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Host Card Emulation Breaks the Mobile Payments Gridlock

We’re likely to see the NFC payments space accelerate this year thanks to host card emulation, or HCE. It’s a technology supported by Android 4.4 that gives any mobile device with NFC the ability to behave like a contactless smart card—without needing to go through the secure element. Instead, HCE stores and transmits payment info (name, card number, etc.) via the cloud. For more on HCE, this Monitise MobileFI article provides a great intro.

MasterCard and Visa have both formally announced they’ve gotten behind HCE—and it’s no surprise, as the technology could allow financial institutions to finally offer mobile payment services that go around telcos altogether. HCE also will greatly expand the options for consumers, who won’t have to use specific devices on specific networks, but will be able to use any NFC-enabled device running Android 4.4.

HCE could be the big break mobile payments have been waiting for. It seems like every day I read about another bank or payment provider announcing HCE-driven mobile wallets or payment solution. Google Wallet is transitioning over the HCE, and will no longer support physical secure elements.

The just-out Forrester Research Mobile Payments Forecast, 2013 To 2018 (US), predicts that mobile payments adoption will grow significantly over the next several years, primarily fueled by proximity payments. HCE could be the reason why.

Remember all the hullaballoo about Apple not including NFC in the iPhone 5? (I even jumped on the bandwagon and blogged about it.) The company deliberately didn’t make a play to own the secure element, which until now, was the major stumbling block.

I think that together, the several announcements we’ve seen about HCE from major players in the space form another major milestone in the evolution of mobile payments. (And I think Apple could be kicking itself yet.)

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