A new feature found on over 200 million Android phones could be a game changer for mobile payments.
It’s called “Host card Emulation,” or HCE, and though the details are complex, it’s important to understand because it is leading to a comeback for certain kinds of mobile payment apps.
Here are some of the key questions we answer in our in-depth report and explainer on HCE.
What is Host Card Emulation (HCE)? HCE is a software-based operation that allows mobile payment apps to power transactions without access to a part of smartphones called “the secure element,” where users’ credit or debit card data are often stored. Access to the secure element is controlled by the carriers. HCE allows mobile payment apps to bypass mobile carriers and deal directly with smartphone owners. See our graphic, above.
Why is HCE technology important? It breathes new life into near field communication (NFC) mobile payments. These are payments made by holding a phone near an NFC-compatible payment terminal. Prior to HCE, mobile wallet providers needed to store payment credentials in a highly restricted part of the smartphone controlled by mobile carriers, the secure element. HCE gets around that, thus lowering the barrier to entry for NFC mobile wallets.
How many phones use HCE? With HCE’s adoption in Android 4.4 (KitKat) there are now nearly 250 million smartphones in use that are HCE-enabled. Besides Google Wallet, a number of other banks and mobile wallet providers are already beginning to deploy HCE-enabled NFC wallets. Apple doesn’t have an NFC chip on its phones, so HCE is not a factor on the iPhone side of things. This gives Android an edge when it comes to NFC-based payments.
Does that mean mobile payments will take off? Not necessarily. While HCE makes it much easier to create and deploy a mobile wallet that can be used by a lot of smartphone users, it still doesn’t solve the basic problem on the consumer side — people don’t see a good reason to pay with their phones rather than with payment cards.
In full, the report:
- Discusses how HCE will shake up the mobile payments industry.
- Includes graphics that explain what HCE is and how it works. We take readers through a high-level explanation of HCE so that they understand why the technology is important.
- Provides 5-year forecasts of the installed base of HCE-enabled Android phones, NFC-compatible terminals and mobile payments volume from 2013-2018.
- Analyses whether HCE can really catalyze an explosion in mobile payments adoption or if it’s just hype.
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