Will that be cash or Mondex?
It's not yet a household word, but Mondex - the electronic cash card on trial in Guelph - is gaining a large following, sooner than expected.
Six weeks after they became available, more than 5,000 people in Guelph are carrying electronic cash cards, roughly one in every 20 city residents. That's more than halfway to the program's target of 8,000 card carriers for the first year.
"For things like a paper or coffee, it's a lot better than pulling our a $20 bill and getting the change", says Bob McCabe, a Guelph resident who's been using his card since February.
More than $15,000 a day is flowing from bank accounts of participants on to the computer chips, or electronic "wallets", embedded in each plastic card. More than $5000,000 have been put on the cards since they were launched in mid-February. And on average, card-holders have placed or spent a bit more than $100 each with their cards.
"Mondex Canada is setting the stage to be the most successful start of any electronic cash introduction or pilot to date", says Allan McGale, vice-president of stored value cards with the Royal Bank, a partner in the Guelph venture with CIBC.
But some people like McCabe, who has worked with computers, wonder about certain aspects of the cards. "My only concern is possibly whether the information can be traced or will be used somehow", he says.
In fact, behind the computer chips and cash counters a debate is under way over card security - one that may fizzle or gain steam. Critics say electronic cash cards could pose a serious risk to consumer privacy and open a crack in the wall for thefts or frauds.
Late in March, CBC television's National Magazine program focused on the Guelph trial and raised questions about the potential for breaches in consumer privacy.
A few days after the broadcast, Royal Bank chairman John Cleghorn wrote to CBC president Perrin Beatty objecting to the program.
"It is one thing to contract out feature news productions to credible independent producers", he wrote. "But (it's) quite another to hire a self-proclaimed group of unapologetic anti-corporate media subversives."
Cleghorn took more direct aim at claims made during the program, arguing in his letter that:
A card-reader, provided to each Mondex card user, keeps track of the last 10 transactions. Card-readers given to merchants maintain a record of the last 300 purchases.
"It's not as anonymous as cash, but it's the next best thing", says Joe Clark, Mondex spokesman in Toronto. If you're looking for audit trails, debit or credit cards leave a more obvious trail.
As for losing a card, it's just like losing cash, he says, except whoever finds a card can possibly return it to the owner with help from the banks.
A broader issue remains, he says. Are the cards secure or could data collected on their microchips be used for any other purposes?
The CIBC does appear to be concerned about public perceptions about security, particularly concerning use of data.
"If Mondex Canada collects data for marketing purposes, it will be the only territory to do this", says an internal bank memo dated Jan. 30 that was meant to advise the banks communications staff. "This is not something we want to be a pioneer on; it's not the time to be setting these kinds of precedents."
The CIBC memo says the bank will not collect data on transactions for marketing use. Any overall information collected would be used only for risk management reasons, such as stopping fraud or theft.
Both Royal Bank and CIBC stress they are bound by confidentiality agreements not to share any customer information with third parties.
Patti-Jo Lilley, a former Guelph research now working in Ottawa, says consumers will be short-changed by the technology. Banks can reduce their costs of handling cash, reducing stall levels and make fewer interest payments - since balances on the cash cards generate no interest.
But the main problem, she says, is the potential trail of information left by the cards.
Others, however, worry that any move to curtail that information trail could cause bigger problems.
In February an international financial action task force created by the G-7 countries, including Canada, expressed worries that electronic cash cards could make it possible to move large volumes of cash with little trace.
"The level of record-keeping is an important law-enforcement concern", the task force reported. "systems vary in the records kept, both of individual transactions and of ownership. Some systems require very limited records, while others maintain detailed records in a centralized database."
While Guelph shoppers, for example, can carry a maximum of $1,000 on a single card, other cash cards could be created to carry unlimited amounts, the task force suggested.
In the United States, debate over electronic cash has raised other questions:
Mondex:Pilot project in Guelph launched in mid-February. About 5,000 cards issued to date.
- Developed by England's Natwest Group. Mondex International is owned by global consortium, including CIBC and Royal Bank in Canada.
- Loads up to $1,000 cash on to cards at bank machines or using specially equipped phones. Card locks and unloks with security code. Transfers cash person-to-person using small "electronic wallet".
Exact:Pilot program began in December in Kingston, Ont.
- Introduced by Belgium-based Banksys. Tests in Canada involve TD Bank, Bank of Montreal, and Canada Trust.
- Loads up to $200 at bank machines. Can't be locked and person-to-person transfers are not possible.
Visa Cash:Tested sine December, 1995, a one-year trial by Bank of Nova Scotia, TD Bank, and Visa Canada is to begin in Barrie, Ont., later this year.
- 10,000 consumers will test electronic cards reloadable at automated banking machines and other locations.
- Cards can't be locked and person-to-person transfers aren't possible.