After Dollars, Cents, A New `Smart Card' Could Become Payment of Choice

WHAT kind of money isn't made from trees and doesn't jingle in your pocket?

It's electronic money, and it could become the world's third major cash source after bills and coins. At least this is the hope of Tim Jones, a payment-services director at National Westminster Bank of London and co-inventor of the Mondex ``smart card,'' to be tested in England next summer.

The microchip-carrying card that looks like a credit card could greatly reduce dependency on cash, make banking easier and less expensive, and make money handling for retailers safer and more flexible. Mondex is being developed by NatWest, Midland Bank, and British Telecom of London.

``We're in the transition from a paper to a digital paradigm,'' Mr. Jones said by phone. ``The goal is to replace cash in everyday spending. Consumers say they most want to use [Mondex] at supermarkets and stores. Kids buy comics today with pocket money; they'll buy electronics tomorrow with Mondex.''

Bryan Ichikawa, a director of the Tampa, Fla.-based Smart Card Forum, agrees. ``I've played with it, exchanging deutsche marks, yen, and dollars from the Mondex wallet to the card,'' he says. ``I was definitely impressed.''

CUSTOMERS will use adapted NatWest and Midland automated teller machines (ATMs) and private or pay telephones to transfer money electronically from their bank account to their Mondex card. Then they can use the card to make purchases at stores having a Mondex terminal. Payments can also be made by adapted phone to a payee. And Mondex cardholders can send each other money from an ``electronic wallet.''

Separate from the card, the wallet looks like a calculator and carries a microchip. It tells the cardholder how much Mondex money is available and details about recent transactions. It can be locked by a personal code number. A third item, a key-ring-sized ``personal reader,'' will check the balance for the last currency used.

A Mondex card will enable customers to draw cash in five currencies from adapted ATMs. Customers can make bank deposits and withdrawals, and check their balance and last 10 transactions. The card also has a locking code.

For consumers, Mondex money could be a cash substitute. ``If you tell someone the next generation of cellular phone is a cash dispenser, they will like that,'' Jones explains.

For retailers, Mondex money has several advantages over ATM and credit cards.

* It is easier and quicker to take as payment because it doesn't require a clearing process.

* A day's transactions can be sent to the bank through an adapted phone, eliminating hand counting each sale, bundling up bills, and risking theft.

* The electronic wallet can replace a cash register at small retailing operations.

Mr. Ichikawa says he likes Mondex because ``it views telecommunications as a fundamental piece of its strategy.''

Hongkong and Shanghai Banking Corporation Limited will acquire franchise rights to it in 10 Asian countries; Hongkong Bank Malaysia Berhad has similar rights in Malaysia. NatWest is currently looking for partners for the system.

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