-selected PIN and a sequence number generated by the host. The security module can also processes the encrypted PIN and user account number to generate a Pin Verification Number (PVN) or other user authorization code. The PVN is subsequently used by a transaction system to verify the identity of the authorized user.