Mastercard Set For Control Of Mondex

The deal is expected to give MasterCard 51 per cent of Mondex, set up by National Westminster and Midland of the UK but now jointly owned by 17 banks. Under the agreement, MasterCard would promote the Mondex electronic cash card through banks which carry its franchise. The Mondex system has been piloted in Swindon, Wiltshire, and Hong Kong.

It works by storing cash on a microchip card, which can be loaded using automatic telling machines or specially equipped telephones. Cards - including credit, debit and store cards - are used for payments worth an estimated 2,000bn a year.

MasterCard believes Mondex could give it a greater share of that market, although some industry observers doubt the appetite for such electronic cash cards. The acquisition could exacerbate tensions between MasterCard and Visa, its main rival, in attempts to establish an industry-wide standard for chip cards. Visa has already done pilot tests of its electronic purse at the Atlanta Olympic Games last summer and in Spain, Australia and Argentina.

It is understood Mondex would become a free-standing subsidiary of MasterCard, and its existing management is expected to remain. Banking analysts said the deal could signal an admission by MasterCard that trials of its own electronic purse had not proved an unqualified success.

Yesterday, however, MasterCard said it would be conducting a full-scale trial of its own smart card in New York next March. Electronic purses are undergoing trials elsewhere in Europe and North America, and some of Mondexs rivals claim it does not conform to the international standards for chip cards developed by companies such as Visa and Europay.

Mondex has had a mixed reception among UK customers and retailers but said this week that it had been received enthusiastically in the Far East. In Hong Kong - where Mondex was launched last month in conjunction with Hongkong Bank and Hang Seng Bank - more than 20,000 customers and 400 stores have signed up to join the scheme at the two malls where it is being tested.The card is also being tested in Canada and is expected to be launched in Australia next year.