Visa Enters the Race for the Electronic Cash Card

The race to establish a global standard for small value payments heated up when Visa launched its electronic purse in 1997. As it is well known, Visa was (and is) MasterCard’s long-term rival and perhaps the only other significant force in retail payments. The contest fast became international as

Visa issued 50,000 of its cards in Hong Kong within a month of starting its trial. Although Visa Cash worked very similar to Mondex, Visa Cash would not offer person-to-person payment.

As had been the case for Mondex, Visa Cash would trial its device in several small towns in Europe and North America. Then it scaled up to test its concept in the northern city of Leeds in 1998. But interestingly, the banks behind the scheme (which almost by definition had not been part of Mondex such as Lloyds and Barclays) were planning to follow the same format of deployment as Mondex had done in Swindon: placing terminals only in retailers, issuing cards only to their own customers, and running a very similar marketing campaign, and so on. Unsurprisingly, Leeds had exactly the same initial results as Mondex had in Swindon.

This led to an initiative within the VisaCash team to change acceptance mid-trial by incorporating Visa Cash into the buses, all the car parks and pay & display and other small value transactions. Then they observed an increase in usage and acceptance as consumers could now use it in places where paying with cash was difficult. Car park and bus operators really liked it as it made significant economies in managing banknotes and coins.

But retailers and shops were still dealing with cash. The banks behind the trial then assessed what it would take to reach universal use. However, none of them were ready to assume the cost of replacing the accepted infrastructure that would secure nationwide universality. The decision was than taken not to roll out VisaCash throughout the United Kingdom.

Visa continued with trials elsewhere. At the same time, Mondex was losing steam, given that it was much more expensive to implement.

Then in 1998, it linked up with American Express and ERG, an Australian smartcard group, in purchasing a majority stake on a device developed by Belgian banks (a consortium called Banksys). Thus was born Proton Worldwide International with the specific aim of contesting Mondex in developing the standard and infrastructure for cards carrying chips that replaced cash. At the time, Proton had 30 million customers and 20,000 terminals in 15 countries.[1] However, Mike Keegan (chief executive of Mondex International) stated that unlike Mondex, Proton cards were not interoperable from one country to another.8 However, Visa’s strategy was different to MasterCard in that Visa was tying to have its members agree on a common international specification for interoperability (while allowing each country to decide on its own specification) rather than impose a standard as was the approach by MasterCard.

But in spite of Visa’s initial success, the truth of the matter was that no one saw the case for electronic cash or electronic purse ahead of introducing chip-based credit and debit. Electronic purse schemes thus faded as debit cards over took credit card payments and became quite popular in e-commerce. At the same time, the focus of the banks was for Visa and MasterCard to work towards a common, global, chip-based, security standard for credit and debit transactions (i.e. Europay, MasterCard, Visa or EMV) to ensure security and global acceptance so that MasterCard and Visa cards can continue to be used everywhere.

  • [1] Buckley, Neil. “AmexCo and Visa join Smartcard Group”. Financial Times, July 30, 1998, p. 34.
 
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