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[alzheimer@juno.com (Ronald Raygun Remailer)]

Financial Times: Friday, November 8, 1996
 
Credit Card Group Set for Control of Mondex 
 
By Tim Burt 
 
MasterCard International, the credit card consortium, has stepped up its
bid
to take a leading position in the embryonic cash card business by
agreeing to
acquire a majority stake in Mondex International of the UK. 
 
Mondex is a leading developer of "electronic purses" -- plastic cards
with
memory chips that can be "loaded" with cash and used for small purchases.

 
The deal is expected to give MasterCard 51 per cent of Mondex, set up by

National Westminster and Midland of the UK but now jointly owned by 17
banks. 
 
Under the agreement, MasterCard would promote the Mondex electronic
cash card through banks which carry its franchise. 
 
The Mondex system has been piloted in Swindon, Wiltshire, and Hong
Kong. 
 
It works by storing cash on a microchip card, which can be loaded using
automatic telling machines or specially equipped telephones. 
 
Cards -- including credit, debit and store cards -- are used for payments
worth an estimated #2,000bn a year. 
 
MasterCard believes Mondex could give it a greater share of that market,
although some industry observers doubt the appetite for such electronic
cash
cards. 
 
The acquisition could exacerbate tensions between MasterCard and Visa,
its
main rival, in attempts to establish an industry-wide standard for chip
cards.
Visa has already done pilot tests of its electronic purse at the Atlanta
Olympic Games last summer and in Spain, Australia and Argentina.
 
It is understood Mondex would become a free-standing subsidiary of
MasterCard, and its existing management is expected to remain. 
 
Banking analysts said the deal could signal an admission by MasterCard
that
trials of its own electronic purse had not proved an unqualified success.

 
Yesterday, however, MasterCard said it would be conducting a full-scale
trial of its own smart card in New York next March. 
 
Electronic purses are undergoing trials elsewhere in Europe and North
America, and some of Mondex's rivals claim it does not conform to the
international standards for chip cards developed by companies such as
Visa
and Europay. 
 
Mondex has had a mixed reception among UK customers and retailers but
said this week that it had been received enthusiastically in the Far
East.
 
In Hong Kong -- where Mondex was launched last month in conjunction
with HongkongBank and Hang Seng Bank -- more than 20,000 customers
and 400 stores have signed up to join the scheme at the two malls where
it is
being tested. 
 
The card is also being tested in Canada and is expected to be launched in
Australia next year. 
 
 
 
Financial Times: Friday, November 8, 1996
 
World Tries Out New Electronic Purse Systems
 
By George Graham
 
Ever since inventors figured out how to implant a miniature computer chip
in
the thickness of a standard payment card, banks have been toying with the
possibilities opened up by this extra memory and processing power. 
 
Top of most lists is the electronic purse: a way of loading money on to
the
card so that it can be used as a direct substitute for cash in small 
transactions such as buying a newspaper or a bus ticket. 
 
Mondex is among a host of electronic purses now on trial around the
world.
Originally piloted in Swindon, England, it is also being tested in Canada
and
was launched this week in Hong Kong. 
 
The arrival of MasterCard, the international payment card consortium, as
its
prospective majority shareholder will give Mondex the opportunity to move
beyond local and national trials to, potentially, worldwide use. 
 
MasterCard had run trials of its own electronic purse in Canberra, though
reports that these proved unsatisfactory would appear to be borne out by
its
imminent new link with Mondex. But Mondex is not alone in the electronic
purse contest.
 
Visa, MasterCard's great rival, piloted its Visa Cash electronic purse at
the
Atlanta Olympics, and in such countries as Spain, Australia, and
Argentina. It
will be launching a trial in the UK next year. Europay, despite being
MasterCard's partner in Europe, has already launched its own purse called
the Clip. 
 
Other national electronic purses range from the disposable Danmont card
in

Denmark -- sold for face value and thrown away when used up, like a phone
card -- to the reloadable Quick chip in Austria, which is integrated into
the
customer's regular cash card. 
 
The most heavily used electronic purse so far, and arguably the only one
that
can yet claim to be a commercial success beyond a closed circuit such as
a
university, is the PMB card in Portugal. It has 170,000 cards in active
use,
and an expected 50,000 point of sale terminals installed by the end of
this
year. 
 
But no winner has yet emerged. 
 
"The reason for all of these pilots is that no one has proven the
business case.
I'll be really interested to see if anyone makes money out of this," Mr
Eugene
Lockhart, president of MasterCard International, said earlier this year. 
 
Banks generally like the idea of an electronic purse, which cuts out the
risk
they run on a credit card payment of not getting paid. It is also cheaper
to
operate than a debit card: because the money is already loaded on the
card,
there is no need for each transaction to be authorised by a central
computer. 
 
'The reason for all these pilots is that no one has proven the business
case'
weighs particularly with late night shops and with bus and taxi drivers
who do
not want to have to carry change around with them. 
 
But they do not want to install new card terminals until they are sure
what the
standard will be. 
 
The gains are much less obvious for consumers. To compete with cash, an
electronic purse has to be not only free but very widely accepted. That
threshold has so far been crossed usually in very limited geographical
areas,
such as the Sydney suburb where an electronic purse accepted at petrol
stations, shops and fast food outlets has been successfully married with
a bus
pass. 
 
Mondex's technological features make it a closer replica of cash than
most
competitors. Mondex money moves anonymously from one person to the
next, and can even be transferred to another individual's Mondex card,
instead of only to a shop with a special terminal. 
 
In most other systems each transaction ends up being processed through a
central computer. That leaves more of an audit trail -- a plus point with
police. 
 
But Mondex's biggest shortcoming has been that it stood alone, raising
questions on whether it would gain acceptance beyond the confines of
Swindon. Rivals say it does not conform technically to the international
standards for chip cards developed by Visa, MasterCard and Europay,
although Mondex officials have demonstrated its cards will work in
standard
terminals. 
 
Mondex took a big step towards wider acceptance this summer, when
National Westminster Bank, its creator, sold control to a broad
international
consortium of banks. With MasterCard expected to take control, the
Mondex card has will be crossing another threshold toward worldwide
acceptance.