18th country where the increasingly popular electronic purse system has been licensed.

Proton World International said last week that Prepayment Cards Ltd. has bought an option on an exclusive U.K. license and expects to exercise it within six months.

The deal is a triumph not just for Proton World but also for one of its owners, ERG Group of Australia. ERG will be bringing to Prepayment Cards Ltd.'s initial project a smart card program in the Manchester region, a version of the mass transit system that it built in Hong Kong. That system is regarded as one of the most successful chip card implementations in the world, with 5 million cards in circulation and serving 3.4 million customers a day.

Proton World, which is based in Brussels, thus lands in the home country of Mondex, an invention of London-based National Westminster Bank and now a subsidiary of MasterCard International.

The United Kingdom is also an active smart card market for Visa International, another Proton shareholder. In fact, all U.K. card issuers -- including American Express Co., yet another Proton owner and licensee -- are about a year into a national conversion to chip technology, which they expect will both reduce fraud and generate revenue from additional card services.

"I congratulate our shareholder ERG for their hard work in achieving this result," said Armand Linkens, managing director of Proton World. He called it a "significant victory" to gain a foothold in "the largest payment card market in Europe."

Prepayment Cards Ltd., or PCL, expects to have the Manchester operation up and running by the end of next year. It also plans to establish a national card management and processing center to serve other public transit operators and issuers of multiapplication smart cards.

ERG co-owns PCL with Sema Group and Stagecoach Holdings PLC. Sema, a multinational information technology company, signed a 10-year contract in 1998 to develop a new ticketing and payment system for U.K. railroads. Stagecoach controls 16% of the country's bus-travel market. The three owners said PCL has a valuation of $64 million.

The PCL venture would comply with specifications of the government-sponsored Integrated Transit Smart Card Organization. It estimates there will be two million cards in Greater Manchester with both contact and contactless interfaces. The latter, which do not require insertion of a card into a terminal, are considered best suited for high-volume urban transportation modes.

"This initiative is part of our long-term vision to drive the introduction of large-scale smart card schemes into the U.K.," said Peter Fogarty, chief executive officer of ERG. He said he expects to see a wide range of services on the cards, taking advantage of the computer chips' multiple-application capability "to bring the full benefits of smart cards to card issuers, transport operators, and cardholders alike."

Proton began in 1996 as the national electronic cash service of Banksys, a payment services organization owned by the Belgian banks. It developed an international licensing program and has been adopted by, among others, national smart card schemes in Australia, the Netherlands, Sweden, and Switzerland.

More than 30 million Proton-type cards are in circulation worldwide. Two U.S. licensees -- American Express and Pathways Group of Woodinville, Wash. -- are still in testing stages.

In July 1998, Banksys diversified the ownership by bringing in Amex, Visa, ERG, and, a short while later, Interpay of the Netherlands. As a group, they provide a solid core of support for the Common Electronic Purse Specifications -- CEPS -- which Visa promulgated to promote cross-border interoperability of cash cards.

The ERG connection could be particularly helpful to Proton and CEPS. ERG is the Proton licensee for Australia and New Zealand and a partner with Proton World and Motorola Inc. in Triumphant Launch, a joint venture with the Proton rights for Southeast Asia.

ERG works closely with Motorola; they have won transit-fare modernization contracts for Berlin, Rome, San Francisco, and Singapore. ERG has also formed a joint venture with the Australian telecommunications company Telstra and Australia and New Zealand Banking Group for smart card processing in Australia.

In these relationships are signs of possible convergence between chip card standards. The technical conflicts have been seen as an impediment to market growth, and particularly to banking industry commitments. Though Mondex still holds out from CEPS, American Express bridges the gap as a licensee of both Proton and the Multos operating system that was developed originally by Mondex International Ltd.

Europay International, the Belgium-based European affiliate of MasterCard, supports CEPS and is a member of the Multos coordinating consortium Maosco Ltd., as are MasterCard, American Express, Motorola, and, as of this month, Telstra.

On his U.K. entry, Mr. Linkens of Proton World said, "I am convinced that the Proton-based multiple-application smart cards will be a success for both transport operators and the traveling public, and we look forward to making the well known benefits of the Proton technology, already chosen by 17 other countries, available in the U.K."

Mr. Linkens had a few other reasons to celebrate last week in Brussels at his organization's Proton World Forum, where the U.K. deal was announced. Touching bases with major chip card suppliers, Proton demonstrated with Gemplus of France and De La Rue Card Systems of Britain some of the first multiple-application cards carrying small Proton programs, or applets, on Sun Microsystems Inc.'s Java Card platform.

Gemplus used its GemXpresso 211 cards, which meet the specifications of the Java Card 2.1 application programming interface and Visa Open Platform 2.0, also using the Java language. Proton executive vice president Yves Moulart said "the multi-applications capacity of the Proton technology is one of its key strengths" but was "underutilized until now." Patrice Peyret of Sun said the electronic purse applets "enrich the selection of financial services for Java Card products."

Because of simultaneous compatibility with the EMV terminal-interface standard and other specifications, Java Card applets open the door to "a multitude of new products and services for the banking sector," said Sophie Escand, financial services business manager at De La Rue, which has agreed to be acquired by Oberthur Smart Cards of France.

Proton also announced that another prominent French vendor and leading microprocessor and e-purse card supplier to banks, Bull Smart Cards, was designated a value-added reseller of Proton for Windows NT. It becomes an option in the Bull unit's SmartPurse package of cards, other hardware, and software.

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