"The days when Mondex will be deployed as a mass system are coming closer," said Michael Keegan, chief executive officer of Mondex. "It's a good day for a major British invention."
He predicted that Hong Kong, where a pilot scheme started three weeks ago had already signed up 20,000 customers, would be the first part of the world where electronic money truly replaced cash.
Mondex's first pilot scheme began in Swindon, Wiltshire, in July 1995. NatWest and Midland own the franchise for Mondex in the UK and 25 per cent of their customer base - 13,000 people - are signed up to the pilot scheme in the town. NatWest and Midland are two of a total of 17 banks that own the remaining 49 per cent shareholding in Mondex.
Customers are given a "smart" card which carries money electronically which they download from their bank accounts. Unlike debit cards, customers do not have to sign receipts when the card is used. It only takes a few seconds for the retailer to take money off the customer's card.
Pilot schemes have been set up at the universities of Exeter and York and David Mills, general manager of retail banking at Midland and chairman of Mondex, expects more "closed" projects to be set up across Britain in the next few months.
MasterCard is paying $150m for the 51 per cent stake in Mondex but its value will increase as royalties will also be forthcoming from the use of the pioneering technology designed and owned by Mondex.
Mondex has designed the "chip technology" which is widely expected to replace the magnetic strips currently used on the debit and credit cards in Britain and much of the rest of the world.
MasterCard is now committed to using that technology in the 370 million credit and debit cards in circulation world-wide and as part of the deal has agreed not to invest in any other "electronic purse" initiatives.
All MasterCard's 23,000 member institutions will be entitled to apply for a license to use the Mondex technology and it is that potential distribution network which will bring the boost to Mondex.
"Over the last several years Mastercard realised chip technology was coming and will ultimately dominate the future of payments," said Henry Mundt, executive vice-president of MasterCard.
Ultimately, this technology will allow card issuers to lump together credit, debit and cash all on one card. The card will also be able to incorporate loyalty programmes, such as the one operated by Tesco, and data transfer.
Mr Keegan expects Mondex's technology to be on MasterCards issued in the UK in early 1998.
But emerging economies may receive the technology first. "The emerging economies may leap over existing economies," Mr Mundt said.Reuse content