Wells Fargo Plans to Take 40% Stake In Mondex's U.S. Smart Card System

Wells Fargo Bank is taking formal steps to become the principala U.S. banking partner and proponent of the Mondex smart card system.

The bank plans to own 40% of the United States Mondex franchise, according to reliable sources, and is seeking regulatory approval to form operating subsidiaries.

Wells' stake would be equal to that of National Westminster Bank of London, which developed the electronic cash technology and has begun deploying it in England.

AT&T Corp. would own the remaining 20% of the company likely to be named Mondex USA.

While Wells Fargo is maintaining an official silence - even though it has been testing Mondex at its San Francisco headquarters since last summer - sources inside and outside the bank confirmed that the wheels are in motion.

By making what is expected to be a substantial financial commitment, one of the country's most aggressively electronic banks is putting its prestige behind one of the more controversial entrants in the new-money sweepstakes.

In contrast to stored-value cards being demonstrated by MasterCard and Visa, Mondex is billed as "true electronic cash" - even allowing for anonymous transactions between cardholders.

National Westminster Bank is several months behind its schedule to have a franchise up and running in the U.S., a market seen as crucial to Mondex's global ambitions.

Mondex Canada - owned by Royal Bank and Canadian Imperial Bank of Commerce- is planning a trial this fall, and others are pending in the Far East with another licensee, Hongkong and Shanghai Banking Corp.

"The good news is Mondex is moving ahead," said smart card consultant Jerome Svigals in Redwood City, Calif. But he said it needs more investors. "There's no way that Wells and AT&T can cover the banking world. I guess we still haven't heard the end of the story."

David Weisman, an analyst at Forrester Research in Cambridge, Mass., said Natwest had been trying to avoid putting more of its own money into Mondex. "Sounds like they couldn't find that third elusive company to jump in," he said.

Mondex USA would earn royalties by granting licenses to other participants.

According to a knowledgeable attorney, Wells Fargo filed a request May 15 with the Office of the Comptroller of the Currency for permission to set up subsidiaries to invest in and administer the franchise. A Wells Fargo spokeswoman would say only that papers had been filed with the OCC.

AT&T declined to comment. Its communications role with Mondex probably would be similar to that of British Telecom and Bell Canada in their respective countries.

Wells signaled its high-level interest in Mondex last year by assigning the project to executive vice president Dudley Nigg. Earlier in his career, Mr. Nigg worked for Midland Bank, a Hongkong & Shanghai affiliate and Natwest's partner in the British Mondex implementation.

Despite its nonconforming technology, Mondex gained credibility by recently demonstrating it could "interoperate" with MasterCard and American Express smart cards. Benjamin Miller, a Rockville, Md., consultant and chairman of the Cardtech/Securtech conference, said the differences are blurring between opposing camps.

But William M. Randle director of marketing at Huntington Bancshares, Columbus, Ohio, said he doubts the viability of cash-oriented cards. "A multi-functioning card" like one his bank is developing with Cybermark Inc. and Battelle Laboratories "seems more commercially viable," he said.

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