Banks in alliance to bring the Mondex system to Irish market

NATIONAL Irish Bank and Ulster Bank are forming a joint venture company to bring the Mondex electronic payments system into the Irish market. The banks have bought the franchise to operate the Mondex smart card, or electronic purse, in the Irish market.

But it will be the end of next year before pilot schemes will be run to test the card on the Irish market, according to Mr Michael Keane of National Irish Bank.

Mondex is an electronic payments system involving a card with a microchip which stores value. When it is fully developed, bank account holders will be able to load the card with cash from their accounts and then use the card to pay for goods and services or to transfer money between different bank accounts.

Card holders can pay for goods and services, transfer money to other individuals or load their cards from their accounts by telephone when a special Mondex telephone is used. Mondex say the system is unique in allowing person to person transfer of electronic cash that is not reported to a central computer system.

The latest electronic card differs from credit/debit cards in that it is pre-loaded with cash and can be reloaded. No credit is involved. The card is loaded with value before the transaction rather that having cash deducted from the customers account when a transaction is done.

It offers person-to-person payment. The card uses a microchip instead of the magnetic strip used in credit and debit cards.

It is a global and multi-use version of the pre-paid telephone or bus travel cards these cards allow the holder to pre-pay for telephone calls or bus trips but they operate only for the specific service involved and cannot be reloaded.

NIB and Ulster are to be equal partners in the new joint venture company which will be called Mondex Ireland. Spokesmen for the banks declined to disclose their investment but said it was "significant". So far they have bought the franchise from Mondex International and have invested in computer systems and documentation.

Because the joint venture operation will be issuing value (cash), it will have to get approval from the Central Bank and may require a banking licence. No decisions have been taken on where the test runs will be carried out according to Mr Keane.

But the location will have to offer enough volume to ensure that potential risk hurdles such as fraud and information technology issues can be fully evaluated, he said. The banks are now working on supporting infrastructure for the card and developing implementation plans.

Mondex International is an independent payments company owned by MasterCard International (51 per cent) and nineteen international banks including Ulster Bank's parent, National Westminister Bank, and NIB's parent, National Australia Bank.

The smart card is currently being introduced in the UK (31,000 cardholders), Hong Kong (41,000), Canada (5,000), San Francisco (700) and New Zealand (800). Retailers will need new point of sale equipment to process card transactions.