Abstract: The invention provides a method for verifying the identity of an entity to a computerised system. The entity is in possession of a personal identification device (PID) having a PID ID and storing a Codec that can be used to encode and decode data. The computerised system holds data associated with the entity including the PID ID of the entity's PID, the Codec and a password associated with and known to the entity. The method involves transmitting an encoded Challenge from the computerised system to the PID, calculating a Reply using the Challenge and the password entered by the user, and transmitting the Reply from the PID to the computerised system. The transmitted Reply is compared with a reply calculated by the computerised system and the identity of the entity is verified if the comparison determines that Replies are the same.