Mondex has conquered Canada.

Announcing commitments this week from five major financial institutions, Canada's Mondex association said nine of the country's 10 largest deposit- taking organizations had joined the smart card-based electronic cash system.

Canadian Mondex supporters strongly hinted that the last big holdout- Bank of Nova Scotia-is within their grasp.

Officials of Mondex International and its 51% owner, MasterCard International, interpreted their coup as a clear indication of technical and marketing superiority. It is the first example of a national banking community's choosing one chip card technology over another that it had tested-in this case, Belgian banks' Proton system.

The decision is likely to reverberate around the world, raising the smart card stakes, particularly in the United States and several Asian and European countries where MasterCard-Mondex will go head-to-head against Proton and-or Visa International's Visa Cash program.

While a few of the Canadian institutions still have plans for Visa Cash, their near unanimity on Mondex will be a tough pill for the California- based bank card association to swallow. Visa dominates the Canadian credit card market to about the extent that its rival's Mondex program appears poised to dominate electronic cash.

Canada's banking industry, far less fragmented than banking in the United States, has a long history of collaboration in the interest of payment system efficiency. And the banks have made independent-minded card decisions, voting heavily for Visa in credit and developing their own debit network. Canada has been more successful than the United States at converting cash and checks into electronic transactions.

"We have no intention to move away from the Visa credit card brand," said Allan J. McGale, vice president of Royal Bank of Canada. "We develop different products for different markets, and we decided on Mondex for electronic cash."

Marlene Boyaner, vice president for stored-value products at Canadian Imperial Bank of Commerce, said the banks are interested in "spreading the infrastructure cost." They viewed Mondex as the most efficient alternative, she said, and concluded it offered a foundation for letting "us get on to where we really want to compete."

Until the official announcement Wednesday, Mondex activity in Canada, including a 5,000-card trial in the Ontario city of Guelph, revolved around the country's two largest banks and charter Mondex members-Royal Bank and Canadian Imperial.

Hongkong Bank of Canada, part of the London-based HSBC Holdings group that owns pieces of the British and Asian Mondex franchises, announced support for Mondex in the run-up to the Guelph launching early this year. So did Credit Union Central.

Bank of Montreal, Canada Trust, the credit-union-like Caisses Desjardins of Quebec, and National Bank of Canada have now joined Mondex. Toronto- Dominion Bank is expected to complete the process of joining in the next several weeks.

Mr. McGale of Royal Bank, one of several Canadian bankers and Mondex officials making these announcements during the Cardtech/Securtech conference in Orlando, said that of the nine Mondex association members, seven have committed themselves to owning equity in Mondex Canada, which in turn owns 6.5% of Mondex International. The percentage shares and dollar values were not disclosed, but all are minority interests.

Credit Union Central and National Bank of Canada "haven't decided" whether to take equity interests, Mr. McGale said.

Bank of Montreal, Canada Trust, and Toronto-Dominion have issued 8,000 Proton cards, brand-named Exact, in Kingston, Ontario. Details on converting Exact to Mondex will be worked out during the next few months, while plans are made to bring Bank of Montreal, Canada's leading MasterCard issuer, and Canada Trust into the Guelph trial.

"We expect the national rollout to begin in the middle of 1998," Ms. Boyaner said. "But the bulk of the rolling out will probably occur in 1999."

"MasterCard is delighted that basically the whole Canadian banking industry has come across to Mondex," said MasterCard senior vice president of chip card development Richard Phillimore. "This underscores that electronic cash systems will tend to be national decisions."

Only in Australia and New Zealand has Mondex won comparably wide support, but Visa Cash is also off to a strong start in Australia.

"Because of its banking structure and infrastructure, Canada was sure to be one of the first places chip took off like this," said Georges Brotman, president of Transaction Technology International, York, Ontario, a consultant to Royal Bank. "The direct debit program took off for the same reasons, and its success was a precursor to this."

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