Wells Fargo Bank began testing a Mondex smart card system this week, giving the highly touted "electronic alternative to cash" its first operating foothold in the United States.
Though modest in scale, the entry is a milestone for Mondex's developer, National Westminster Bank of London, which has viewed the United States as crucial to its plans for creating an international network.
Natwest and Wells Fargo publicly played down their system launch, noting that just 90 cards were issued to Wells employees for use at nine locations in and near the headquarters building in San Francisco. But officials of both companies confirmed that the system went live on Monday.
Tim Jones, the London-based chief executive of Mondex, was quick to point out that the two banks have merely entered into a testing agreement. There is still no Mondex franchise in the United States comparable with the United Kingdom organization owned by Natwest and Midland Bank or the Canadian company owned by Royal Bank and Canadian Imperial Bank of Commerce.
Wells, which has quietly been building a reputation as one of the most aggressive U.S. banks in pursuit of electronic service alternatives, seems certain to be one of the U.S. owners of Mondex. Industry observers also expect affiliates of Natwest and Midland Bank - National Westminster Bancorp in New Jersey and Marine Midland Banks Inc. of Buffalo - to be in the group.
Mr. Jones said this week that he is on schedule to officially announce a U.S. ownership consortium before yearend.
Wells' Mondex project had recently become an open secret in bank card industry circles. The companies' shunning of publicity tended to divert attention to other chip card experiments - with cards numbering in the thousands - at a Bank of America building and at Visa International headquarters, both also in the San Francisco area.
None of the U.S. banking efforts yet approaches the magnitude of Mondex's trial in Swindon, England, which started in July on its way to an anticipated 40,000 cardholders.
Electronic Payment Services Inc., operator of the MAC automated teller machine network, is preparing for a large-scale smart card test in Delaware early next year, and Visa expects to have perhaps millions of chip cards in circulation in time for a showcase at the Atlanta Olympics next summer.
Each test is geared to low-dollar-value "electronic purse" transactions. The cards' computer chips generally store a sum comparable to the cash people carry in their wallets - typically $10, $20, or $50 in fixed-value prepaid cards, though Mondex and some other electronic purse schemes can go much higher. Transaction amounts are debited with each use, such as at a vending machine or point of sale terminal.
Bankers investigating Mondex have been struck by its technology, which in addition to the stored-value card includes a multicurrency electronic wallet that enables payments not just between buyers and sellers, but between any individuals with the equipment.
Mondex also has an impressive array of development partners, including British Telecom, Bell Canada, AT&T Global Information Solutions, and the Japanese chipmaker Hitachi.
In its biggest geographical coup, Mondex last fall granted Hongkong & Shanghai Banking Corp., part of the same holding company as Midland Bank and Marine Midland Bank, the license for much of Asia.
At Wells Fargo Bank, Mondex users will get both the smart cards and electronic wallets. They can go to a specially equipped automated teller machine to transfer value from their bank balances onto the portable devices. The same ATM will be used for uploading and settlement of merchant transactions during the trial.
Chip-reading point of sale terminals have been placed at the Wells Fargo Museum shop, the employee cafeteria, and seven nearby stores including a Starbuck's coffee bar and Walgreen's pharmacy.
"It's a limited employee pilot at this stage, but it's an important step toward developing smart card capabilities," said bank spokeswoman Lorna Doubet.
"It's small - I don't want to hype it up - but it is a symbol of the progress we're making," Mr. Jones said.
Ms. Doubet said Wells chose Mondex because "we think it's the most advanced of the stored-value approaches, and the most tested."
"It doesn't preclude our testing or using other smart card concepts," Ms. Doubet said. But Mr. Jones noted that Wells made a financial commitment to the trial that reflects serious intentions.
He did not reveal the dollar amount, but another indication of Wells' seriousness is that the project comes under the purview of Dudley Nigg, executive vice president and head of the direct distribution group.
The in-house pilot is set to continue through yearend, with a likely expansion in the number of participating employees and merchants.
After an evaluation of results, Ms. Doubet said, "The next step would be a larger-scale test somewhere in California" in 1996.
