Visa and MasterCard Green-Light HCE, Giving Banks and Merchants New NFC Options (Feb. 19, 2014)
Visa and MasterCard today announced plans to support Host Card Emulation (HCE), which enables storage of card credentials in the cloud, rather than using the secure element embedded in handsets, a move observers say could reignite prospects for NFC. HCE leverages a method of card emulation Google introduced last fall with Android 4.4, so any Android application can emulate a card and talk directly to the NFC reader, bypassing the need for third parties, including banks and merchants to rely on wireless networks to securely store card credentials.
Until now, mobile carriers typically controlled access to the secure element, forcing third parties to pay a fee for that service and restricting the apps available to users. Google Wallet’s rollout was hamstrung by lack of support from Verizon, AT&T and T-Mobile, which are backing their own NFC-based mobile payment venture, Isis.
But HCE now has two big payment networks’ stamp of approval for using the process to enable NFC payments. Visa today unveiled an updated standard embracing HCE that will enable banks and merchants to add NFC functionality to their apps, with plans to release a software development kit for third parties to develop their own cloud-based payment apps. MasterCard said during the first half of this year it will publish its own specifications detailing methods for mobile apps to support NFC payments. Other networks have yet to announce any HCE moves. And a major unanswered question is whether Apple Inc., which has held off on supporting NFC, will back HCE.
In the U.S., HCE’s expansion could possibly alter the MNOs’ strategies behind Isis, as it renders the MNOs unnecessary for NFC, and introduces new options for MCX, the merchants’ mobile-payments initiative, Menekse Gencer, a former PayPal executive and consultant with San Francisco-based Mobile Payments Consulting Service, tells Paybefore. “Whether HCE convinces merchants to accept this new implementation of open-rail NFC or whether MCX continues to roll out its own proprietary rail remains to be seen,” she adds.
HCE likely will have a significant effect in Europe, too, Zilvinas Bareisis, a senior analyst with Celent, believes. “European banks have been issuing contactless cards, and HCE will make it easier for them to make use of that infrastructure for mobile payments as well.”