With the creation of new payment systems, money and information stored on either Smart Cards or PCs and then exchanged over networks, presents a new security threat; interception by third parties with the intent to steal money or to invade an individualís privacy. Mondex International has developed a sophisticated and comprehensive plan (as described previously) to combat the challenge of providing security and protecting privacy. However, security and privacy solutions will have to be continually updated and refreshed. Mondex International must be alert not only to its value transfer protocol and cryptography systems, but also to provide sufficient quality and reliability in the chip embedded in the card by thoroughly controlling the manufacturing and distribution processes. The requirement for manufacturing and supply chain control requires a high investment for chip makers such as Hitachi, and the high standards results in higher costs for the Mondex system. If the current protective measures are not effective, more certifications will be required to make transactions in safety.

The most technically innovative feature of Mondex with regards to security is its IC card-based electronic payment system. Different from the network-based electronic payment systems such as e-cash and CyberCoin, Mondex is based on a hardware-based transaction which makes counterfeit and fraud difficult. However, it is obvious that Mondex cannot neglect the Internet in the architecture of its payment system. To respond to this challenge, Mondex is developing a new card reader devise which can be attached to PC and makes Mondex usable via the Internet.

Perhaps, there is still a security concern because Mondex, is originally hardware-based and its security system may be insufficient to address Internet activity. To illustrate, e-cash, is designed to be a network-based Open-type electronic payment system. It has an extremely complex cryptography system that has been developed to alleviate having to trade-off security and anonymity. Thus, if we try to implement Mondex into the Internet, will we need further investment to develop another security system?

According to Mondex International, when we use Mondex over the Internet, information exchanged on the network is only transaction information such as process identification and deal order, the password used for identification does not ride on the network. In addition, the transaction information is encrypted within chip. This is much safer than credit card base payment on the Internet in which key information like credit card number is typed in a plain message format. Additionally, because the upper limit of the amount in one Mondex card is restricted, Mondex insists that costs for counterfeit and interception will surpass money value on one Mondex card.

Technically, Mondex seems to have promising future on the Internet. However, there are threats other than the reliability of its own system. These two concerns have to do with the proprietary nature of Mondex.

• If a standard of identification system of electronic commerce is established which is different from that of Mondexæ for example SET (Secure Electronic Transaction) methodæ is established, it will be a threat to Mondex securing a leadership position on the Internet. As long as Mondex keeps its identification system confidential, there is a diminishing possibility that Mondex will become the standard.
• Currently, most common firewall systems are based on a proxy-server which does not allow Mondex-based transaction from the outside to access inside the wall. This causes a problem when corporate customers want to buy something on the Internet with Mondex from inside of their company.