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SCMP Reporter

HSBC Holdings-sponsored Mondex card is heading for a clash with the industry-wide smart card standard, being developed by Europay, Mastercard and Visa (EMV).

   The three major card organisations, EMV, have announced that further global specification on the smart card system will be released by mid-June.

  The step will move the industry closer to a worldwide framework for the use of smart cards.

  'The release of the card and terminal specifications will represent a stable base upon which the financial services industry can begin to develop chip card applications that are capable of functioning across borders and systems,' EMV said.

  Banks around the world have taken a cautious stand on smart cards, hoping to wait until a global framework comes out before making an investment.

  But Midland Bank, British Telecom and NatWest have embarked on the Mondex project, a smart card project that has its own chip-card technology.

   Mastercard's chip card technology senior vice-president Robin Townend, who is involved in the EMV discussion, said the specifications to be released were incompatible with Mondex.

  'We will send a copy to the Mondex banks so that they can identify areas of differences,' he said.

  In Hong Kong, Hang Seng Bank and Hongkong Bank have signed up for the Mondex project which will be tested in a few weeks in Britain.

  It is believed that other banks are adopting a wait-and-see attitude.

  However, Standard Chartered Bank joined the pilot scheme conducted by Mastercard in Canberra in March.

  Smart cards have been described as 'personal computers on a piece of plastic', as the embedded chip stores a variety of information.

  The Hong Kong Monetary Authority (HKMA), the territory's de facto central bank, was about to lay down rules to govern the use of the new cards but has been unable to do so because of the constantly advancing technology.

  The HKMA feels comfortable about single purpose smart cards, in which case, the issuer is also the provider of goods and services, for which the card can be used exclusively.

  The Royal Hong Kong Jockey Club project, for instance, allows card-holders to bet and eat at the race-course.

  'However, for multi-purpose smart cards, particularly when they are pre-paid, it appears to us that the issue of those cards would constitute the business of taking deposits,' said Joseph Yam, chief executive of the HKMA.

  Under the Banking Ordinance, firms that accept deposits from the public must be registered with the Government as authorised institutions and subject to HKMA regulations.

  Multi-purpose cards carry monetary value which can be used to purchase goods and services provided by unrelated parties.

  However, the HKMA admitted that the dividing line between single and multi-purpose cards was blurred, depending on the details of each scheme.

  More consultation will have to take place between the HKMA, the banking industry and legal experts concerning regulating such card products.

  Although no multi-purpose smart cards have been launched, they are expected to be introduced soon.

  Mr Yam appealed to companies interested in venturing into smart cards to first consult the HKMA.

  Another area of concern to the HKMA is how to accurately track down money supply statistics, which frequently serve as indicator of the economy's inflation and credit growth.

  'We will inevitably be asking issuers to supply yet more statistical information,' Mr Yam said.



Mondex heads for clash over card standard