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Japan Gets Mondex E-Cash Franchise

Sanwa Bank, one of Japan's leading financial institutions, and JCB, a global top-five credit card company with over 39 million cardholders, have joined with MasterCard International to purchase the Mondex electronic cash franchise for Japan.

London-based Mondex International announced the formation of Mondex Japan on February 15.

Sanwa, JCB, and MasterCard, which have exclusive rights to develop a commercial Mondex system in Japan, hope that the widespread use of pre-paid cards here for telephones, public transportation, and vending machines will lead to rapid acceptance of Mondex electronic cash.

Current Mondex smart cards utilize a Hitachi microprocessor with 8KB of memory that embeds protocols for receiving, storing, transacting, and locking value in up to five currencies.

Value is transferred from one Mondex chip to another as a unique digital signal that confirms transaction details and the authenticity of each card.

Mondex cards will initially be used in place of cash in participating stores.

The long-range vision of Mondex, though, is to be a global solution for online shopping.

A Mondex smart card is suited to purchasing low-value services or goods that Internet sites can't otherwise easily charge for because of high credit card processing fees.

The obvious stumbling block is that such online purchases require a PC equipped with a Mondex card reader/writer and special software.

With a properly equipped PC, however, a Mondex cardholder could conceivably download value to the card from his bank account, essentially transforming a home PC into an ATM terminal.

Vice President Gondo of JCB's electronic commerce division said that "it is functions such as person-to-person transfer, the ability to download cash via a phone line, and the system's suitability for vending" that will make Mondex successful in Japan.

The franchisees, though, hope to create multi-application cards that would, for example, allow a Japanese cardholder to also use a Mondex smart card as a commuter pass, hospital ID card, and gym membership card.

Mondex Japan joins 57 other national Mondex franchises around the world, and it becomes the 14th Mondex franchise in Asia.

According to Deputy General Manager Sugiyama of Sanwa Bank's retail banking division, the bank decided to support Mondex "because it is likely to become a de-facto world standard."

It must thus be made available for consumers in Japan, he said, "from the perspective of international compatibility, as the world is increasingly becoming borderless."

The launch of Mondex Japan is just the first step in what will likely prove a long and problematic process.

Mondex International has been holding discussions other Japanese banks, including Asahi and Sakura, and several credit card companies with the aim of securing their participation in the roll-out of the system across Japan.

So far, though, no firm commitments have been announced.

Which is not a new situation for Michael Keegan, CEO of Mondex International. Keegan has often been in Japan promoting Mondex.

"After a long period of evaluation and negotiation, it is encouraging to see such strong franchisees make a firm commitment," he said.

The official launch of Mondex Japan must come as a relief for Keegan, who had publicly predicted the franchise's formation 'in the near future' as far back as spring 1997.

On the technology side, Mondex has long been working with leading Japanese smart card industry vendors, including Hitachi, Dai Nippon Printing, Oki, and Panasonic.

Continued support from these domestic market leaders will be useful in driving introduction of the technology and helping Mondex to establish Japan's first global electronic cash system.

Mondex is not alone in trying to bring electronic cash to Japan.

Currently, some 20 domestic electronic cash projects, many with Japanese government support, are in the testing or technical development stage.

These include Smart Commerce Japan (Toshiba), Machiko (NTT Data), and JapanNet (Mitsubishi Shoji).

But none of these projects enjoy the worldwide diffusion and acceptance of Mondex.

"The addition of this important G7 economy strengthens Mondex's position as the only global electronic cash product," Keegan noted.



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