The Mondex electronic cash system has made a major advance in Africa, adding 17 countries through an agreement with a regional development organization.

Mondex International Ltd., which is 51% owned by MasterCard International Inc. of Purchase, N.Y., announced last week during the International Monetary Fund and World Bank meetings in Washington that it had sold exclusive franchise rights to PTA Bank, a multilateral financial institution based in Kenya.

PTA Bank -- formally the Eastern and Southern African Trade Development Bank -- is jointly owned by the governments of 16 of the 21 countries within the Comesa economic zone. Among those it brings into Mondex are Angola, Ethiopia, Kenya, Sudan, Tanzania, Uganda, and Zimbabwe.

Including South Africa, Ghana, and three other previously franchised countries, 22 nations in Africa with a potential 450 million cardholders are in the system, the London-based smart card organization said.

Mondex said the PTA move, in that it is backed by the Committee of Comesa Central Bank Governors, is likely the largest governmental endorsement ever conferred on a smart card technology. Mondex took it as confirmation that its approach is particularly suited for emerging cash-oriented economies seeking to modernize payment systems at reasonable cost.

The Mondex design allows for card-to-card, or chip-to-chip, transfers of cash value, even between individuals with the aid of an electronic wallet device. Transactions can occur cheaply over telephone lines, central processing costs are minimized by the fact that not all payments are centrally accounted for as they are in the credit card business, and Mondex points out that it recently earned the highest certification level under the Information Technology Security Evaluation Criteria, or ITSEC.

Also appealing to the Africans is the ability of a cardholder to carry up to five currencies at once.

"Mondex enables developing economies to leapfrog old technology and build a banking infrastructure based on security and convenience for both banks and consumers, together with all of the cost savings inherent in electronic cash technology," said Mondex deputy chief executive officer Chris Potts.

"We chose the Mondex electronic cash application because, among other unique advantages, it allows for off-line transactions and has both multicurrency and cross-border capability," said Martin Ogang, president of PTA Bank. "For cash-based economies, retailers face very high cash-handling costs that can be reduced considerably with Mondex e-cash."

Mr. Ogang said Mondex, which will be accompanied into the region by the Multos operating system for multiple applications on a smart card, "represents not only a cash alternative but a natural successor to the PTA Travelers Checks as a payment instrument for Comesa."

Comesa came into being in December 1994 as the successor to the PTA, or Preferential Trade Area, which dated back to 1981. PTA Bank was formed in 1985 as the financial arm of what is now the Common Market for Eastern and Southern African States, which has set an October 2000 goal for removing all tariff and nontariff trade barriers.

Aside from the smart card project, PTA Bank has moved to modernize the regional banking infrastructure through a five-country "integrated financial services network" based on V-SAT satellite technology. The bank has $540 million of capital. It serves as financial adviser to a $300 million Comesa "telecommunications interconnectivity project."

Mondex and MasterCard made their initial African announcement in November 1997 with the ABSA Group and Standard Bank of South Africa, which purchased Mondex rights concurrently with their decision to introduce the Maestro debit card. At the time, just 5% of South Africans had access to credit, and the country's central bank saw the debit and chip cards as steps toward economic empowerment.

Those Mondex rights extended to Lesotho, Namibia, Swaziland -- the Rand Monetary Area -- and later to Ghana.

"MasterCard is focused on delivering a portfolio of products and services that meet the needs of member financial institutions in both developed and developing nations," said Ashley Head, MasterCard's vice president and general manager for southern Africa. "Comesa's selection of Mondex e-cash is a key first step toward developing a broader banking infrastructure for the region." Multos, meanwhile, would allow "financial institutions to develop multi-application MasterCard cards as the market matures."

Comesa's first step will be a cross-border launch involving three countries. They were not named and Mondex said details would be forthcoming.

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