Mondex USA has fallen victim to the slow start of smart cards in the United States.

The U.S. franchise of the MasterCard-controlled venture that is selling an electronic substitute for cash is in the process of closing its San Francisco headquarters.

This will leave 18 people looking for work. President and chief executive officer Janet Crane said she is retiring, at least for the time being.

The company's technical, licensing, and administrative functions are being taken over by MasterCard International of Purchase, N.Y., which in addition to owning 51% of Mondex International Ltd. has a 10% stake in Mondex USA.

Ms. Crane and other Mondex and MasterCard officials described the consolidation as a strategically sensible, efficiency-enhancing move that does not affect the overall mission and purpose. They said Mondex USA remains a going concern with an active ownership led by Wells Fargo & Co. and Chase Manhattan Corp., whose banking subsidiaries together own 50% of the shares.

Mondex USA's standing in the global hierarchy is unchanged. It simply passes to a new form of "association management," said Mondex International CEO Michael Keegan in London. "MasterCard has experience and capability in a multimember environment and it made sense to have the functions performed by them."

MasterCard is also 51% owner and manager of Mondex Asia.

G. Henry Mundt 3d, MasterCard's executive vice president for global deposit access, went so far as to call the move "another indication that things in the smart card business are starting to pick up."

The Mondex USA owners "have realized that MasterCard has a lot of expertise and depth of chip resources and wants to leverage those as we move forward," he said.

MasterCard's U.S. chip card unit, headed by vice president Michael Tempora, will be playing "a much more aggressive role," Mr. Mundt added.

But on the heels of other disappointments, notably the yearend demise of the 100,000-card New York City market trial that Chase and Mondex conducted jointly with Citibank and Visa U.S.A., the Mondex USA restructuring is perceived elsewhere as a setback.

"It is a sad loss," said Jerome Svigals, a Redwood City, Calif.-based consultant and frequent critic of the bank card associations' smart card plans. One Mondex USA failing, he said, was "not using their MasterCard relationship to support and enhance their market position"-a problem that the outsourcing to MasterCard seems to address.

"The commitment of the owners is no different," said Chase senior vice president Ronald Braco, chairman of Mondex USA. He said the board of directors took a "hard look" in the budgeting process and concluded that the lack of progress of stored-value cash replacement programs, on which the San Francisco office was focused, required a fresh approach.

Mr. Keegan said the relocation makes sense also because "the financial center of the U.S. is on the East Coast."

Avivah Litan, a research director with GartnerGroup of Stamford, Conn., suggested that the "no-nonsense" style of Wells Fargo, being run since a 1998 merger by management from the old Norwest Corp., may have played a role in the decision.

Wells owns 30% of Mondex USA and because of the retirement of executive vice president Dudley Nigg, it has lost a highly vocal champion, Ms. Litan said. (Sharon Osberg, a close associate of Mr. Nigg's, has moved into his Mondex role and board seat.)

Disputing that momentum has been lost, Mr. Braco said Chase and other bank members are looking forward this year to running multiple applications-not just stored value-on the Multos operating system, which has been designed for more diversified purposes such as debit and credit, shopper loyalty points, medical information, and cardholder authentication.

Mr. Svigals said Mondex suffered from not moving more quickly into multiple applications that could begin to generate the fees that are lacking from the basic stored value function. "In this business, one has to put a business case together and then finance it," he said. "I didn't detect that."

Most bankers, including the Mondex USA leadership, have concluded that the simple electronic purse is not profitable enough to banks or compelling enough to consumers to fly in the United States.

"Around the late summer last year, we began deciding that we were ahead of the market," said Ms. Crane. "We started out expecting electronic cash would lead the smart card into the U.S. market, but now we see that the multiple-application operating system had to come first."

Mr. Braco said it "made all the sense in the world" to set Mondex USA up in San Francisco in 1996. San Francisco-based Wells had gotten a head start on Mondex as one of the global venture's founding members, one of the 16 institutions that bought pieces of Mondex International from its inventor, Natwest Group of London.

Ms. Crane and much of her staff came from Wells Fargo, which was as steeped in the Mondex technology as any bank other than Natwest.

As MasterCard was moving to take its controlling interest in the international company, Wells and AT&T Universal Card Services, the other early U.S. investor that has since become part of Citigroup, brought MasterCard and four others into the Mondex USA ownership.

The lineup is currently Wells at 30%, Chase at 20%, and MasterCard, Bank One, Citibank, Michigan National Bank, and Discover Financial Services at 10% each. A few modest pilots are continuing, and Discover recently gave the Multos technology a boost by joining Maosco Ltd., the consortium that governs the technical standard-setting.

Besides Mondex USA Services, the commercial development company Ms. Crane ran, there is also Mondex USA Originator, the entity responsible for cash-issuing and risk management functions. Henry Polmer, a former Washington lawyer who became Originator's president in October 1997, has taken charge of the transition in San Francisco. Ms. Crane said his status after the scheduled completion of that process in March is uncertain.

Ms. Crane, 44, who has recently been working to help her staff find new jobs, now resides in Florida. With experience in payment systems at Mellon Bank, MasterCard, and Wells Fargo, she could be a hot commodity, but she said her immediate priority is "to enjoy life and see what comes."

"I always said I'd retire by 45, and I'm getting pretty close," she said.

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