Seven US financial giants, including the country?s biggest bank, have thrown their weight behind the UK-developed Mondex electronic cash smartcard system, with the formation of San Francisco-based Mondex USA.
Mondex was set up in 1990 by the National Westminster Bank to pilot electronic cash payment schemes with user trials beginning in Swindon in 1995. In July this year the bank set up Mondex International with 17 partner companies, including Wells Fargo Bank and AT&T.
Wells Fargo will be the largest shareholder in Mondex USA, with 30 per cent of the new company. Wells Fargo executive Janet Hartung Crane will become chief executive officer. AT&T has a 10 per cent stake in the new venture.
Chase Manhattan, the US? largest bank, takes a 20 per cent stake, while Michigan National Bank, credit card firm Dean Witter, Mastercard International and the First Chicago Bank hold 10 per cent each. NatWest Group has sold its stake completely. Mondex USA will have a market capitalisation of around $50 million.
The formation of the new subsidiary comes a month after Mastercard announced it was buying a 51 per cent holding in Mondex International for an estimated sum of between $100 million and $150 million. The remaining 49 per cent is divided between Mondex UK, the USA company and other regional interests.
Mondex USA will be responsible for marketing the Mondex smartcard in the US with infrastructure building seen as the top priority in 1997. A number of pilot schemes are planned by the partner companies. "We view 1997 as a lab year," said Hartung Crane.
AT&T has begun a 200-user pilot scheme in Florida to allow employees to use smartcards to shop on the Internet via virtual transactions. Wells Fargo has already enabled 800 of its employees in San Francisco to use Mondex to shop in 22 shops in the Bay Area, including coffee houses, bookshops and drugstores.
The most immediate knock-on effect of the Mondex USA formation has been to delay a planned first quarter smartcard pilot in New York until the fourth quarter of next year. The trials, run by a consortium of Chase Manhattan, Citibank, Visa and Mastercard, were intended to prove the interoperability of Mastercard?s Mastercash smartcards and Visa?s Visacash alternative. But Chase Manhattan, which had intended to issue 50,000 Mastercash cards for the pilot, needs time to revamp its systems and hardware to issue Mondex-based products instead. Citibank will still issue Visacash cards for the trial in Manhattan?s West Side, which will see 500 retail and commercial outlets accepting smartcard payment.
The pilot will see the introduction of a common card terminal for use by shops. There are differences in the approach taken by Mondex and Visa to electronic commerce, notably that the former does not charge a fee to shops for transactions.
Mastercard has made no comment on what it plans to do with its Mastercash development now that it has adopted Mondex as its strategic platform. A number of senior executives in the Mastercash unit have left the company in recent months.
Smartcards are a relatively uncommon phenomenon in the US, but are attracting increasing levels of attention with the growth of interest in the network computer concept and the expansion of public access to the Internet. In this environment, smartcards are one way of achieving secure banking and other transactions over the Net.
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