Visa has launched another offensive against MasterCard's Mondex smart card system, this time with ammunition that is anything but technical.

Taking a tack very different from recent arguments over operating systems and standards, Visa has its sights on the very structure of Mondex's ownership.

With a bluntness reminiscent of his attacks a year ago on American Express Co. and its attempts to lure banks as marketing partners, Visa International president Edmund P. Jensen warned that Mondex could emerge as a new brand and pose a competitive threat to the members of the association-MasterCard International Inc.-that owns 51% of it.

His concern: that Mondex remains enough of a self-contained entity that its profit motive could come to dominate and defeat the more cooperative, collective interests of the MasterCard membership.

It was not lost on Mr. Jensen that thousands of banks in the United States, the world's biggest credit card market and a wide open frontier for smart cards, are members of MasterCard and Visa. He was also turning on its head a long-standing complaint that Visa was the less "bank-friendly" of the two card associations.

"Most of that was perception, and I never understood it," said Michael Zucchini, a Visa director and vice chairman of Fleet Financial Group. "Ed said what had to be said."

Addressing a gathering of Visa's directors from around the world, Mr. Jensen lumped MasterCard and Mondex with companies like American Express and First Data Corp. that he said should be viewed with suspicion because they lack Visa's "focus on its members."

MasterCard-Mondex is laying the groundwork for "commercial freedom" on a par with those nonbanks, Mr. Jensen told his annual "all boards" meeting Monday in Hawaii. He vowed that "we will not try to institutionalize Visa apart from its members. Rather, Visa is an integral part of its membership."

"Let's face it," Mr. Jensen added. "Mondex is an organization designed to make a profit for its owners-including AT&T."

AT&T Universal Card Services Co. is one of seven owners of Mondex U.S.A. and was among about 20 financial institutions around the world that bought pieces of Mondex International from its creator, Natwest Group of London, before MasterCard acquired control early this year.

MasterCard structured Mondex as a subsidiary, with management based in London and reporting to G. Henry Mundt, an executive vice president at the card association's Purchase, N.Y., headquarters. Spirits there have been buoyed by several smooth-working pilots and marketing successes such as the mid-May announcement that most of the Canadian banking community had signed on.

In a phone interview Tuesday, Mr. Mundt said Mr. Jensen threw up a smokescreen to distract attention from the fact that Visa is trailing Mondex's "definitive product and technologies."

"What they've done relative to a chip strategy is minimal by comparison," Mr. Mundt said.

Until now, most Visa-Mondex face-offs were on technical grounds. Visa, with more than 20 pilots in at least the planning stages and 18.5 million chip cards issued, claimed in March that it would leapfrog past the allegedly inflexible and outmoded Mondex technology with a deployment strategy and operating system built around Sun Microsystems Inc.'s Java programming language.

Mondex, with less than 100,000 cards but claiming still to be out in front with a coherent system ready for global implementation, shot back last month with a multiple-application operating framework called Multos that it said answered all of Visa's points and more.

Mr. Jensen alluded to the technical aspects of the rivalry. After praising MasterCard for its work with Visa on the Secure Electronic Transactions protocol for Internet payments, he warned of the consequences of divergence: "If members cannot count on interoperability and standards within the industry, then the power of the cooperative structure has not been optimized and an opportunity for nonbanks to step in has been created."

But Visa's chief reserved his venom for what he views as Mondex's independent streak, its introduction of "yet another acceptance brand," and a possible hidden agenda.

"If you carry that to its ultimate point of success," Mr. Jensen said, "it will look like MasterCard but will not function as a partner for members. It will become a third-party provider of a new payment card brand and a new acceptance mark.

"And how convenient it would be for Mondex to provide a substitute for a weakened MasterCard brand or to move the MasterCard brand to the Mondex structure. There it will operate on a for-profit basis without the cross- border constraints and rules of an association."

While urging his members to "stay flexible on technology," Mr. Jensen warned of "a new acceptance brand offered by an institution whose mission is its own profit. If successful, it will dilute MasterCard or replace it, or change its name to MasterCard, shifting the mission from member profit to institutional profit."

Mr. Mundt of MasterCard strongly disagreed, saying Mondex and all other MasterCard ventures are designed to promote the interests and profitability of members. "Benefits accrue to issuers and acquirers, not to any central organization," he said.

He pointed out that each Mondex country or regional franchise is structured differently, in keeping with local business needs.

Derek Fry, CEO of Visa Canada, described Mondex as "closely held." The banks that "got in first get revenue off the top," he said. "That's a very different corporate structure" than an association.

Mr. Mundt said that with the en masse endorsement of Mondex by Canadian banks, "Visa has to be concerned about the beginning of a trend." But Mr. Fry said he was confident the Visa strategy would prove right.

Visa U.S.A. president Carl Pascarella said the Mondex structure would be equivalent to Visa's VisaNet infrastructure "being owned by 10 banks . . . and everybody else would be tenant farmers."

"That's where we all came from-tenant farmers of a bank in California," said Visa Latin America CEO James Partridge, referring to Visa's roots at Bank of America. "If our banks want to operate outside the association mode, we can do that. That's just not the way we have been going for a number of years."

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