The Host Card Emulation in Payments: Options for Financial Institutions

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25 November 2014
Zilvinas Bareisis

Report Published by Mobey Forum

Abstract

The objective of this report published by Mobey Forum is to provide guidance to the financial institutions considering their options for implementing NFC payments. The paper highlights the implications of HCE technology, describes two main HCE solution alternatives and summarises the results of an HCE survey conducted in September 2014 by Mobey Forum.

Near Field Communication (NFC) technology has been around for quite some time now. Yet after numerous great promises, NFC payments haven’t really managed to take off in most parts of the world. Host Card Emulation (HCE) technology represents an alternative to the “traditional” NFC payments. Given the payment schemes’ (Visa, MasterCard and American Express) endorsement of the approach, HCE might become a game changer for the mobile payments ecosystem.

Celent had the privilege to support Mobey Forum and its new white paper, The Host Card Emulation in Payments: Options for Financial Institutions, and we are pleased to make the report available to our clients. The report details the results of a survey that outlines the attitudes of Mobey Forum’s international membership toward the adoption of host card emulation (HCE). The survey reveals members’ appetites for third-party support with HCE solution development and ranks their key criteria for the selection of a technology partner.

In addition to the proprietary research, the report also presents a history of HCE and explains its position as an alternative to "traditional" near field communication (NFC) payments. Two main HCE deployment options — full cloud and token-based — are discussed in conjunction with the roles and responsibilities of the key stakeholders. Security concerns are outlined in addition to information on the current thinking on how to mitigate them.

“HCE has the potential to fundamentally change the layout of the mobile payments landscape, but it comes with its own complexities,” comments Zaf Kazmi, Chair of the Mobey Forum HCE Workgroup and Head of Mobile Payments & Commerce at CaixaBank. “Some financial institutions are attracted by HCE, others will continue to place their faith in traditional secure elements (SE) and some will seek to use a mixture of the two. Understanding the market dynamics and key control points will be essential to success.”

“HCE is a credible option to implement NFC payments, particularly for Android-based mobile devices,” says Zilvinas Bareisis, Senior Analyst with Celent’s Banking Group and editor of the report. “With Apple Pay continuing to roll out as an NFC solution for iOS, financial institutions now have real alternatives to pursue contactless mobile payments across different operating systems.”

This 24-page report contains seven figures and four tables. The document concludes by mapping HCE onto the control point model established by Mobey Forum in its previous mobile wallet white paper series.

About Mobey Forum

Mobey Forum is the global industry association empowering banks and other financial institutions to lead in the future of digital financial services. Mobey Forum connects industry thought leaders to identify commercial drivers for the development of better digital mobile commerce. Mobey Forum’s members collaborate to analyse business strategies and technologies to create innovative, interoperable and competitive financial services.

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Content Type
Reports
Focus
Industry Trends