One of the few advantages possessed by a nation with an infrastructure as dilapidated as Russia's is the opportunity to leapfrog generations of technology. As it leaves the world of shuffling stamped pieces of paper around cluttered desks, this country has a unique chance to move straight into the world of electronic money.


At the root of this transition could be the smart card -- a plastic card carrying a small microprocessor. Next year a consortium called Mondex is to pilot a scheme in the English town of Swindon which could show that much of the clearing technology used by banks and credit-card companies is unnecessary.


Between 30,000 and 40,000 people are to be given Mondex smart cards, and card readers are being installed in banks, shops and pay telephones. The cards will be "charged" with the owner's cash or from his bank account and it will be possible to top them up through specially equipped telephones.


With existing card-based systems, your savings sit in a bank and the card can be used to authorize your bank to pay other people. With a Mondex card, when you make a purchase the amount is deducted directly from the money sitting on your card.


What is so revolutionary about the scheme planned for Swindon is that it requires absolutely no central clearing system. If you have a Mondex card then the transaction is directly between you and the vendor -- like handing over money from an electronic wallet. Also like a wallet, if you lose the card you lose all the money as well.


"We looked at what a clearing system does and asked: Do we really need it? In the UK we have a clearing system which has developed over 100 years and existed for solid technological reasons. In Russia where much of the work is being done from ground level why build a system which is now unnecessary?" said a spokesman for Mondex.


Some Russian banks have adopted card-based systems and some even use smart cards. However their penetration of the market is still limited. The telephone infrastructure cannot support widespread use of regular magnetic cards since every terminal requires an on-line connection with a central clearing center.


The big disadvantage of all the card systems is fraud. This is a particular concern in Russia where there are so many clever programmers with a lot of time on their hands.


Over the last two years, however, microprocessor design and encryption technology have advanced to a stage where attempted forgery or fraud of good smart cards would be very difficult and extremely expensive. Mondex says breaking into its cards will be so much of a challenge that the second generation of cards will be circulating long before fraudsters have cracked open the first one.


Here Mondex believes the situation would actually be safer for someone in Russia: "The security does not lie in the network; it lies in the programming on the chip. So if Russia was to adopt Mondex tomorrow there would be no worries about the Russian mafia bribing people in the central clearing house. They would be buying into a world-wide guarantee of security well outside their own borders," said a spokesman.


For most Russian businesses, avoiding clearing systems must sound like an impossible dream. The Central Bank clearing system is so poor that commercial banks are struggling to find alternative methods of transferring funds between themselves and to their own branches. But Russia's commercial banks are light years from agreeing on common standards for transfers. As a result, businesses cannot access their capital quickly.


There is also a certain poetry in the idea that you could arrive at the accounting department of a firm that owes you money and present them with your card. Perhaps they ought to start work on re-writing the guide book of excuses right now.





Robert Farish is the editor of Computer Business Russia. Tel: 265-42-14, Internet e-mail: farish@glas.apc.org