March 12, 1997 6:00 PM ET

AT&T;, Mondex wade into 'micropayment' battle
By Sean Silverthorne

  LOS ANGELES -- AT&T; Corp. and Mondex International Ltd. announced here at Internet World today a partnership to create a electronic commerce "micropayment" system that would make it cost-effective for merchants to sell items for dollars or even pennies.

The effort, which will undergo testing this year with possible deployment in 1999, takes its place against a half-dozen or so other micropayment efforts, but AT&T;'s brand recognition and reach with consumers could give this effort an edge, analysts said.

To use the system, consumers would use Mondex' smart cards and a special reader to make payments over the Web. That's both a strength and weakness of the system. The "chip-to-chip" transaction would cost virtually nothing to process, a big plus for merchants, but users would be required to purchase readers or wait for computer makers to build them into their machines. And users would have to be willing to add a new piece of plastic to their wallet.

The cost of processing a credit card transaction over the Internet makes many transactions under $10 commercially unviable. Yet many of the things that could be purchased over the Net-newspaper articles, images, games-could cost much less than that.

"You can shop [on the Net], but it's tough to buy," said Keith Kendrick, a senior vice president at AT&T; Universal Card Services.

Customers already use Mondex cards to make payments in stores and in vending machines affiliated with the company. Users download electronic cash from their bank accounts to a chip on the card, which then keeps track of the balance.

Other cash card competitors include DigiCash Inc., Cyber Coin and First Virtual Corp.

On Tuesday, another micropayment plan was put forward by Digital Equipment Corp., of Maynard, Mass. Its Millicent program would not use cards, instead moderating transactions between computer users and allowing transactions involving fractions of a cent. But the project is still under development and a deployment date has not been announced.

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