Visa International and its European smart card allies struck hard last week at forces aligned with the competing Mondex system, but it quickly became clear that it was not a knockout punch.

Within 48 hours of Wednesday's announcement that Visa had joined with American Express Co. and others in forming Proton World International, which would support the common standard for electronic purses that Visa had been championing, Mondex's Multos operating system won a major endorsement from Fujitsu Ltd.

The Japanese computer giant and its two Fujitsu Group affiliates, ICL of the United Kingdom and Amdahl Corp. of the United States, said they would incorporate Multos into the smart card systems they design, sell, and integrate on behalf of customers around the world.

"We see Multos, with its leading multi-application technology, as instrumental in driving worldwide market adoption of smart card solutions," said Fujitsu board member Yuji Hirose.

"We believe Multos offers a combination of high security, low cost, and interoperability, and as such, we are committing to it as a global industry standard as well as migrating our current and future solutions and services" to Multos.

Fujitsu also would become a member of Maosco Ltd., the consortium that oversees the development of the Multos multiple-application operating system for smart cards.

Fujitsu would have one of eight votes within Maosco, equal to the single vote shared by MasterCard International and its Mondex International subsidiary, which handed their proprietary interest in the operating system over to Maosco in May 1997.

American Express-which, like Visa, ERG Ltd. of Australia, and Banksys of Belgium, is a shareholder of Proton World International as of last Wednesday's disclosure-became a Maosco member three months ago.

Bridging the political gulf, American Express said it intends to run a Proton electronic cash service on the Multos operating system.

Thickening the plot, many suppliers of smart card technology are neutral in the battle between Multos and the operating system based on Sun Microsystems Inc.'s Java programming language that is the basis of Visa's Open Platform. Chip manufacturer Motorola Inc., for example, sees fit to support the Java Card standard and sit on the Maosco board.

The German-owned card maker Giesecke & Devrient would do the same, pending completion of its Maosco paperwork.

"Multos is an open standard, and it is great if others want to put other products, regardless of brand, on top of it," said Nick Habgood, chief executive officer of London-based Maosco. "Other payment associations can and will join Maosco, and that is an invitation extended to Visa as well."

Despite occasional conciliatory signals from both the Visa Open Platform and MasterCard-Mondex camps, there is little indication of any formal convergence beyond the technical capability of running Java applications on Multos.

Proton World International managing director Armand Linkens and others on his side have similarly invited Mondex and Maosco to sup at their table, though they hold out little hope of immediate conciliation.

Mr. Habgood said American Express' continued fealty to Maosco as it tests other operating alternatives stands as a key endorsement of his group's multiple-application approach and that the addition of Fujitsu strengthens its credibility.

"We are moving away from interesting pilots and toward mass-market rollouts, and that requires the power and resources of a company like Fujitsu," Mr. Habgood said in a telephone interview last Friday.

He said its size, prestige, and presence in the smart card market complement that of another Japanese company and Maosco member, Hitachi Ltd.

Hitachi has assumed a crucial position in the Mondex-Multos supply line, with half a million chips on order conforming to the advanced multiple- application requirements.

Fujitsu Group members have had a long association with Mondex and its licensees as part of a long-term interest in the technology.

Last year it articulated a "global smart card vision." It pulled together constituent parts such as the ICL SmartCity system, currently deployed in 40 locations including several U.S. military sites and a pioneering smart card program at Florida State University.

ICL divisional president Tim Escudier said a Multos-based version of SmartCity and other "Multos-compliant" applications are under development.

Andrew Neill, the United Kingdom-based director of smart card strategy, Fujitsu smart card group, said, "We have seen the smart card as a building block in the electronic commerce strategy we have been developing."

In the process, Fujitsu and its units have developed a close relationship with Mondex that brought it into close contact with Multos and led to its Maosco participation.

Fujitsu considers itself "hardware- and solution-independent," said Walter Zenko, vice president of field operations for Amdahl, also U.K.- based. But in a sign of its affinity to Mondex, the Amdahl Mondex Solution has been taken up by, among others, Royal Bank of Scotland, Mondex Israel, Bank of Montreal, and National Australia Bank and its U.S. subsidiary, Michigan National Corp.

Mr. Zenko and Mr. Neill said Multos' advantages include the ability to put applications or services from different providers on a single card and add or delete applications "on the fly," even over phone lines.

Java Card is designed to do the same, but there are disputes over how immediately it can be available.

Maosco has been heartened by the conclusions of a report published in May by Ovum Ltd., a London-based research house. As cited by Mr. Habgood, it said, "Multos is a working solution and the choice for financial systems. Its strong security model, efficient use of card resources, and the stability of the specification will appeal to financial systems developers."

Ovum made strong statements about the lack of readiness of the Java Card API-applications programming interface. "The standard still needs developing" to address certain security concerns, for example.

But Java loyalists have hit back. Even some who conceded that Java Card is more of a work in progress expressed faith in developers' ability to close any gaps in short order.

Christophe Chancel of the multimedia division of Gemplus, the largest smart card manufacturer, said Ovum arrived at some "strange conclusions" in view of the fact that thousands of programmers are working diligently on Java Card.

He said it is natural at this early stage that Java systems "may not be as secure as other products," but "this is being worked on. They will be secure in a matter of months."

Frost & Sullivan in Mountain View, Calif., weighed in last week after Visa and American Express announced their hookup with Proton, which grew out of the electronic purse system developed by the Banksys association in Belgium.

The technology analysis firm said it appeared Visa had leaped ahead of MasterCard and its Mondex subsidiary, but "the commercial viability of both Java Card and Multos has not been proven" and "the business case of the cards has not been proven."

Frost & Sullivan said the battle may turn less on whose technology is superior than on business issues like cobranding and ownership of "real estate" on the computer chips embedded in the plastic cards.

Smart card analyst Alyxia T. Do suggested that the outlook is as uncertain as that of computer operating systems was in the early 1980s, before the emergence of Microsoft Windows. "It is simply too early to tell" what will be the Windows of smart cards, the analyst said.

Borrowing from the title of the Ovum report, "The Balance of Power: Uncertainty and Opportunity in the New Smart Card Market," Mr. Habgood said, "The balance of power is shifting in this business away from hardware and toward software and system integration companies like Fujitsu that are in a position to build on solid and robust standards like Multos."

He said he is confident that the Multos momentum will continue along with Maosco.

The latter's members, not including Fujitsu and Giesecke & Devrient, are American Express, Dai Nippon Printing of Japan, Hitachi, the Australian payment automation company Keycorp, MasterCard/Mondex, Motorola, and Siemens of Germany.

The charter allows for 14 voting members and Mr. Habgood said payment associations, telecommunications companies, system integrators, and card manufacturers are all prospects.

"We are in good shape," he said, "and I feel comfortable at the rate things are progressing. The number of issuers wanting to pick up Multos is spreading us a little thin, but that is a good problem to have."

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