Mobile payments are still far less common than credit cards or cash for transactions in stores, but a new feature found on over 200 million Android phones could be a game changer.
Near Field Communications or NFC, which is used by many mobile payment apps (including Google Wallet), allows people to pay simply by tapping or waving their phone in front of a compatible payment terminal.
Before “Host card emulation,” or HCE, mobile payments that used NFC technology required access to a part of smartphones called “the secure element,” in order to store and use payment card data. But access to the secure element is controlled by the carriers. HCE is a software-based operation that allows wallet providers to bypass mobile carriers and deal directly with smartphone owners.
Here are some of the key points from our in-depth report on HCE and how it will shake up the mobile payments industry:
- HCE means a new wave of competition for Android-based mobile wallets (it’s also in use on BlackBerry devices).
- HCE also breathes new life into NFC as a mobile payments technology. By eliminating the need for mobile wallet providers to partner with carriers, it lowers the barrier to entry for NFC mobile wallets.
- There are now nearly 250 million Android smartphones in use globally that are HCE-enabled. Basically that means all Android phones with version 4.4 or above installed. Besides Google Wallet, a number of other banks and mobile wallet providers are already beginning to deploy HCE-enabled mobile wallets.
- While HCE does make it easier for companies to get into the mobile wallet space, it still doesn’t solve the basic problem on the consumer side. People don’t see a huge gain in convenience when they pay with their phones instead of their plastic credit or debit cards. Mobile payments are still used mainly by early adopters.
- HCE isn’t relevant for iPhone users because Apple still has not adopted an NFC chip for the iPhone.
In full, the note:
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