A senior Visa executive is holding open the possibility that the two bank card associations' smart card programs can find some technical common ground.
Philip Yen, the Visa International senior vice president responsible for chip card platform strategy, indicated in an interview last week that Visa is willing to go at least halfway to resolve some of the controversies raging with MasterCard International and its Mondex subsidiary.
"I have had some discussions with (Mondex) technical people," Mr. Yen said. "MasterCard and Visa should compete but not create unnecessary differences, especially in the technology area."
Though there is no formal progress to report, the notion Mr. Yen is suggesting-interoperability-is gaining "motherhood and apple pie" status in technology circles, particularly when it comes to payment systems and electronic commerce.
People on the Mondex side are no less enthusiastic, in principle.
"The idea of agreement on a baseline technology is very smart and has always been what Mondex wanted to do," said Janet Crane, president of Mondex USA in San Francisco. "Mondex would be very supportive."
Ms. Crane described Mr. Yen's statement as "a great thought" and "a starting point."
There remains considerable distance from here to a standardization agreement. MasterCard-Visa competition has been heating up in general, and nothing in recent years has gotten the juices flowing more than their contrasting smart card courses.
Mr. Yen said cooler heads may prevail as bankers active in the two associations get closer to smart card issues and agree on the desirability of that technological baseline.
"We believe we should be competing on products, not necessarily the technology," he said. "How an electronic purse operates and what system you use, how you load and personalize the cards, is technology. Marketing, branding, the applications you put on the purse, are not technology."
The two camps are most obviously divided in their choices of underlying operating systems, the subject of heated debate for much of the last year.
Mondex is promoting Multos, a system it designed to enable a card's semiconductor chip to accommodate multiple applications or services. Visa has embraced what it calls a Java Card open platform, based on Sun Microsystems Inc.'s Java computing language.
Visa stressed Java's flexibility and technical openness-it is compatible with any type of computer system and well suited to Internet transactions and upgrades-as a way to let banks and countries adopt the technology and its features at their own pace.
Mondex, which MasterCard controls after acquiring 51% of the equity last year from a global consortium of banks, has also emphasized openness and product flexibility, but has insisted on a common technical basis for all its programs worldwide.
Visa has accused Mondex of being inflexible and overly proprietary; Mondex has attacked Visa for lack of interoperability, even among the existing Visa cash programs in various countries.
Yet when Mondex announced Multos last spring, it left an opening for Java if the market called for it.
"We were encouraged when MasterCard and Mondex said they would support Java Card in Multos," Mr. Yen said last week.
"We see the possibility of convergence on Java Card as the standard for application development, with Multos available as one of the operating systems," he said. He conceded other potential ground to Multos: "It could even be the operating system for the merchant card"-the chip card that receives and tracks purchases before they are posted to the merchants' bank accounts.
Such conciliation has been rare. Aside from the Mondex-Visa rivalry, the proliferation of smart card products and operating standards-the Belgian banks' Proton system is big in Europe, and many countries have chip programs that are incompatible with others-has left many bankers' heads spinning.
At least two neutral groups-the Smart Card Forum and Smart Card Industry Association-have been trying to keep industry participants educated while promoting interoperability principles. But politics has been difficult to overcome.
For example, the Global Chipcard Alliance, which was organized by telecommunications interests, has made progress toward standards for prepaid phone cards and has said it expects to influence bank and payment cards. American Express Co. joined the alliance, but Visa and MasterCard- Mondex did not.
MasterCard and Mondex are making headway with Open Trading Protocol, a proposal to duplicate on the Internet the way payment choices are made in the physical world. Though it has gained support from technology leaders like International Business Machines Corp. and Hewlett-Packard Co., OTP has not won over Visa or American Express.
American Express has championed an OTP-like protocol for business-to- business purchasing, Open Buying on the Internet, but MasterCard and Visa are conspicuously absent.
MasterCard and Visa did overcome a rocky start in 1995 and 1996 to bring SET, the Secure Electronic Transactions protocol for Internet card payments, to fruition. American Express and the Discover/Novus card organization are also on board. That might bode well for a Mondex-Visa Cash agreement.
"The issue isn't what name is on the card," said Daniel Eitingon, Visa's president of global support services, who oversees Mr. Yen's area. "There has to be an open platform for all types of transactions on the cards."
"There has to be a convergence at some point in terms of the platform," he added. "We think open platform is the way to go, not competition based on saying 'ours is better than yours.'"
Mr. Eitingon said it did not help the interoperability cause that industry attention has focused on the stored value function, which "won't be the leading driver of chip cards. We need to give our members a foundation to build applications on, and stored value is just one of them.
"Banks are in a great position if they want to be there," Mr. Eitingon said of an emerging technology that phone companies, retailers, and others like Microsoft Corp. may also want to commandeer. "There will be good business opportunities in the future. Most of the Visa-Mondex debate was about stored value, and that was misplaced."
Mr. Yen, who has assumed a higher profile since the departure late last year of his boss and Java Card strategy architect Francois Dutray, said the issues can be deep and complex. This is especially true in view of the sizable number of independent smart card schemes and the likelihood that the telecommunications industry, mass transit and government agencies, and other entities may be ahead of banks in system development.
The possible confusion makes the Visa-MasterCard problem seem straightforward. "Enough doors are open on the two sides that I hope we can come closer," Mr. Yen said.
"If we can't fill in the full picture, then at least we can agree to common loading of applications. It will be unnecessary and confusing to banks if we have two ways" of putting value and services on a card.
"We are very much in favor of working together to define a next- generation electronic purse," Mr. Yen added. "We are talking to some of the schemes in Europe" toward that end.
Any standards effort may require creation of an independent governing or coordinating body. Mr. Yen said Visa is open to that idea but "it is premature to talk about the form and nature" of such an entity.
He said it would be unwise for that body to be responsible only for converging standards. "That would just be creating one more association," he said. "We also have to have the goal of creating value."
"It is futile to dream" about clearing away the technical distractions," Mr. Yen said. "We do some checking (with the other side) to the extent we can. We are sensitive to the need to compete and not cross the line of eliminating competition." Although federal antitrust authorities have put some MasterCard and Visa operating policies under their microscope, Mr. Yen said "the government is comfortable on the issue of standards and interoperability."
Meanwhile, Visa has lost none of its enthusiasm for Java or its desire to help its member banks win in the ways that count. Mr. Yen brandishes a book, the "Visa Open Platform Product and Vendor Guide," with information about multiple-application capabilities and resources available to make them work.
Visa has been saying Java-based smart cards, which among other capabilities will be upgradeable "on the fly" via phone lines, will be on the market by midyear. But Mr. Yen said the story will be far from over.
"People ask me, 'When will Java Card be ready?,'" Mr. Yen said. "It won't be the same as the magnetic stripe card, static and not changing for 10 years. It's like trying to find and buy the ultimate personal computer. It won't happen. The technology will continue to evolve and there will always be new versions."
