Electronic Commerce: Barclays Unit's Lab Serves as Test Bed for Internet Commerce, Smart Cards
Kutler, Jeffrey, American Banker
The future is serious business at Barclays Bank.
Hoping to get away-when appropriate-from banking's conservative and risk-averse inclinations, London-based Barclays in 1994 launched the kind of research and development effort that might have been more at home in a technology or pharmaceutical company.
Today the emerging markets group is 40 people, housed at the card operations center in Northampton, England. They are led by bankers who have risen enough above the day-to-day fray to talk like technologists.
"We have a cards background, but we work for Barclays as a whole," said the team leader, Roger Alexander, a 30-year Barclays veteran whose title is managing director.
"We believe cards have a future in electronic commerce," he said, hence Barclays' heavy involvement in smart cards, leading to various modes of Internet commerce and biometrics and other advanced security techniques. Its Barclaysquare on-line mall is a living laboratory, closely watched by bankers and other e-commerce aspirants around the world.
The timing of all it is testing is uncertain, but Barclays sees an advantage in having been in the thick of experimentation and controversy. Its aim is "to learn about these products before they hit the market in any significant way," Mr. Alexander said.
In any few minutes with Mr. Alexander and his top deputies, group directors Steve Collins and Mick Linnell, opinions fly as free as Internet content was supposed to be.
For consumer identification, they say, hand geometry seems more feasible than eye-retina scanning. They see less of a business case in stored-value smart cards than in portable digital certificates for customer authentication.
SET, the MasterCard-Visa Secure Electronic Transactions protocol, is "a solution, not the solution" for Internet payment security, Mr. Alexander asserted. Barclays is "agnostic" in the debate over smart card operating systems, said Mr. Collins, and "we haven't slammed any doors"-not even on Mondex, which is owned by MasterCard and not the Barclaycard's nearer forebear, Visa.
"We believe we have components and ideas that can contribute to new business models," Mr. Alexander said in a recent interview. "Putting them together in the right way can get electronic commerce moving more quickly."
For all its pioneering, Barclays' emerging markets group does not have the future to itself. Each of London's Big Four commercial banks- historically known as the clearing banks-has gone, in its own way, avant garde.
The cards division of National Westminster Bank produced the Mondex electronic cash system, which Mr. Collins admired as "extremely elegant in design." In 1996 and 1997, Natwest sold 51% to MasterCard International and most of the rest to other banks around the world.
Still a part-owner, Natwest kept an R&D legacy in an electronic markets unit that, retail banking chief and Mondex co-inventor Tim Jones said, "opens doors for us to go anywhere. We talk to a lot of niche software companies and big global corporations" that may not otherwise have found Natwest bankers very interesting.
Midland Bank, part of HSBC Holdings, was an early Mondex partner and, before that, lit a fire under the United Kingdom retail market by creating First Direct Bank, the first virtual, or branchless, consumer financial institution.
Lloyds Bank, having completed the merger and complex technology integration of Trustee Savings Banks, is being hailed by consultants and analysts as one of the most innovative, efficient, and profitable consumer banks in the world.
If Barclays' emerging markets group has a higher profile, it is because of the time it has invested, its roots in the nine-million-card Barclaycard business, and a visibility beyond what would be expected of pure laboratory research. In June, for instance, Mr. Alexander's unit released a smart card, Endorse. In its chip is stored a digital certificate for verifying the cardholder's identity in a government-sponsored document transfer system. …