Friday, May 23, 1997

Mondex scores a victory in Canada

The endorsement of Mastercard's stored value smart card
by major Canadian banks poses a strong challenge to the Visa Cash card

by Ray Van Eng

It is as if a lightening bolt has struck the Canadian stored value smart card scene.

All of a sudden, a number of Canada's biggest financial institutions have decided to join the Mondex bandwagon to implement the UK derived electronic cash technology currently on trial in Guelph, ON.

What is even more astounding is that three of the banks: Bank of Montreal, Canada Trust, and Toronto Dominion (TD) Bank have switched horses in mid-stream right in the smack of their launch of another e-cash card, the Exact card in Kingston, ON.

So what will happen to the Exact card trial, a system based on Belgium Banksys' Proton electronic purse system? Officials there say the pilot will continue, however, the card will be converted to the Mondex platform in the future.

The three banking partners in the Exact trial will also issue the Mondex card in the city of Guelph later, but the exact timing has not been determined.

The size and penetration of the two stored value smart card trials in Guelph and Kingston are comparable. Both have a population base of around 100,000, each has about 500 merchants participating, three card issuing banks, with Bell Canada and Nortel providing telecommunication links. The Guelph trial (launched in February '97) has more than 5,000 cards issued by the end of March while the Kingston trial (launched in December '96) has about 8,000 cards in circulation.

With the endorsement of Bank of Montreal, Canada Trust, TD Bank, Le Mouvement des caisses Desjardins, and National Bank of Canada joining the existing members of the Mondex Canada team which includes Canadian Imperial Bank of Commerce (CIBC), Royal Bank, Credit Union Central of Canada, and HongKong Bank of Canada, Mondex has the consolidated support of about 90% of the financial clout in this country.

A national roll out of the Mondex card is planned for 1998 with the nine banking partners participating. The last hold-out of the major banks is the Bank of Nova Scotia, but officials believe that it will eventually come on board.

So what will happen to Mondex's competitor -- Visa Cash from Visa International ? Given Visa's dominant position in the credit card payment industry and the strong ties it has with its global banking members, Visa Cash is here to stay in Canada. The smart card market is still in its embryonic stage and the market is certainly big enough to accommodate two major players.

But by all accounts, Mondex has taken a clear lead in Canada in this first round at least. In contrast, Visa Cash has yet to launch its first reloadable stored value card test in Barrie, ON later this year.

Previous Visa Cash card tests in North America, including the one launched at the 1996 Olympic Summer Games in Atlanta, Ga, and the trials in Vancouver, Toronto, and Montreal were all of the non-reloadable variety.

Mondex Canada is part of the Mondex International Ltd., which is chiefly owned by Mastercard International (51%), together with 23 other corporations in North America, Europe, southeast Asia, Australia, and New Zealand.

Indeed, the Canadian stored value electronic cash card market is moving very rapidly. The overwhelming and quick endorsement of the Mondex system in Canada signifies a dramatic change in how people would regard money, especially bills and coins in the days ahead.

Copyright © 1997 by Cosmotek Interactive Technology, Inc. All Rights Reserved. Reprinted with permission.