American Express Co. has broken some ice by buying into a competitor's smart card technology.
As announced during the Cardtech/Securtech conference this week, American Express is licensing Multos, the operating system that grew out of the Mondex program of MasterCard International Inc.
American Express also joined Maosco Ltd., the body that oversees the setting of Multos standards. It is akin to letting a Microsoft Corp. rival help design Windows.
Suddenly, alignments in this hotly contested market no longer seem so rigid. The meaning of "openness," an industry mantra, will be put to a true test, and if it goes advocates' way, many technical and political obstacles to smart card deployment could be swept aside.
"For a year we've been talking a lot about openness," said Nick Habgood, chief executive officer of London-based Maosco. "It is no longer just academic. Now we can demonstrate it by bringing a competitor of Mondex- MasterCard into the consortium."
Whether because of competitive juices or the fluid nature of the technology, smart-card-related sensitivities have run high in the financial industry. Despite general agreement on the need for a basic technical compatibility, MasterCard, Visa, and American Express had been on divergent paths.
Unlike existing magnetic stripe cards, any one type of smart card is thus not automatically interoperable with-acceptable in the same terminals as-another.
Visa, basing its strategy on Sun Microsystems Inc.'s highly flexible Java technology, does not seem ready to follow American Express into Maosco. But Maosco, like American Express and many others, is doing some Java programming, laying groundwork for a de facto convergence of the platforms.
In another indication of opening and loosening, the Global Chipcard Alliance, which began as a telecommunications group, announced its first financial services members other than American Express. Mondex USA and Citicorp, which is a Visa loyalist, were among 10 additions to Global Chipcard. Others included smart card makers Schlumberger, Siemens, and Giesecke & Devrient, the payment automation company Verifone Inc., and Chipper Netherlands, a home banking venture of ING Group.
"Cross-industry alliances are absolutely crucial," said Janet Crane, president of Mondex USA, San Francisco. "We are pleased to be part of the GCA and excited that its members share Mondex's commitment to openness and cooperation in moving the smart card industry forward.
Just as Visa is claiming that all momentum is going its and Java's way (see page 12), Maosco can say that MasterCard-Mondex, American Express, and Discover-Novus are all with Multos. (Like MasterCard and several major banks, Discover's parent, Morgan Stanley Dean Witter & Co., is a part-owner of Mondex USA.)
Visa sees nothing to criticize, said a spokesman, but he contended Amex made a technical decision that is not necessarily a competitive victory for the other side.
"It's significant," said Dan Cunningham, president of the Smart Card Industry Association. "I wonder what it means for Proton."
Proton, developed by the Banksys association of Belgium, was American Express' previous chip card licenser and likewise supports Java. One of Proton's selling points is that 25 million cards worldwide are running on its systems, several times the number of Mondex and Visa Cash combined. American Express uses the Proton electronic purse in about 2,200 trial cards, said Banksys marketing chief Armand Linkens.
Mr. Linkens said he sees nothing wrong with his customer's testing another operating system. Amex said it will stay with Proton and link it to Multos for payment, hotel, airline, loyalty, and other services on chip cards.
R. Allen Gilstrap, vice president in the American Express smart card center of excellence, Salt Lake City, said the company embraces openness and "will be interoperable with even the fiercest of our competitors."
"We are committed to working with a variety of products and technologies on a nonexclusive basis," said American Express vice president Andrew Bartels. He said he considers Multos "a preferred smart card operating system."
Amex is "further(ing) our leadership in the smart card arena by being able to offer our customers smart cards with an open, multi-application operating system," Mr. Bartels said.
"We have said from the beginning Multos would be an open standard," said Ronald Braco, a Mondex USA director and senior vice president of Chase Manhattan Bank. "We wouldn't mind having the other guys come in too."
