In inventing Mondex, National Westminster Bank created a mold for chief executive officer-and didn't throw it away.
The smart card enterprise has had two CEOs whose accents might require a Henry Higgins to differentiate. Both are high-energy Londoners with credit card experience who sound like electronic-cash missionaries and, in a spare moment, might sneak in a few riffs on electric guitar.
There the similarities end. Michael G. Keegan, in his 15th month at the helm of Mondex International Ltd., once played in a punk band. His predecessor Tim Jones, now heading the retail business of Natwest Group's flagship U.K. bank, was hard into rock 'n' roll.
Mr. Keegan, 35, defers to Mr. Jones, 42, in musical accomplishment. "He actually made records," Mr. Keegan said.
But Mr. Keegan had another pursuit. Active in Conservative Party politics, he tried for a seat in the House of Commons eight years ago. Undaunted by his failure to carry the heavily Labor Vauxhall constituency, he bounced back in 1994 hoping to represent North London in the European Parliament. He lost again.
By then Natwest was moving Mondex into the marketing phase that culminated two years later in the formation of the multibank venture whose members should surpass half a million cards in circulation by the end of 1997.
The would-be lawmaker, at Mr. Jones' side during that period as chief operating officer, "put that aside," Mr. Keegan said of the political life.
"You don't get this kind of opportunity in a professional career very often," he said of Mondex.
His personal traits should come in handy. His musical tastes bespeak an ability to connect with the younger generation that is said to be most ready to adopt Mondex's electronic purse and Internet payment capabilities.
The skills of politics and negotiation might help him cope with the icy reception Mondex and its 51% owner, MasterCard International, have been getting from the opposing Visa camp.
"Interest in Mondex is at a fever pitch," Mr. Keegan said in a recent interview in New York. "Our challenge is to convert that into something real."
He oversees a staff of 170, lean for a company that wants to revolutionize payments worldwide. But "Mondex central," essentially a coordinating, franchising, and brand management body, is supplemented by hundreds more people from MasterCard. Conferring with that association and orchestrating those forces have been major preoccupations since MasterCard closed the deal in February.
Mr. Keegan said Visa has imposing strengths "in its brand and marketing. But any disadvantage I may have had before MasterCard acquired 51% has been neutralized."
He said he was pleased with a recent vote of confidence-MasterCard renominated him as CEO and endorsed his entire management team-and said the affiliation will be crucial in making Mondex the "global payment scheme" that its mission calls for.
In recent months, Mondex has signed important licensing deals in Israel and Central America, recorded significant growth after its Hong Kong and Canada introductions, and mapped out the 1998 rollout in Australia. Chase Manhattan Bank's 25,000-card New York City trial, the MasterCard half of a test of coexistence with Citibank and Visa, gets under way Oct. 6.
Mr. Keegan said he is working diligently to fill territorial gaps in Latin America and Africa, complete a long-anticipated agreement with Japanese institutions, and make the crossing to continental Europe, presumably with the aid of MasterCard's Belgium-based affiliate, Europay International.
The last won't be easy, said Hans van der Velde, president of Visa's European Union region. At a recent press conference in New York, the executive said European institutions disdain Mondex because it requires new infrastructure investments, does not leave transaction audit trails that are important to central bankers, and is expensive to license.
Mr. Keegan disputes the accusations, illustrating how the two sides talk past each other. Visa says its adoption of Java computing standards makes its system more flexible and less proprietary than Mondex. Mondex says only its operating system is equipped today for a sophisticated set of multiple applications on a single card. And it is not opposed to accommodating Java.
What Mr. van der Velde regards as the undesirable cost of entry into Mondex, Mr. Keegan views as responsible business practice: "There is a difference between us and Visa Cash. You have to buy our product."
Europe's banking and bank card atmosphere may be highly charged, but its markets are fertile. Visa's Partner Program is making some headway, Europay has had limited success with its Clip program, and there are numerous local or single-country purse and stored-value programs typified by Belgium's Proton.
Mr. Keegan is banking on the global nature of Mondex to carry the day. Single-country or single-currency cards are, by definition, not usable elsewhere. His big rap against Visa Cash is that it is an amalgamation of nonstandard systems linked by the common name.
"They'll say Mondex doesn't have many cards" compared to the millions of Visa Cash issued, Mr. Keegan said. "But do a comparison of globally interoperable cards, and Mondex will win every time.
"Long term we will have to end up with global schemes and global interoperability," he continued. "We are a global brand and global technology. Visa Cash is a global brand but not a global technology."
"MasterCard is pushing us to do more," Mr. Keegan said. "There is no shortage of demand, and they are in more than 100 countries. You will see a steady stream of announcements."
Mr. Keegan was little known outside the Mondex organization when Mr. Jones stepped aside in July 1996. Mr. Jones achieved his goal of launching Mondex International, and Natwest cleared his desired path back to the bank and quickly into upper management. He still sits on the Mondex board, in the seat reserved for the founding bank.
Within Mondex, Mr. Keegan was very much a known quantity and Mr. Jones said that in the anointing, continuity was uppermost in his mind.
It also had the effect of extending Natwest Group's influence over card technology advances. Besides the pair of Mondex CEOs, MasterCard's senior vice president for chip strategy, Richard Phillimore, is a Natwest alumnus. Before joining MasterCard early this year, Mr. Phillimore worked at Europay and its predecessor Eurocheque for seven years, most of that time under a CEO who came out of Natwest, Ron Williams.
Mr. Williams "assigned me to do our first due diligence on Mondex about four years ago," Mr. Phillimore recalled. "A deal was not consummated. MasterCard and Europay eventually went separate ways, and I developed Clip," which has some on-line and accountability features that are closer to the Visa Cash design than to Mondex.
Mr. Phillimore said he was impressed by Mondex from the beginning because it can be "freely circulated like cash," including card-to-card payments, without the "accounting overhead" that drives up the costs of competing models.
If Mr. Jones was the visionary genius-two words Mr. Keegan freely applies to him-Mr. Keegan was his commercial right-hand. He negotiated bank membership and franchising deals and managed what he calls the "brand exercise" that settled on the product's catchy name.
Mr. Jones brought Mr. Keegan into the program, then with fewer than 10 employees and going by the laboratory name Project Arthur, in 1991. Mr. Keegan has no claim on the inventors' mantle that Mr. Jones and card- business colleague Graham Higgins shared, but he said he could see immediately what they had wrought.
Mr. Keegan recalled that in his first visit to Project Arthur, a somewhat manic Mr. Jones was bouncing from one side of a room to another, demonstrating how to transfer data-which could have been money-without wires. He was a few years ahead of the times.
"He married the business function of electronic purse with a technology," Mr. Keegan said.
As early as 1991, he said, "we knew that to work, this would have to be global with a worldwide bank ownership."
The Mondex developers also quickly settled on the need for public key cryptography on the card, and hence computer chips, to ensure security. Mondex has faced accusations of not fully explaining its security; some computer scientists alleged that it is less than air tight.
Through it all, Mondex's leaders kept stiff upper lips, the sniping has subsided, and the words of former MasterCard president H. Eugene Lockhart, who engineered the acquisition, are ringing true: "Three firms did technological due diligence and said it was awesome, especially in security of access."
"The strength of asymmetric cryptography is not a proprietary issue and can't be," Mr. Keegan said. "It's in the public domain."
Mondex security is "appropriate for this business environment," he said. "For the future, of course, we will have to upgrade the silicon, invest more in crypto, and increase key lengths to stay ahead of the hackers."
The competitive battle has shifted decidedly into the realm of operating systems, Mr. Keegan said. Mondex, its Multos multi-application operating platform, and the technology licensing consortium Maosco Ltd. are pitted against Visa and its affinity to Sun Microsystems Inc.'s Java language.
Because "openness" and "interoperability" are part of the Mondex-Multos mantra, Visa's charges that Mondex is "fixed" and "proprietary" hurt.
Visa International "does not lock members into a single technology or operating system," president Edmund Jensen said recently. "And members don't have to buy an equity stake to play because they are already members of Visa."
Visa adds to its economic argument the fact that its chips are cheaper. Mr. Keegan throws that back at Visa, saying that as it moves to put stronger cryptography on its chips, the cards will cost as much as Mondex cards-and Visa will still be saddled with the high marginal costs of tracking and auditing transactions, which the Mondex off-line bias minimizes.
While the programming languages Multos initially operates in, Mel and C, may lack some of the properties that make Java popular, Mondex has pledged to offer technology licenses widely and flexibly. The company says it will be ready to accommodate the Java Card 2.0 standard "when available."
"We say, 'Here is a license. Put your application on Multos,'" Mr. Keegan said. "How is that closed?
"If they say Java is the right language, we say, 'Great. Why not put Visa applications on Multos?'
"We expect competition," Mr. Keegan said. "Let's compete on the applications, and let the issuers make the choice."