MasterCard Will Buy 51% of Smart Card Firm Mondex

By Block, Valerie | American Banker, November 19, 1996 | Go to article overview

MasterCard Will Buy 51% of Smart Card Firm Mondex


Block, Valerie, American Banker


MasterCard International said Monday it would buy 51% of Mondex International and promised significant investments to create a global electronic cash system.

The pending deal - one of the card industry's worst kept secrets - puts MasterCard in the forefront of the smart card race. Observers had criticized MasterCard Cash, a smart card system that was deemed less than successful in its Australian debut.

With Visa Cash in several pilots around the globe and American Express announcing a licensing agreement last week for the Proton smart card technology owned by 60 Belgian banks, many industry observers said the dash for dominance would now begin in earnest.

Mondex, developed by National Westminster Bank of London and owned by 17 banks worldwide, is to retain its board, staff, and organizational structure, acting as an independent subsidiary.

With at least 39,000 cards issued, Mondex is being tested in England, Canada, the United States, New Zealand, and Hong Kong.

"We're very pleased to acquire (a product) that leapfrogs us toward the future of money," said H. Eugene Lockhart, MasterCard's president and chief executive.

He compared the planned transaction to the 1988 acquisition of Cirrus System Inc., which he said has become the largest automated teller machine network in the world.

The size of the Mondex deal was not disclosed, but Mr. Lockhart strongly denied reports that MasterCard was paying $150 million. Based on previous disclosures, 50% of Mondex International would be worth about $75 million to $80 million. A knowledgeable source said MasterCard would make its contribution through expenditures on the project over several years, rather than paying a lump sum.

The card association would put "substantial technical and financial resources" behind Mondex, Mr. Lockhart said, to accelerate the growth of a company that has already exceeded industry expectations.

Mr. Lockhart characterized Mondex as "the only (system) with global scope." He said "no product in the marketplace is as well developed. …

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