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SCMP Reporter

IMAGINE you have a super-powerful plastic card in your wallet combining credit and debit card functions.

   Imagine the card contains your bank account details, your medical record, allows you to book opera and MTR tickets and eliminates the need to carry any cash at all around the world.

  Sounds like a smart idea. But way of futuristic banking, or more appropriately described as the way of living in a cashless era, is no longer just a far-fetched day-dream. The smart card era is catching on.

    Hutchison Whampoa is believed to be teaming up with Overseas Trust Bank to issue smart cards for purchases in its vast network of retail outlets.

  On a larger scale, Hongkong Bank is persuading its peers to participate in the Mondex card project, at present being studied by National Westminster Bank, Midland Bank and BT (British Telecommunications).

   However, unlike the credit card market in which banks, using mainly the international systems of MasterCard and Visa, compete fiercely on free gifts and card benefits, the initial phase of smart card competition will take on an intriguing pattern.

   What will soon emerge on the smart card scene in Hong Kong will be competition between two different and possibly opposing approaches to introducing smart cards to the public.

  The two camps are represented by the Hongkong Bank group and Standard Chartered Bank.

  Smart cards are cards that carry a computer chip. With the tiny chip, the functions of the card are instantly expanded with only the boundary of imagination as the limit.

   Standard Chartered Bank has just announced its participation in a pilot scheme on a multi-currency stored value smart card launched by MasterCard International, becoming the first bank in town to bring smart cards to the public.

      The card, which can be a credit or debit card, enables the bank's customers in Hong Kong, Singapore and Malaysia travelling to Canberra to gain easy electronic cash access.

   They can use ATM or a terminal at any of the participating merchant locations such as convenience stores, petrol stations and specialty retailers to load value from their bank accounts on to their cards.

   In essence, the bank is supporting an evolving international chip card system being developed by three powerful networks Europay, MasterCard and Visa, referred to as EMV.

    Instead of leaving the development of chip card technology to each networking system, EMV is striving to lay down accepted standards and specifications on the chips to enable future inter-operability among the three systems.

   'The critical element of such a project is a worldwide standard. In this sense, because of the size of the organisations, EMV stands a good chance of acceptance,' said Jonathon Gould, regional sales manager of Verifone, a supplier of transaction automation systems such as the ETC terminals.

   If Standard Chartered's pilot test proves popular, other banks are expected to rush in.

  On the other hand, Midland's partnership with NatWest on the Mondex card project has made Midland's sister banks, Hongkong Bank and Hang Seng Bank, firm supporters of Mondex.

    Mondex, an electronic cash payment device, aims at taking cash completely out of the public's wallet. Equipped with an electronic wallet and a specially adapted home telephone, funds can be transferred electronically among cards or from a bank account downloading on to a card, without going to an ATM or branch.

    Announced in early 1994, Mondex cards will stand its first test later this year with a trial run in Swindon, Wales.

   Although these two systems are not identical in their functions, bankers see them as competitors.

   'In a way, Mondex is a competition to the MasterCard and Visa systems, because NatWest is selling the franchise [of Mondex]. There seems no point for banks to do both,' said Richard Martin, editor of Cards International , a publication on card development.

  In fact, amid the heavy investment by the Mondex enthusiasts, bearish views abound. 'Bankers are critical, especially those who are about to join the MasterCard and Visa system, because Mondex has no audit trail, which brings the issue of security,' Mr Martin said.

  Sceptical of the suggestion of a separate system on top of the infrastructure that MasterCard and Visa are now building on, bankers prefer to wait on the sidelines.

  Some banks in Hong Kong who have been approached by Hongkong Bank to join the Mondex camp have been hesitant.

  'We have not formally replied yet, but I don't think the bank will join,' one banker said.

  Another crucial element in the Mondex jigsaw is the Government's attitude.

  'What does the Government want to know about people passing money around?' Mr Gould, of Verifone, said.

  Despite the cautious attitude expressed by most bankers, Hongkong Bank insists that Mondex will be the forerunner of the cashless Utopia.

    Edwin Lau, assistant general manager of Hongkong Bank, argued that Mondex cards with their security features could work in a terminal-free environment, allowing funds to be easily transferable and lockable.

    'It overcomes the inconvenience of other smart cards, such as those using MasterCard system.'     Participating banks in Hong Kong will form a joint-venture company and buy the Mondex card franchise.

   But Mr Lau admits that with the loss of cash and the untraceable nature of the transactions, certain regulatory issues and its implications on the money supply have yet to be resolved.

    'Who should take up the liability when cash goes missing? This is an issue to be addressed,' Mr Lau said.

    While bankers in town are perceiving the smart card environment now as an EMV versus Mondex dichotomy, others believe that a convergence may subsequently take place to defuse the head-on clash.

    'It is the evolution process that in the end may result in some convergence,' Mr Gould said.

  But he added that it was too early yet to judge which approach would win the race.



Battle of the super-smart card