MasterCard and its European ally Europay called two shots last week in the global battle of smart card wills, handing Visa one victory and taking one for themselves.
Europay signed on to a standardization effort called CEPS-Common Electronic Purse Specification-that has become a linchpin of Visa's chip card strategy. Indirectly through Europay, MasterCard and its Mondex subsidiary have bowed to the European banking majority's pressure for a multinational, stored-value payment framework in advance of the continent's unified currency, the euro.
Europay's other decision was no cause for celebration in the Visa camp. The Belgium-based association endorsed Multos, the operating system closely associated with Mondex, which rivals the Visa Open Platform that is based on the Java programming language.
The moves do not end the strategic and tactical struggles for smart card supremacy. But they underscore how high the stakes are in Europe, where ongoing philosophical debates and market competition are likely to influence developments in the United States and other parts of the world.
Clarifying a smart card strategy that had been up in the air for at least a year, Europay demonstrated the depth of its regional influence and of its increasingly friendly relationship with MasterCard, after some rocky times.
MasterCard, Mondex, and Maosco Ltd., the governing consortium for the Multos platform, hailed Europay's vote of confidence. Maosco chief executive officer Nick Habgood said it "demonstrates the increased momentum toward the adoption of Multos as a common standard across the financial services industry."
Meanwhile, Visa took heart from the CEPS endorsement as Europay added its weight-9,000 banks and 200 million debit and credit cards in more than 40 countries-to the majority of European electronic purse cards already in the fold. Visa International senior vice president Philip Yen called it "very encouraging" and "a big step."
"If all the banking infrastructures agree (on the standard), credit, debit, loyalty, and everything else can be on top of that," Mr. Yen said.
During a panel discussion in San Francisco last Wednesday during the Smart Card Forum's annual meeting, Mr. Yen cited Europay's nonsupport of Multos as a problem for the MasterCard side. The next day at its biannual membership meeting in Cannes, France, Europay mooted that argument.
Europay said it would support any implementation a member chooses but would recommend Multos because it "offers the best combination of security, performance, and value."
Aside from backing both CEPS and Multos, Europay International is joining Maosco, the oversight body that includes MasterCard International, Mondex International, American Express Co., and several technology vendors.
Also in Cannes, Europay said Midland Bank of London would be its first member to pilot debit and credit services on the Multos system later this year.
And Europay forged an interoperability agreement with ZKA, the bank association behind Germany's Geldkarte electronic purse program, which has been working with Visa on CEPS.
With 45 million cards, Geldkarte is the biggest of all stored-value systems. In June, Geldkarte and SERMEPA of Spain were the first to join in the CEPS effort. Further support came shortly thereafter when Visa, American Express, and ERG Ltd. of Australia bought into Proton, the smart card system developed by Banksys of Belgium.
ZKA, or Zentraler Kreditausschuss, is Europay's immediate conduit into CEPS. Through their agreement, Geldkartes can display the Clip logo that Europay introduced two years ago. Europay is refreshing its two-year-old Clip program and offering it as a "cross-border acceptance mark," signifying the interoperability that European card systems will need to match the multinational euro notes and coins due by 2002.
The original Clip technology did not catch on, as individual countries went their own ways with cash cards, said Herve Kergoat, Europay's electronic purse chief. Now the emphasis will be on branding, with CEPS as the underlying technology.
It will be some time before cross-border Geldkarte-Clip acceptance is a reality. Europay is in discussions with merchants in Austria, Switzerland, and Spain. Chief executive officer Louis-Noel Joly said he expects several thousand merchants, mostly in tourist locations, to be the first on the system.
Europay said it is taking a "federation approach," supporting and preserving investments in existing electronic purses, and "migrating" to the unified CEPS program.
"The protection of current investments will be ensured, and the future, large-scale implementation of a standard is facilitated," said Manfred Kruger, chairman of the ZKA chip working group.