Europe Bucks Conventions

Want to get an advanced look at tomorrow's electric money? Technical, financial, and political forces are now coalescing to make Europe the place to turn to see the future of electronic commerce.

Europe is in the unique situation of inventing a new monetary system. Before the turn of the millennium, the 20 or so currencies used by individual European states will be replaced by one currency, called the Euro. This should do away with exchange-rate speculation on international money markets , help money flow more smoothly across borders, boost the pan-European marketplace, and bootstrap a state-of-the-art electronic commerce environment.

This sweeping change i s happening in an already progressive monetary environment. Many Europeans now find clogging up the payment channels with paper checks--sent from payer to payee to the bank and back--about as quaint as the 12-hour clock. If they want to pay a bill, they don't send a check. They send a payment request and the relevant account numbers to the bank, which transfers money from the customer's account to the merchant's. About 15 years ago, banks introduced a phone- or modem-based version of this service.

These systems continue to evolve. Much of Europe's research on electric money focuses on Smart Cards. Many countries are running field tests with cards that use automated teller machines (ATMs) or pay phones. You generally use these cards off-line (payments don't require you to connect to a bank or card processor) for low-volume transactions. For larger, point-of-sale transactions, regular ATM and credit cards remain ubiquitous. A calculator-size electronic wallet, with a slot for the card, allows transaction s practically anywhere.

In Austria, 2.5 million consumers already carry a card that has the standard ATM magnetic stripe as well as the embedded Smart-Card chip. In the British town of Swindon, some parents even dole out their children's allowance with the Mondex Smart Card. British Telecom and two major British banks, National Westminster and Midland, jointly developed Mondex. The card can store the local equivalent of about $250. Hitachi has developed a prototype modem that would allow you to use Mondex on the Internet.

Conditional Access for Europe (CAFE), a project in the European Community's ESPRIT research program, is developing a secure electronic payment system based on Smart Cards and several types of electronic wallets with infrared transceivers. You can run the protocols using standard PDAs. Thirteen partners from several countries, including the Netherlands, Denmark, Britain, France, and Germany, are involved. CAFE is now in field trial.

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CAFE, No Sidewalk

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Europe's Conditional Access for Europe (CAFE) project uses several types of electronic wallets with infrared transceivers to secure electric-money transactions.