Mondex banks on land of the rising sun

Mondex hopes to make it big in Japan following a deal between on of the country's oldest commercial banks and its number one credit card issuer.

Japan's third largest commercial bank -- which dates back to 1656 -- Sanwa Bank, credit card issuer JCB and MasterCard International have signed up as Mondex electronic cash franchisees in a deal that may aims to get millions of Japanese consumers spending electronic yen.

An UK-spawned smart card initiative, Mondex International is being franchised aggressively across the world. The latest deal is the first stage of a wider plan to introduce Mondex electronic cash to Japanese consumers for low-value, transactions such as telephone, transport and vending machine payments. Later, the company hopes health, identity, security smart card applications will follow.

A well as being in talks with several other parties, including Asahi, Sakura Banks and also credit card companies, Mondex has struck deals with national smart card kit vendors to help propel the roll-out of its e-cash system.

Mondex, in which MasterCard has a 51 percent stake, is attempting to establish itself as a global standard for smart card systems and has a broad geographical spread. The Japanese deal adds to the company's 14 franchisees in Asia Pacific, bumping up the its total number of country partnerships to 58. But a spokesperson from the company's PR arm was unable to say how many cards have actually been issued.

Compared to other electronic purse projects -- such as the German Gelt Karte e-cash initiative - Mondex take up has been poor, according to Andrew Phillips, semi-conductor applications group analyst at Dataquest "Some 50 million Gelt Karte smart cards have been issued, many of them being banking or transport payment cards. But if you add up the Mondex cards, it's not far off 5 million. Mondex is a mid-sized player," said Phillips. In a country where even fast food chain McDonalds accepts smart card payments, Germany is further in the e-cash arena.

Phillips believes a major stumbling block for the smart card industry is the price. The average cost of a chip card is $2.8 (£1.70). The demand for enhanced security features, requiring a more expensive cryptography engine, also bumps up the cost. Other issues are compatibility of the hardware and software. "In Europe, there will be operating system issues. For example, what operating system will a bank use and if you're a retailer do you really want to buy numerous readers for the different cards?" said Phillips.

Mondex has adopted the Multos platform -- an operating system that supports multiple applications -- and is part of the Maosco consortium that aims to push the Multos smart card standard. Other Maosco member are American Express, Europay International, Fujitsu, MasterCard International, Motorola and Seimens.

Meanwhile, rival electronic purse scheme Visa Cash uses what it calls the "non-proprietary and interoperable Visa Open Platform technology" that is based on Java. Visa International and other companies sponsored by the Japanese government, rolled out an e-commerce project two years ago in which 30,000 Visa cardholders in Kobe were given chip cards. Visa currently has chip card programs underway in nearly 30 countries with more than 21 million Visa chip cards issued, including nearly 8 million Visa Cash cards.