Mondex

In the late 1980s Nat West (a major UK based banking group) was developing payment cards. They tried various forms, but did not find a model that provided benefits to consumers and the bank. As part of project close down one participant insisted on a formal close-out to record findings and conclusions. 

The main problem was that the available encryption was insufficiently secure to allow transactions that did not have to be verified by the bank and achieving a zero transaction cost meant not verifying via the bank.

It was known that more secure systems were in principle available but the processing power required was way beyond what could be incorporated into a smart card. Then came the genius questions –

  1. Given Moore’s Law[1], how long might it be until it became feasible to run secure encryption on a card?  Answer: about 4 years.
  2. How long might it take us to plan, develop, test, launch etc a new concept in payment cards. Answer: about 4 years[2]

They immediately had a meeting with the CEO, engaged patent lawyers and set up a project team. By 1993 they had launched Mondex – a card that could store currency that could be used as cash (exchanged between people and retailers, or between people and other people, without needing a transaction with the bank). It had modest success being used in some towns and at several UK universities.

Two Mondex cards and a key-ring reader, showing a balance of £2. The ‘calculator’ could have 2 cards inserted and transfer cash from one to the other without any interaction with a third party (bank).

It is worth noting that the world today is a very different place to the one where Mondex was created and launched. Most of the Mondex design work was done before the first GSM service launched in the UK and Mondex was fully launched before the Netscape[3] IPO. The low cost and near ubiquity of mobile communications has changed the scene.

It is also worth noting that Mondex compares favourably with technologies like Bitcoin in that it doesn’t require a crime against the planet of the power consumption of a major economy to keep the system going.

[1] Named after Gordon Moore. It is the observation and prediction that the number of transistors that can be designed into a chip doubles every 2 years.

[2] This may seem a long time to modern audiences but was a realistic estimate of its day.

[3] For the younger reader, Netscape was a popular browser before Google was formed.