Mondex has landed in North America.
The smart card venture owned by National Westminster Bank of London announced Friday that the two biggest banks in Canada have agreed to join the program.
Tim Jones, chief executive officer of Mondex, said he is closing in on a similar breakthrough in the United States, which would go a long way to establishing global credibility and viability for the system described as an "electronic alternative to cash."
The new entries - Royal Bank of Canada and Canadian Imperial Bank of Commerce - will own that country's Mondex franchise and invite other financial institutions to join. They will issue the cards embedded with computer chips that can store "electronic cash" in multiple currencies, and will develop an infrastructure of retail terminals and other devices for transferring those values.
Working closely with Bell Canada, which will play a role similar to that of British Telecom with Natwest in the United Kingdom, the Canadian banks are planning a market test in the first half of 1996 and a national rollout in 1997.
Mr. Jones said the Canadian signings are especially significant given the banks' size and influence - each has more than $100 billion of assets in a country with only six major commercial banks - and the fact that neither is affiliated with the institutions that gave Mondex its initial push in Britain and Asia.
"This gets us into North America and signals we are on our way," said Mr. Jones, who coinvented the Mondex electronic purse concept while working in Natwest's payment system businesses.
After three years of research and development, Natwest formed the Mondex U.K. franchise with Midland Bank, also of London, in December 1993. Bank of Scotland announced March 30 that it would participate in Mondex U.K., which is scheduled to launch its initial trial in July in Swindon, England.
Last September, Natwest granted a license for much of Asia to Hongkong & Shanghai Banking Corp., which is owned by the same holding company as Midland, $300 billion-asset HSBC Holdings.
Natwest and HSBC connections are expected to help establish Mondex elsewhere. In the U.S. they own National Westminster Bancorp and Marine Midland Banks Inc., respectively. And HSBC may have a hand in Mondex Canada through Hongkong Bank of Canada, the seventh-largest bank there, at about $10 billion of assets.
But Mr. Jones wants to build a broad base of support before officially opening a U.S. franchise.
"We are a few months away from a U.S. banking group," he said. "We hope to make an announcement by the end of the year.
"We are talking to a high-quality group of institutions and there are certain commercial and regulatory issues to deal with."
Mr. Jones said the "memorandum of agreement" that Royal Bank and Canadian Imperial announced in Toronto last week was "16 months in the making, which is about par for the course."
They were the first Mondex participants to discuss consumer pricing, saying the cost of a chip card with a simple, portable balance reader will be a maximum $3 a month. Final pricing decisions will be made after a year- long pilot test, in a city to be decided.
Mr. Jones said he expects the price of a key piece of hardware, a portable "electronic wallet" with a keypad, will come down in mass- manufactured quantities to $75 at the retail level. Electronic wallet functions could also be built into screen telephones, cellular phones, or handheld and personal digital assistants, Mr. Jones added.
"Mondex will revolutionize the way people pay for goods and services," said Royal Bank senior vice president R.M. Juneau. He noted it can be used like cash for person-to-person transfers, and "in combination with a screen phone you have the electronic equivalent of an automated banking machine."
Royal and Canadian Imperial are members of Visa, which has favored other approaches to stored value cards. Mr. Jones downplayed the Visa connection, saying these banks' "sharing of a certain outlook" was the reason they joined in Mondex.
