By Robert Shapiro
Early next year the London suburb of Swindon will be the launch site for the first serious effort to create digital cash.
Mondex International, a joint venture between National Westminster Bank and Midland Bank, plans to provide digital cash cards to 40,000 customers of the two banks. These cards carry a depletable balance that can be restored electronically, similar to some library copier-cards and transit fare-cards.
Like paper notes and coins, Mondex cards are not identified in any way with the bearer or with a financial institution; there are no names or identifying numbers on the cards. Transactions between two parties occur privately and directly, without clearing through a bank or credit network.
For the initial phase of the trial, nearly 1,000 retailers will be equipped with card-reading terminals that accumulate Mondex credits paid by customers during the day. No signatures necessary. No central records kept. Merchants can bank their accumulated credits by telephone at any time.
Transactions between individuals occur over specially equipped British Telecom telephones. These devices – installed in public areas, businesses, and private homes – are also used by consumers to transfer money from their bank accounts onto their Mondex cards.
Unlike other plastic, Mondex cards store information on computer chips rather than on magnetic strips, making them safe from static electricity and magnetic fields. And hackery won't be a problem, Mondex executives insist. They say the system is immune to hackers, although, naturally, "for security reasons," they won't say why.
If Mondex succeeds in the trial in Swindon, a town of 300,000, the partner banks anticipate rolling it out relatively quickly to UK businesses and consumers. But bringing it to the United States may be another matter, says a spokesman for the venture. Executives fear that US law-enforcement officials will balk at anything that makes it easier for people – particularly narcotics traffickers – to transfer large sums of money secretly.
If Mondex does become a standard, even if confined to Europe, the big winners will be the partner banks and British Telecom. According to Mondex, British banks spend billions of pounds a year transporting money from place to place. Reduced costs from electronic transfers would fall straight to their bottom lines. For British Telecom, the electronic cash card could become the best thing to come along since the fax machine: millions more calls would be made each day.
Going into the test, the concept seems economically viable and a potent consumer convenience. Yet if Mondex creates a paradigm for the future of personal digital commerce, the cards still retain one of the nasty qualities of cash: lose 'em, and you're out of luck.
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