An international specification for stored value cards is taking a more formal shape.
The Common Electronic Purse Specifications developed by Visa International and supported by many of the world's smart card payment networks, have been turned over to a management body, the CEPS Consortium.
The consortium, similar to others overseeing various types of smart card standards, will be responsible for administering and licensing the spec.
Visa and three other CEPS "founding developers"-CEPSCO Espanola of Spain, Europay International, and ZKA of Germany-will be represented on the management consortium's board, to be known as CEPSCO. There will be eight members in total; the others have not been named.
"We think this will dramatically accelerate the rollout of smart cards worldwide," said Mary Buckley, senior vice president of Visa International, at the CEPS announcement during the Cardtech/Securtech '99 conference this week.
CEPS supporters are heartened by the fact that networks representing more than 90% of stored-value cards worldwide, a number exceeding 100 million, have climbed on the bandwagon.
As has been the case since Visa proposed the standard to the global electronic purse community last year, the card association's chief rival, MasterCard International, has yet to give its support. MasterCard is the 51% owner of Mondex International, which has criticized CEPS for, among other things, being too slow to market. The first CEPS implementation in Europe is expected in early 2001, ahead of the advent of euro coins and currency, which is an impetus for creating a standard that allows cash- value cards to be used across national borders.
Though rumors are flying of an accommodation between Visa and MasterCard/Mondex on broader chip-platform interoperability, Mondex chief executive officer Michael Keegan gave no indication of any thaw on the specific application of electronic purse.
Mr. Keegan unabashedly considers Mondex the most successful electronic purse, claiming that it manages technical certifications and performs other functions that are still on the CEPS drawing boards. He said he welcomes the competition.
CEPS proponents emphasized the main difference between their approach and Mondex's: CEPS is based on accountability of transactions, whereas Mondex allows for anonymity similar to an undocumented exchange of cash between individuals.
Duncan Brown, a chip card expert with Ovum Inc., a research firm with offices in London and Boston, said the "divergence of views" could in time be reconciled. He pointed out that in the recently concluded New York City trial of both Mondex and Visa Cash, it was proved that "single terminals could accept both."
He suggested that the two programs could end up being "compatible, but not convergent."
Armand Linkens, managing director of Proton World International of Brussels, a close ally of Visa and a supporter of CEPS, said, "It is an architectural more than a technological problem." But he criticized the Mondex design, saying, "Nobody developing a computer system today would not have an audit trail in it."
Visa and its allies are counting on its numbers to carry the day-not only the 90% penetration but also more than 130 licensing requests received and 50 agreements signed.
"Standardization is the route we are pursuing in order to effectively respond to our members' need in terms of cost savings and speeding up the market growth of electronic purse," said Herve Kergoat, head of electronic purse at Europay International in Waterloo, Belgium. "It's the only way to start the market."
Europay is a MasterCard affiliate and a supporter of the Multos operating system that grew out of Mondex, but Mr. Kergoat explained why it is also in the CEPS camp: "We are partners with MasterCard, but we're not the same company."
For now, the greatest CEPS urgency is in Europe, because of the converging currency and because stored value cards are already in wide circulation. Udo Einhoff, director of the German ZKA payments association, said up to 60 million smart cards have been issued in Germany, all with electronic purse.
"What banks want is an open standard on which they can build their own product and have cross-border" compatibility, Mr. Kergoat said.
The consortium members said they do not anticipate major costs in adapting their existing electronic purse applications to CEPS, because the specification builds on existing infrastructure and can be implemented gradually by replacing cards when they expire.
In Germany, for example, 15 million to 20 million smart cards need to be reissued every year. Once CEPS is in place, it will be integrated into the newly issued cards.
"The most decisive advantage of CEPS is the fact that it enables us to continue to protect investments and to build upon existing systems," Mr. Einhoff said. "The additional costs of introducing a cross-border electronic purse have been kept to a minimum, because of synergy effects and economies of scale."
The purse specifications were formally published two months ago. Organizations from 22 countries have agreed to adopt the specifications. Among the supporting brands are Geldkarte of Germany, with 60 million cards issued, Proton with almost 40 million cards around the world based on its system, and eight million Visa Cash cards.