By endorsing a new form of mobile payments, MasterCard and Visa have handed payments power to the banks
MasterCard and Visa have announced that they plan to endorse Host-Card Emulation, which essentially removes the need for the old system of secure element and carrier approval of mobile tap-and-pay purchases, thus putting the power of payments into the hands of banks instead.
Android’s KitKat operating system already has this in place, making use of Tap & Pay to help apps support payments without needing to go through the secure element hardware stored on the phone. It’s one way that Google could easily make it’s Google Wallet service ubiquitous across so many handsets.
HCE is nothing new, as Blackberry phones have been equipped with the technology for a while now, but thanks to Android’s adoption of the service it means that there’s a far bigger base of users who can take advantage of such a situation.
While NFC has currently been dominated by mobile carriers who approved access to the secure element in payments, thus locking out certain apps from making payments in stores as the transaction would occur through the phone’s secure element, now that’s no longer the case.
The only stumbling block that HCE presented came from card issuers denying the ability to store card information online in a secure ‘cloud’ for apps to access securely, thus bypassing the SE technology in phones. However, it looks as if that last wall of resistance has been blown down as both MasterCard and Visa have said they are certifying this method of payment.
So why have the banks now got the payments power?
Well, it means that banks can now easily create their own apps – or integrate into others – allowing for payments to be made without the restrictions imposed by mobile carriers. It’s also worth noting that issuers such as Visa and MasterCard want the banks on side in this new market as they’ve worked together for years in supplying customers with bank cards. It also helps that customers tend to trust their banks more than third-party apps, and it should also reduce the amount of hassle needed when setting up a payments account for the first time – after all, you bank should know who you are.
This isn’t the be all, end all, though. MasterCard and Visa will both have their own rules for authentication when making an NFC purchase through HCE, meaning that payment-enabled apps will have to comply with these rules to be able to access the information.
Still, this has really levelled the playingfield for many payment startups, and it’s opened up a world of opportunity for banks. Capital One has already said they’re exploring the possibilities of HCE in its new payments app. And HCE creators, SimplyTapp, are working with helping smaller companies put it into their payment apps too.
If anything, this could well rescue NFC payments from a seemingly uncertain future.