News & Views - Savantor

Host Card Emulation – the right direction?

Sunday, 09 February 2014
Visa and MasterCard are both pushing new initiatives for mobile payments based around Host Card Emulation (HCE), whereby smart card details are essentially stored in a secure cloud application rather than on the telco-controlled smartphone SIM card. This approach has obvious benefits to the card schemes’ clients as it means that mobile payments can be effected without the need to have specific arrangements in place between the bank and multiple mobile network operators (the owners of the SIM cards) as well as making use of their existing card processing platforms and services. It should be noted that it is also of benefit to Visa and MasterCard as payment traffic will continue to run through their card payment platforms. So, HCE is a great idea to open up mobile payments whilst limiting costs and red-tape. But is mimicking a physical card in the cloud really the next step forward for payments? Putting a focus on attempting to integrate existing technologies into new and emerging environments doesn’t seem the most prudent direction that an industry can take. In payments, it was tried with ecommerce (albeit without the hindsight we have today) whereby card details were shared over the web with no assertion that the card was in-hand. This has resulted in the monster that is online card fraud which we have yet to properly address, even today. Either we didn’t see it coming or we deferred dealing with it until it became a problem, likely a bit of both. Most attempts to shore up ecommerce transactions have remained focussed on the card being the payment instrument of choice. What the world of ecommerce needed, but has never been delivered, is a strategic, secure and trusted online payment method, designed specifically to its needs. Now we have mobile payments and the solution on offer from the schemes, at least for now, is HCE. This may be a good vehicle to expand the market in the short-term but ideally it shouldn’t be left as an isolated solution like it was with online payments. There must be a long-term vision, which HCE will be a step towards. Servicing the payments market is complex, with the whims, fads, preferences and insecurities we all suffer from as consumers making it impossible to predict and no new payment method is going to achieve a critical mass in terms of consumer adoption until it is imposed on us. The fact is, however, that the existing key stakeholders involved in most payments – the card schemes –are the ones that are capable of driving the industry, and so it may be that HCE is the end-game. The question remains … rather than trying to facilitate a card payment through a mobile device, should we not be identifying and developing a technology capable of delivering to the specific needs and challenges of mobile payments?
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