Mondex International's long-time efforts to bring electronic money to Japan may finally be paying off. Early this year, two major finance/credit card companies here agreed to purchase the Mondex electronic money franchise for Japan, and use of the Mondex card in this country should be possible by year-end. But the question is will Mondex be enthusiastically adopted by the Japanese - traditionally conservative when it comes to financial affairs.

The new Japan mondex franchisees are Sanwa Bank, a major city bank, and JCB, Japan's largest credit card company. Sanwa Bank also acquired a 2.5 percent share of Mondex International. Originally, Mondex Japan was to have been formed a few years ago, with the Industrial Bank of Japan taking the lead for local implementation. Under pressure from its poor financial performance and bad loan problems, the Industrial Bank decided not to join the Mondex operation, leaving Mondex International struggling to find Japanese participants over the last few years. In April, with Sanwa's and JCB's participation wrapped up, a renewed Mondex (Japan) promotion consortium was established, comprising Hitachi, Oki Electronic, Matsushita Electronic Industrial, Fujitsu, Dai Nippon Printing, and Toppan Printing.

Japanese bank support crucial

"Involving a Japanese bank, the Sanwa Bank, was a significant event for Mondex," says Akira Otsuka, a researcher at Nomura Research Institute (NRI). "After Sanwa Bank joined Mondex, the credit card companies have come to perceive that Mondex is the most plausible electronic money scheme, since it is supported by a Japanese bank. If Mondex succeeds in attracting more Japanese banks - like Sakura and Asahi - it is highly likely that Mondex can be successfully accepted in Japan."

Other e-money projects in Japan

Visa, meanwhile, has not been idle. The international credit card giant has been conducting a trial with its VisaCash system since July 1998 in Tokyo's Shibuya shopping and entertainment district, and other players include NTT, who has been running its Supercash project since April this year, and the Ministry of Posts and Telecommunications (MPT), who has been testing an IC card for postal savings in Saitama Prefecture since February 1998. However, none of these systems are interoperable, and use of each e-cash card is limited to each trial area, making it one possible source for the lack of e-money enthusiasm seen so far. According to an NRI survey report published in December 1998, some 700 people (approximately half of the respondents) replied that they didn't know about electronic money at all.

Second wave e-money

Mondex International itself admits that the first stage of their strategy has failed. "The fist wave of electronic money had a mismatch in terms of technology as well as targets," said Chris Potts, deputy chief executive of Mondex International. "The lack of success was due to being driven by technology-push, not by market-pull." But he also stressed that another wave of electronic money schemes are being planned. "With the growth of the Internet, e-commerce business requires a secure payment method. This change of business environment is very important for our growth."

Mondex with MULTOS

The biggest change in the next Mondex scheme will be the incorporation of MULTOS (multi-application operating system), an operating system for IC smart cards. To promote MULTOS as the de facto standard OS for electronic money, a nonprofit consortium - MAOSCO - was established in May 1997, supported by American Express, Discover Financial Services, Dai Nippon Printing, Europay International, Fujitsu, Geisecke & Devrient, Hitachi, Key Corp., Motorola, Siemens-Nixdorf, and Mastercard/ Mondex International.

With MULTOS on its card media, the new Mondex scheme is now attracting interest from Japanese credit card-related companies. Mycal Card has announced that the company will replace their 5 million existing credit cards with MULTOS cards in July. LIFE has also announced that they will issue about 5 million MULTOS cards.

"Japan is the most advanced market in the world in terms of MULTOS adoption," said Nick Habgood, chief executive of MAOSCO. "MULTOS is the only e-money standard which Japanese companies can control." In support of his comments, the MULTOS Network seminar held in Japan in April attracted over 80 Japan credit card issuers. In addition, the most active Japanese player - Hitachi - has announced several new MULTOS projects. In 2000, Hitachi plans to distribute MULTOS cards to its some 60,000 employees as their ID/cash/in-house cafeteria cards. Later this year, the company will also release the H8/3114 micro-controller incorporating MULTOS version 4.0 and a 16Kb EEPROM. Habgood said, "We have produced about 250,000 MULTOS cards so far, and have received more than 1 million orders for MULTOS chips worldwide."

MULTOS vs. Java card

MULTOS is not the only OS for IC cards. Sun Microsystems has developed a Java-based card and Microsoft has developed a Smartcard for Windows. The Java Card will be a tough competitor for MULTOS, but is not yet widely used in systems in the field, and the technology is not mature. The Java Card is trying to cram Java (an object-oriented language designed for the 32-bit platforms) into existing smart card chips which are generally built around 8-bit architectures. In order to fully utilize the Java features, the smart card platform must become more powerful than those currently available. Microsoft's Smartcard for Windows has yet to be fielded at all.

MULTOS, however, has some limitations. All MULTOS onboard applications must be written in a low-level assembler language, called MEL (MULTOS Extension Language), which is not suitable for high-level prototyping. However, a C compiler has been developed to deal with applications written in the C language, which is well suited to building embedded applications. MULTOS also plans to enhance the MEL-to-C compiler to be able to produce compact application code, allowing the application to use very little memory on the card. The new C compiler is scheduled to be released this summer.

Killer app tools

For the second round of e-money schemes, application tools will be a key issue. In Europe, where digital satellite broadcasting has become popular, the set-top box is one promising application tool for e-money. The set-top box - connected to the Internet via satellite - is an ideal venue for conducting online shopping and using e-money payment methods.

In Japan - where satellite broadcast players are struggling to survive - a different infrastructure will be necessary for dissemination of electronic money. Candidates include mobile phones connected to the Internet, POS (point of sales) terminals, and PCs. Among these, the mobile phone seems to be the frontrunner, since NTT Mobile Communications (NTT DoCoMo) launched the world's first mobile phone Internet-based data service this year. This may not help Mondex, however, because NTT DoCoMo's e-money plans are based on their existing tie-up with Sun Microsystems and the Java Card.

In the UK, a major cellular phone company - Cellnet - has developed a GSM-based cellular phone system for VisaCash, and the company is planning to develop a similar system for Mondex. In Japan, however, Mondex's attractiveness for any of the cell phone companies is an open question, as they seem to be focusing on POS terminal applications. As Chris Potts of Mondex International says, "the race is now on." (Access www.multos.com for more information on MULTOS - Ed.)

Noriko Takezaki is Senior Editor at Computing Japan.