Mondex Canada has said it will end its first market trial next month and turn attention to applying the lessons learned in a new pilot starting in the first half of next year.

After a year and a half, the initial operation in Guelph, Ontario, will close with more than 12,000 cardholders, 500 merchants, and three million Canadian dollars of cash value loaded on the smart cards.

The cards were issued by Royal Bank of Canada, Canadian Imperial Bank of Commerce, and Guelph Credit Union.

The second trial will take place, as previously announced, in Sherbrooke, Quebec. It is an indication that, far from giving up on Mondex, the Canadians want to get past the shortcomings they found in Guelph, a university town of 100,000 west of Toronto that attracted international notice for its pioneering implementation of electronic cash.

The closing will be concurrent with that of the Mondex USA trial in New York City, a joint effort with Visa U.S.A. Chase Manhattan Bank issued Mondex cards, Citibank issued Visa Cash cards, and MasterCard International, the parent of Mondex International and part owner of Mondex USA, was a co-sponsor.

Sherbrooke differs from Guelph in that the two Mondex participants-Royal Bank La Mouvement des caisses Desjardins and Royal Bank of Canada-have a combined 70% local market share. The Mondex institutions' share in Guelph was only 45%.

"In Guelph, one issue was that the cardholders wanted more retailers who took the card, and the retailers wanted more traffic into their establishments," said Joanne De Laurentiis, president of Mondex Canada. "Greater critical mass should improve the situation."

The Toronto-based joint venture managed to install the technology in buses and parking meters as well as conventional points of sale. That complicates the logistics of dismantling the pilot. Cardholders will be given a deadline for redeeming the value left on their cards.

The technology will be upgraded in Sherbrooke with the Multos operating system, which accommodates multiple services on the chip. The Guelph experience confirmed findings in New York and elsewhere that a stored-value service alone has limited appeal.

"Our view is that most Canadians will choose multiapplication cards," Ms. De Laurentiis said. Sherbrooke "will begin to tell us how consumers will want these products together"-including debit and credit with stored value.

The popularity of the straight cash function in fast-food restaurants, vending machines, and parking meters "established that there's a great niche for stored value," Ms. De Laurentiis said.

Bank depositors could load money on their Mondex cards at home through special telephones made by Northern Telecom. Of all cash transfers in Guelph, 30% occurred through 650 of these phones. Another 250 public phones had downloading capability.

"We now know that we have to equip Canadians with home loading devices," Ms. De Laurentiis said.

Another conclusion from Guelph concerned the importance and sensitivity of infrastructure changes in government departments and in payment- accepting industries outside banking.

"The decisions aren't just being made in the financial sector," Ms. De Laurentiis said. "All the various sectors have to recognize the benefits of chip technology and then they have to work through their business cases to see that it makes sense."

Ms. De Laurentiis, who likened the coming of smart cards to the building of the railroads, said it would take at least five years for smart cards to become mainstream.

"It took us five to six years to roll out debit across the country," she said. "This is not done overnight."

Before being appointed president of Mondex Canada in September 1997, Ms. De Laurentiis spent three years heading Interac, the national debit payment network. Before that she was vice president of the Canadian Bankers Association.

MasterCard International has joined the Global Chipcard Alliance, adding weight to a major multi-industry effort to promote smart cards.

MasterCard is the 30th member. Its Mondex USA affiliate joined last spring, followed by Visa International in August. They and financial institutions such as Citibank and Wells Fargo & Co. have brought balance to an international initiative started in 1996 by telecommunications companies to promote interoperability among card programs.

Alliance president David Anastasi, a vice president of US West in Seattle, said, "Cross-industry alliances are critical in driving multiapplication smart cards and global interoperability." He called MasterCard "a perfect addition to assist in implementing the association's goals."

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