Was the HCE endorsement by Visa & MasterCard the 'game changer' for mobile payments? Probably.
Sometimes nothing happens in the industry - or rather 'things' do happen but it's all a little random and haphazard. Occasionally, just occasionally, certain stories and announcements happen so much in sync that you think there is some kind of giant masterplan. This last week was such an occasion. And it all had to do with Host Card Emulation.
In the space of two days we had stories left and right that covered HCE announcements. First were the news (separate from each other) that both MasterCard and Visa are to adopt HCE for NFC-based payments. While this definitely falls into the 'cat amongst the pigeons' category, it is undoubtably a huge breakthrough for NFC mobile payments. Judging by the traffic/comments on the various LinkedIn payment groups regarding this subject matter, I am not the only only one who sees it in this way. An endorsement certainly but this also now leads the way to cloud-based tokenisation allowing more secure mobile payments.
Apple has also been mentioned a couple of times in context to this release. Some industry observers have reported that "Apple has been quietly asking for Visa and MasterCard to endorse a Secure Element replacement and to present a framework for tokenization of the payment card held in the cloud." Well, it's here now. So what does that mean for any future Apple announcements? Perhaps the mobile iWallet is nearer than we think…
But enough of Apple - who else made the news this week concerning HCE? Well, following on the heels of the MasterCard and Visa announcement came ABnote, a card manufacturer and provider of Near Field Communication (NFC) and Trusted Service Manager (TSM) based solutions, will integrate its existing TSM service with SimplyTapp’s Host Card Emulation (HCE) platform, creating what they describe as "the payment industry’s broadest offering of secure, cloud-based NFC solutions." The combined service will be hosted securely within ABnote’s certified global network of data centres, and will support both standard Secure Element (SE) cloud implementations and token based solutions.
Proxama also announced a partnership with security provider Cryptomathic to launch a mobile contactless payment solution, called EMV Tokenised Transaction (EMV-TT) and leverages Host Card Emulation. As opposed to ABnotes solution, with EMV-TT, card issuers can launch a mobile contactless payment service without having to rely on a secure element provider or Trusted Service Manager (TSM). The companies point out that this means the cutting down of complexity and cost, while providing greater flexibility for value added services. As a standalone solution, EMV-TT leverages existing card issuance and authorisation systems and Proxama’s TapPoint® service platform and mobile wallet SDKs. Proxama also point out that EMV-TT has been designed to enable a simple migration from the HCE to the standard Secure Element based approach or vice-versa should the bank or network operator wish to change its deployment or partner strategy in the future.
With so much industry chatter concerning HCE, it also seems like a no-brainer that we will hear more on this subject during MWC in Barcelona this week. Having said that, I don't suppose everyone will be looking to 'big up' HCE. I spoke with Gemalto last year at Cartes and asked about HCE and the impact that it would have on their business. They were fairly laid back and spoke about how they "supported the use of other payment solutions that did not necessarily employ a secure element in the SIM card." Fair enough, but on the news that both MasterCard and Visa were endorsing HCE, Gemalto's share price dropped the most it had in more than three years.
Analysts from various banks were following the same line as Ali Farid Khwaja, an analyst at Berenberg Bank, who said, "The outlook for Gemalto’s Mobile Communication segment, which accounts for around 50 percent of its earnings, is the main reason for our sell recommendation. HCE is simpler, cheaper and the fact that Visa and Mastercard have approved it also suggests that it is secure to use for payment transactions.” I am sure that the stock price will rebound, but companies such as Gemalto and their like had better have a more convincing argument when speaking to the 3,500 media and analysts at this week's show. HCE is here and unlikely to disappear, and for my money, represents the most disruptive security payment solution out there today. Ignore it at your peril.
So yes, were are at the 'big bun fight in Barcelona', as we have taken to calling it, this week. If you would like to speak to us or have us drop round and show us your demos or even want to chat about future CI inclusions or coverage, please drop me a line either directly or through the contact form on the CI site - we are picking up as things come in. But more than that - if you see us - say 'hello', it really does make our day!
Hasta la próxima semana.
Steve Atkins
Contactless Intelligence
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