VISA & Mastercard; Mobile Payments Will Move On….

The message for mobile operators is clear and direct, your time is up. The world of mobile payments will move on without you. Visa and MasterCard have announced 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.

NFC & HCE Development

Near Field Communication, also known as NFC, is a set of standards for smartphones, credit cards, and similar devices, to communicate with similar devices by bringing them close to each other. Starting in 2004, several phone manufacturers joined forces to define the standard and help. With backing from the likes of VISA, Mastercard, Samsung, Nokia & Blackberry, one could expect NFC to be rolled out widely across the country. In fact, signs point to an increase in the potential, with credit card terminals supporting Visa and Mastercard appearing at increasing frequency in stores around the country. But to date, the standard has been to use SIM based secure elements for authentication and security. However, mobile operators across the globe have failed to take advantage of the HUGE window of time the industry gave them. Hence the invention of HCE or Host Card Emulation.

HCE allows any NFC application on an Android device to emulate a smart card, allowing mobile payments, while permitting financial institutions to host payment accounts in a secure, virtual cloud.  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. This leap forward could spell the end for the Mobile Operator lead mobile payments consortium ISIS.

New life for Google's Mobile Payments

Last year Google took the wraps off its much-anticipated Nexus 5 NFC smartphone. As the first Android 4.4 device, it will also be the first to offer support for Host Card Emulation. Which will power future generations of Google Wallet, a service hampered by a lack of collaboration from mobile operator.
During the HCE announcements,both Visa and MasterCard have confirmed 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. Visa is claiming support from bank clients in Australia and North America, including ANZ, NAB, Royal Bank of Canada and US Bank. With live deployments expected in the coming months.

HCE isn't a new technology, in fact companies like SimplyTapp have been pioneering the technology ahead of industry standards. I'm certain their investors will be celebrating, as announcements from industry heavy weights like VISA, validate their investment in developing the technology.
There is a clear message in here to organisations that take their time bring to market innovation and digital savvy services. Innovate or get out of the way, because the pace of global innovation won't wait for you. Mobile payments has been on the brink of mass adoption for several years now, and the HCE standard appears to clear all remaining setbacks. Off the back of this, I'd expect dozens of new mobile payments startups that leverage the HCE standard to drive innovation in the industry.
This announcement comes at a time where mobile operators also got hit with the news of Facebook's acquisition of Whatsapp, effectively handing control of global messaging traffic that outpaces SMS nearly 10 to 1.

© Scott Bales 2014. All Rights Reserved.