In France, No Amour for E-Cash


By Rachel Tiplady It seemed like a no-brainer at the time. When French banks devised a way to reduce labor-intensive processing costs on checks and debit cards in the late 1990s, they thought they had a winner. The idea was a microchip-embedded smart card called Moneo.

Consumers could load up to $120 from their bank accounts onto the card and use it for piddling purchases -- the daily baguette, a pack of cigarettes -- without scrambling for loose change. Shopowners stood to benefit by cutting down on bad checks and the risk of being robbed with a register full of cash. Both sides would pay a small fee, one for the card, the other for the card machine, but since it benefited everyone, no one would mind.

CONSUMER BACKLASH. Not exactly. Since 1999, when Moneo was first introduced in Tours, only 1 million consumers in a country of 62 million have used the card to spend $95 million a year. Many think the banks grossly overestimated the demand for something that bridges the gap between cash and credit/debit cards, known as carte bleue or CB. Moneo's flop represents the latest setback for efforts to introduce electronic cash, or e-cash, to the buying public in Europe.

Problem is, the banks decided to add Moneo to every CB card up for renewal without first asking customers. Today, 30 million CB cards have a dormant Moneo chip embedded in them, which consumers can choose to activate in a payment machine. Thinking that customers would welcome the service, the banks charged $6 to $14 a year for Moneo -- on top of variable fees for the original CB card -- sometimes regardless of whether it was used. Consumers could choose to pay from their normal account or from Moneo for each transaction.

Straightaway, consumer groups were swamped with complaints. Some even reported that their Moneo chip was inadvertently activated when they tried to pay from their bank account. "When CB cards were introduced in the 1980s, they made sense. We could buy expensive items without carrying cash around or defer payment," says Nicole Perez, president of financial affairs for consumer group UFC-Que Choisir. "Moneo only offers to replace small change, so it shouldn't cost us anything."

NOT GIVING UP. Things aren't much better on the business side. A handful of major chains, including Casino cafeterias and the Pomme de Pain bakeries, accept Moneo. But smaller merchants, who have to fork out a monthly rent for the payment machine and a 0.4% to 0.9% cut on each transaction, complain that it's too expensive.

"There's no way I'm going to pay for something that helps the banks more than me or my customers. As it is, I only make 5% in margins, so I'm not going to happily hand over yet another slice," points out Réné Chiron, a tobacconist in Paris who pays a similar amount for his CB machine.

However, after investing some $540 million in Moneo, the banks, grouped under the Billettique Monétique Services or BMS consortium, aren't giving up on the project just yet. BMS is negotiating more distribution points. The Paris city council announced in May that it will install more than 7,000 Moneo-friendly parking meters by September, 2005, while the national railway, SNCF, another BMS member, has pledged to add Moneo to every train station within a year.

"Adding services like these is a great idea," says Benjamin Ensor, senior analyst at British research firm Forrester. "People buy tickets every day, so it could become second nature to swipe your Moneo card."

COST ISSUE. Yet the system apparently still has lots of kinks. The council of Paris suburb Boulogne-Billancourt was inundated with customer complaints when it converted all of its parking meters to a Moneo-exclusive system in 2002. Now the council is reverting back to meters that accept coins.

Faced with boycotts from consumer groups, the banks are beginning to deploy deactivation machines in their outlets, which permanently remove Moneo from their CB cards. "But more important, if Moneo is to succeed like the Belgian smart card, Proton, it needs to keep costs down," warns Ensor.

A handful of banks offer the service free to consumers and cheaper package deals for corporate clients. BMS director Pierre Fersztand hopes it will be enough to tip the balance.

PARIS BLOCK. He says the card is already more popular in rural areas where banks are harder to come by and customers can add to their account using the local tobacconist's card machine. And although Paris shopowners have largely spurned the service, Moneo's introduction to the capital's parking meters could familiarize consumers with it and result in increasing pressure on shops to get with the program.

With all the improvements now under way, Fersztand reckons France could be home to 10 million Moneo users by 2006. But the path from here to there hardly looks smooth. Tiplady is a reporter in BusinessWeek's Paris bureau


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