A method and apparatus are provided for improving the security of data transmissions between stations. The method obviates the need for transmitting user-identification information such as personal identification number (PIN) from station to station, e.g., from the station utilized by the user to enter his PIN and initiate a transaction, to the station that processes the transaction. Also, for added security, the method provides for encryption (encoding) and decryption (decoding) of data during a transaction using encryption and decryption keys produced from different (independent) PINs. The apparatus includes at least one irreversible algorithm module, a random number generator and at least one data file (e.g., disc or magnetic tape storage). The apparatus also includes a comparator or, alternatively, an encoding algorithm module and a matching decoding algorithm module.