In an interesting turn of events, Visa and MasterCard have announced their support for
Host Card Emulation, a cloud-based mechanism for hosting NFC applications outside the Secure Element that effectively removes the need for bank reliance on telcos in implementing mobile payments.
HCE allows any NFC application on an Android device to emulate a smart card, letting users pay with their smartphones, while permitting financial institutions to host payment accounts in a secure, virtual cloud.
Both Visa and MasterCard have announced a new set of tools and support applications designed to make it easier for banks to adopt HCE as an alternative to renting space on the SIM from airtime operators.
The initial Visa payWave standard for cloud-based deployment is available now, alongside a software development kit to support clients who wish to develop their own cloud-based payment applications. Future versions of the Visa payWave standard will add support for QR codes and in-app payments, alongside a new service and platform for the issuing of digital tokens rather than the 16-digit payment account number.
MasterCard says it will publish its secure remote payment specifications during the first half of 2014. The scheme has been working with Capital One and Banco Sabadell on developing its approach via small scale pilots.
“For Capital One, the pilot was about exploring new ways to commercially deploy an NFC-based offering and securely store credentials. We’ve enjoyed a longstanding partnership with MasterCard, and we continue to work together to deliver innovative solutions for our bank customers,” says Jack Forestell, EVP, digital, Capital One.
Visa is claiming support from bank clients in Australia and North America, including ANZ, NAB, Royal Bank of Canada and US Bank.
Michael Starkey, general manager, channel development, digital and direct banking, National Australia Bank, says: “This is an exciting opportunity for NAB, and its partners, because it overcomes the limitations existing solutions that are currently in pilot, which house account information on the phone and limit NFC solutions to a small selection of Android devices as a result.”
Spain’s bankInter last week announced that it would go live with a HCE-based mobile payment service in Q2/Q3 following a year-long pilot trial using BlackBerry devices.
Says Jacobo Díaz, director of innovation, products, markets and quality of Bankinter: “Blackberry has been the company leading Host Card Emulation technology, and we are glad to recognise their major contribution to HCE-based mobile payments. Google later announcement (Nov/13) about HCE support on their new Android 4.4 Kit Kat operating system has allowed us to build a wide enough commercial proposal for our customers. We are convinced that iOS and Windows Phone will incorporate HCE very soon.”
The breakthrough poses a challenge to mobile airtime operators, who will be forced to redefine their relationships with banks and merchants and build in more added value services to attract support.