The electronic age has produced more than a few innovative ideas for modernizing and streamlining payment systems but none quite so wild-eyed as that of Tim Jones.
Mr. Jones is co-inventor, champion, and now chief executive officer of a London-based venture called Mondex, dedicated to nothing less than creating a global, multicurrency, electronic system that replaces cash.
Despite the grandiosity of the business plan and the product's vaguely futuristic name, Mr. Jones is a banker, and his company was formed by National Westminster Bank of London.
Their entrepreneurial ambitions may not jibe with British banking's buttoned-down traditions, but they are dead serious about exploiting what they see as a huge profit potential in revolutionizing the way consumers conduct the vast majority of their money transactions.
They have made painstaking plans to demonstrate their system - which is built around smart cards and sophisticated devices for reading and revising them in homes and other remote locations - a year from now in the southwest England town of Swindon, with up to 40,000 cardholders and 1,000 merchants.
They also have launched a campaign to bring a global network of banks into Mondex, with the United States seen as crucial to the whole enterprise.
Mr. Jones is an increasingly frequent visitor to these shores, and he has appointed a relationship manager for North America, Ralph Browning, to be stationed here. They have begun touching bases with what Mr. Jones calls "the top tier of retail bankers in the United States," in hopes of finding what would be the nucleus of a U.S. franchise.
No one is disclosing how many millions of pounds, dollars, or other currencies have been committed to Mondex, but Mr. Jones and some leading executives in British banking, at least, see it as money well spent.
"It is a major commercial opportunity for banks everywhere," Natwest group chief executive Derek Wanless said last December when the strategy, including the plan for the 1995 test, was announced.
Natwest rival Midland Bank, as co-owner of Mondex U.K., will also be participating in the Swindon test, along with some of the biggest names in technology from three continents, including AT&T, Hitachi, and Texas Instruments.
British Telecom, better known in Britain as BT, will be a key ally as it makes its telephones compatible with the smart cards.
"BT believes that smart cards will play a key role in providing new and innovative services [and] is delighted to be working at the forefront of such communication developments," said Bruce Bond, group director of products and services management.
Mr. Jones, 39, sees these corporations' involvement as a welcome endorsement of a project he began more than four years ago. He worked then in Natwest's payment services area and shares credit for the idea with Graham Higgins, then manager of the card strategy group.
They worked under Ron H. Williams, who later became chief executive of MasterCard's European affiliate, Europay International.
"I went looking for the next big product move, and we got lucky to find it in electronic money," Mr. Jones said in a recent interview.
"The business case is there, and we have very capable corporations with us because consumers see value in the proposition."
That's not mere speculation.
Typical of Mondex's highly systematic methods, the group did market research as early as 1991 in Britain, France, Germany, Japan, and the United States. This indicated a widespread understanding of the concept: Once it is explained, 94% react favorably.
The smart card is seen as suitable for payments of all sizes, and 59% say they would use it for transactions of less than $15.
"People see it's nice to have the equivalent of an automated teller machine in the home, or to be in a taxicab and not have to worry about carrying the right amount of change." Mr. Jones said.
The concept is in keeping with the prepaid cards and "electronic purses" that are generating interest among bankers and their credit card associations.
MasterCard and Visa are at the early stages. of making such products available (see article on the next page).
Electronic Payment Services Inc., the joint venture of several superregional banks and operator of the MAC automated teller network, is perhaps the furthest along toward developing a fully ,functional system in which smart cards carrying stored value are widely acceptable for transactions of less than $20.
EPS expects to launch its program in its home state of Delaware next year, perhaps around the time Mondex comes to Swindon.
Prepaid programs are typically geared to small transactions. EPS assumes that, of 360 billion consumer payments annually in the United States, 80% are in cash and 90% of the cash payments are for less than $20.
Visa International has estimated that $1.8 trillion of lowvalue payments worldwide are susceptible to prepaid-card treatment.
The chips in smart cards offer a higher level of security and durability than standard credit or debit cards, and they lend themselves easily to storage and replenishment of value. Money can be transferred from the card to an electronic point of sale device, and the card's value can be augmented by transferring funds from a bank account, using an ATM or telephone connection.
Mondex has unveiled an array of card-reading devices, including a balance checker that fits in a pocket as a key chain would, a screen telephone, and a portable "wallet" that is itself a store of value. Mr. Jones is looking to keep the retail price of a wallet under $100 and the more elementary balance reader around $12.
For a night at the movies, a cardholder might move $20 from the wallet onto the Mondex smart card, which then becomes "pocket money," as the wallet is left at home.
The system - namely, the wallet - can accommodate up to five currencies at once, a feature designed to appeil to Europeans and to international travelers everywhere.
Mr. Jones envisions the smart card as a key to remote devices like personal computers, mobile phones, personal digital assistants, and set-top television boxes for video games or movies on demand.
Mondex makes a still more radical departure: Payments can be made not only to and from banks and retailers but also from one Mondex cardholder to another. The system is modeled after cash, and since individuals can exchange cash easily and anonymously, so can two Mondex users.
Although a general awareness of Mondex is just beginning to build. particularly in the United States, it has already created a major stir in the growing community of bankers and others interested in smart cards. The controversy over cardholder4ocardholder payments has been front-and-center.
Visa International has viewed "accountability and auditability" as priorities for stored-value systems, said senior vice president Michael Nash. Its approach is thus incompatible with Mondex' "focus on a system that is not accountable," in that cardholderto-cardholder payments work exactly like cash.
Mr. Nash also believes individual countries' central banks and regulators will not give a "nonaccountable" Mondex free sailing, though Mr. Jones reports having gotten favorable reviews from the Bank of England and some of its counterparts elsewhere.
Central bankers should like the idea of automating currency, he said, and can readily track it alongside coin and currency in the money supply.
Mr. Nash conceded that market tests may reveal a demand for both accountable and nonaccountable systems. But accountability is the direction in which a Visa-coordinated electronic purse working group is headed. Its 19 members include Electronic Payment Services and, perhaps paradoxically, a representative of Mondex' parent, National Westminster Bank.
"Maybe they are not putting all their eggs in the Mondex basket," Mr. Nash said of Natwest.
Pete Hill, another Visa senior vice president, pointed out that the chip to be used in the Swindon cards is not as secure as Mondex and other programs ultimately call for. Mr. Jones acknowledged the limitations of the Hitachi H8-310 chip and said it would be upgraded "beyond Swindon."
Diane Wetherington. a senior vice president at MasterCard, where Nalional Westminster Bank has a board seat, left open the possibility that Mondex "may migrate" toward the card associations' preferences.
"A number of prepaid applications will emerge around the world, some with national, some with international acceptance," she said. "Applications will be both competitive and complementary.
"The industry is too new to draw clear lines between competitors and partners. There will be a number of surprises."
Mr. Jones, who asserts that Mondex is not competitive with credit or debit cards, said the product elicits a continuum of reactions, from initial enthusiasm, to skepticism, to serious interest.
The sales cycle is necessarily long because it requires "a major strategic commitment," Mr Jones said, but Mondex has already protected its service mark in 70 countries and is actively marketing in 15.
"Because the product is money, there is a need to decentralize control within countries," he said. So Mondex wil be structured the way the Swif or Europay payment organizations are, with an international umbrella company overseeing national associations or franchises.
"We're not going to incorporate Mondex International unless we have a significant quantity of interest from the various territories," he said. "It could be a small number and is unlikely to be more than 10 to 15."
In the United States, he suggested, three to six banks might buy the rights to Mondex and then build relationships with others.
Mondex could benefit by the presence of Natwest's subsidiary bank in the New York-New Jersey area and perhaps by Midland Bank's affiliation with Marine Midland, a Buffalobased regional.
But neither bank has the clout to pull a U.S. franchise together so Mondex is approaching senior executives at the largest banks. "In the U.S., we have enough connections to start pretty much at the top of the shop." Mr. Jones said.
"We're ahead of plan, he said, " and delighted with the progress we're making.