21 December 2017
Host Card Emulation is the real breakthrough for mobile payments
The market for mobile payments has always been fragmented, because banks, telephone manufacturers and telecom providers all offered their own solutions. Mobile payments have therefore never gained traction with the majority. The introduction of Host Card Emulation (HCE) can be seen as a real breakthrough for mobile payments, because it unifies the market and can be deployed on a global scale. Recent examples of banks introducing mobile payments are Belfius Bank in Belgium and Postbank in Germany.
In this interview, Cezara Ceobanu, product manager HCE at equensWorldline, explains this technology and its contribution to mobile payments.
Can you briefly explain what Host Card Emulation is?
“HCE is a software solution which enables the software emulation of a plastic card, such as a credit or debit card with an incorporated Near Field Communication (NFC) chip. This allows contactless communication between a mobile application and a terminal, to support contactless payments. With HCE, people can use their smartphone and payment app to make payments, without the necessity of a debit or credit card.”
What is the difference between HCE and previous technologies for mobile payments?
“Previously, banking credentials were stored in the Secure Element (SE) on the SIM card of the telephone or the payment card. Those credentials are essential to process payments. With HCE the credentials are stored securely in a payment App. That is why it is also referred to as the Software Secure Element.”
Why is the software aspect of HCE is important for banks?
“The banks, telecom providers, software companies, phone manufacturers: everyone was concerned with mobile payments, which made it quite complex. They could not come to an agreement of what the standards should be, so when HCE was introduced, it was a breakthrough. For example: now it does not matter which mobile phone brand is used to make payments; each smartphone with the Android Kitkat 4.4 operating system or newer versions supports HCE.”
The smartphone becomes a payment method with HCE, what does that mean for payment terminals?
“HCE ensures that data is transferred from mobile apps to the NFC antenna in the terminals. From a terminal standpoint, there is no difference between the two signals, because the chip of the payment card is emulated in the software application. As long as the terminal supports NFC contactless payments, it supports mobile payments with HCE.”
HCE was introduced at the end of 2014. Can you say something about the process of deploying the technology to the market?
“We were one of the first adopters and it took us less than three years to evolve to a deployed product, on a scale that was not possible before. I can honestly say this is a very important development which the market has not seen before. Three years is a short amount of time to develop such a complex system. It is software based, so the security aspect is very important. We were able to meet rules and regulations in this time span, which is fantastic. Additionally, HCE is a relatively new concept, which needs to be integrated in the core processes of the banks.”
What is the point of view from the banks when it comes to HCE?
“It differs per bank, but the adoption rate of HCE is good. In most European countries, the larger banks adopted the system, because they have the financial resources to invest in new technologies. For small or medium banks this is a bit more difficult, because they don’t possess the resources to invest and innovate. This new technology is still being developed, so they would not immediately gain volume in transactions with HCE.”
Can you say anything about the adoption rate in the near future?
“In the Netherlands, it is becoming popular quite rapidly. Other countries, such as Belgium, France and Germany have started recently with HCE and the business cases look promising. In France, the goal is to have one million users in one year for all the banks. That is really impressive.”
What is necessary to reach full adoption for mobile payments with HCE?
“Consumers need to be convinced to use it, that it is reliable and safe. Facilitating mobile payments with HCE is only the first step, banks now need to increase the quality of mobile payments experience. This needs to be done with additional services, such as loyalty programs or personal finance apps. A smartphone is an ideal tool for this, as it tracks consumers, pushes promotions, processes digital receipts and reports on spending.”
Will the mobile phone fully replace the physical card?
“The goal is to replace the card, but it is uncertain when that time has come. It is not as easy as it seems, because the card is part of the payment culture.”
More information on Mobile Payment Services and Host Card Emulation can be found on this website of equensWorldline.