The many critics of Mondex, perhaps the most ambitious of the proposed smart card payment systems, may have been too quick to write off its greatest source of strength.

Mondex's not-so-secret weapon, a not-so-wild card in its strategic deck, is its parent organization - the Natwest Group of London and its principal subsidiary, National Westminster Bank PLC.

While competitors have bashed Mondex for its brash independence from the global bank card establishment, and questioned Natwest's willingness to continue throwing money down a speculative rat hole, the bank is not wavering.

Its executives sound as committed as ever to Mondex. They say the attacks indicate that Mondex, through its live pilot in Swindon, England, and through banking alliances on four continents, is confounding the critics.

"We've seen the mood about Mondex change," said Chris Potts, Mondex's chief of commercial development, who came to the project through a consulting assignment at Natwest Bank.

"First it was, 'Will Mondex make it?' Then, 'I wonder who is going to do it.' And now it's, 'Why haven't we started yet?'"

The naysaying, which has been especially harsh from Visa International and from the MasterCard affiliate Europay International, was "fully expected," said Richard Karl Goeltz, Natwest Group's chief financial officer.

"If there is a sharp break from the past, a true quantum step in the evolutionary chain, then those comfortable with the status quo will hurl slings and arrows," Mr. Goeltz said in an interview last month at Natwest headquarters in London.

"I have no problem with attacks, as long as they are honorable and factual," Mr. Goeltz added. "We should expect, as a leader, to attract attention. If brickbats - some uninformed - are thrown by some competitors, so be it."

The interview with American Banker was one of the few on the subject of Mondex granted by a high official of the bank. Most public pronouncements have come from Tim Jones, the energetic Natwest banker and Mondex co- inventor who is its chief executive, or from people reporting to him, like Mr. Potts.

With strong and carefully chosen words, Mr. Goeltz affirmed the parent company's support for Mondex and its intention to stick with a strategy that has been several years in the hatching.

"I think (group chief executive) Derek Wanless wrote the first check for the Mondex project six or seven years ago," said Mr. Goeltz (pronounced "geltz"), who joined Natwest in 1992 from the Seagram Co. in the United States. He took on Mondex supervisory responsibilities the next year.

The "tens of millions of pounds" that he said Natwest has since poured into its innovation - outsiders guess the total is approaching $200 million - evidence a long-term commitment and conviction.

Though other bankers may find it hard to relate to such bold risk- taking, Mr. Goeltz suggested, it would be folly to expect Natwest to fade away just as Mondex seems to be gaining momentum.

To be sure, the enterprise has yet to conquer the world. Its business plan is couched in revolutionary terms - to make Mondex the global electronic alternative to coins and currency - but its most visible manifestation, the Swindon test, is still mostly show.

Even with more than 10,000 of its cards in circulation, Mondex accounts for just a tiny fraction of purchases in that town of 190,000 people. Mondex UK, Natwest's partnership with Midland Bank for the home-country launching, blundered by predicting early on that it would have 40,000 cardholders - equal to the banks' combined customer base in Swindon. It has since had to fight the impression that it is lagging expectations.

Yet the momentum is unmistakable.

"Some of the most sophisticated, hard-nosed banks in the world," Mr. Goeltz said, are on the Mondex bandwagon: Midland for the United Kingdom franchise; Midland's affiliate, Hongkong and Shanghai Banking Corp., with the rights to much of Asia; several large Australian and New Zealand banks, which recently formed a regional franchise; Royal Bank of Canada and Canadian Imperial Bank of Commerce, which are two months away from a Swindon-like experiment in Guelph, Ontario; and Wells Fargo Bank, the system's earliest and strongest backer in the United States.

Meanwhile, at Swindon Town Centre, a commercial zone 70 miles west of London where Mondex has literally set up shop to demonstrate its system and its seriousness, the electronic purse has become just another payment choice. Clerks at retail stores, newspaper kiosks, movie theaters, and supermarkets don't bat an eye when presented with the futuristic card.

Users - including many merchants - are openly enthusiastic about Mondex, even if volumes are small and the merchants have not yet had to pay fees on cash-card payments as they do on credit cards.

Many local stores have participated in promotions to encourage Mondex usage. At a small in-town branch of Sainsbury, a major supermarket chain, Mondex volume tripled after it offered a cash-back incentive, said manager Bob Upshall.

John Keil, manager of a nearby MGM Cinemas, said he personally is sold on Mondex. "I'm a cardholder, but I don't live in Swindon - I wish I had more places to use it outside of town," he said.

Such positive sentiment has energized Natwest Bank, reinforcing its resolve, Mr. Goeltz said. It doesn't sway the many doubters, who tend not to have visited Swindon.

Mr. Goeltz also said others' judgment may be clouded by a cultural backwardness. From the perspective of his earlier stops at Seagram (also as CFO), Exxon, and the London School of Economics, he described the traditional part of the industry as "bureaucratic, slow-moving, pachydermic," tendencies Natwest has tried to expunge.

Britain's No. 2 retail bank was an early adopter of debit cards, in partnership with Midland and others. This year it raised some hackles by allying with Tesco, Sainsbury's principal supermarket rival, to let the food retailer market financial products to its customers.

The Tesco link, reminiscent of Banc One Corp.'s early aid to the Merrill Lynch Cash Management Account in the 1970s, exemplifies "a new way of doing business" that Mr. Goeltz said British banks would not have contemplated "before the Thatcher revolution, when they were a protected oligopoly."

After Tim Jones and Graham Higgins brought forward the Mondex concept in 1990, "some of my colleagues had the vision and courage to back basic research and development because they believed in the product," Mr. Goeltz said. "This is one of the few products I've seen that benefits all three participants in the value chain - banks, retailers, and customers.

"I view Mondex as a way to serve our customers and make money for our shareholders," said the 53-year-old, American-born financial executive. "Our other global founders believe in it the same way. This isn't a case of just Natwest being enamored of a technology."

Even as Natwest seeks to separate itself from the pack, whether with the Mondex technology or the Tesco marketing play, "we also have to cooperate," Mr. Goeltz said. Hence the historically close relationship with Midland Bank and the fact that interbank cooperation is written into the Mondex plan.

"From the beginning we recognized Mondex would succeed only if it were an open system," structured to benefit from collective thinking and action, Mr. Goeltz said. "We're very good at a number of things, but we are certainly not a unique repository of technology and commercial knowledge."

Mondex International, the umbrella organization for the network of licensees, has not yet been incorporated, but it has begun convening meetings of the "global founders," Mr. Goeltz said. It is only a matter of time before Natwest will "forsake its special status as inventor and essentially become just another shareholder."

He said the sale of Natwest Bancorp, the U.S. holding company that was sure to be a Mondex USA co-owner, may actually work to the advantage of that franchise, which is still in formation. "That means U.S. banks will be making decisions for" the United States, Mr. Goeltz said. "They won't have to worry about Natwest Bank as a mole out for its own interests."

His spin on openness and cooperation is not universally accepted:

*Despite recent demonstrations of its compatibility with MasterCard-Visa smart card standards, Mondex is still perceived as out on a limb, its technology elegant but too elaborate for mass acceptance.

*And despite Mondex's emphasis on privacy - its ability to accommodate person-to-person, cash-like exchanges sets it apart from competitors - it has been attacked by MasterCard and Visa for being "unauditable," and by the Internet payment system company Digicash Inc. for providing insufficient anonymity.

*Even as MasterCard is negotiating some undisclosed transaction with Mondex - whether it is to be a global founder, equity participant, or licensee remains a mystery - Europay has weighed in with a competitive chip card called Clip.

*The negotiations with MasterCard and other potential equity holders support, for some, the notion that Natwest needs help, particularly financial bolstering.

"Completely wrong," Mr. Goeltz scoffed.

While Mondex will produce "no short-term quantum impact" on Natwest's bottom line, he said, a bank that exceeds $10 billion in annual revenue won't be hurt by an R&D commitment and is fully prepared to stay the course.

"Natwest recognizes that man does not live by short-term profits alone," said the true-believing banker. "There are things we have to bequeath to our successors."

He said Mondex has addressed, or will adequately address, any commercial skepticism, regulatory inquiries, or social-political concerns. It "will become widely accepted much more rapidly than people have anticipated," he predicted.

"The concept of Mondex has been fully public at least three years," Mr. Goeltz said. "A lot of powerful, sophisticated organizations have been trying to come out with a superior product, and through it all Mondex has maintained its superiority."

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