Visa And MasterCard Strike A Huge Blow To Carrier-Backed Mobile Wallets

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MOBILE CARRIERS LOSE CONTROL OF THE MOBILE WALLET ECOSYSTEM. One hurdle for NFC-based mobile wallets from a developer’s perspective is that in order to store a payment card on a mobile phone the app needs access to the phone’s “secure element,” a partitioned and highly secure piece of the phone that’s inaccessible to most applications. Access to the secure element is usually controlled by mobile operators.

Mobile operators have many reasons for limiting access to the secure element besides needing to secure customer payment information. One reason is that some mobile operators are launching their own mobile wallets and want to limit competition. For example, Verizon, which is invested in the ISIS mobile wallet, doesn’t allow Google Wallet on its phones.

Google’s latest version of Android supports a feature called “host card emulation” (HCE) that bypasses the need for an app to access a phone’s secure element in order to make an NFC-based payment. HCE accomplishes this by storing payment information in the cloud rather than on the secure element.

Yesterday, Visa and MasterCard both announced their support for HCE. What this means is that any app that supports HCE could potentially support card payments transacted using mobile devices. In this case, mobile carriers will not be able to so easily box out competitors. On the other hand, NFC-based transactions haven’t taken off in the U.S. and unless they improve the consumer’s point-of-sale payment experience, there is no reason to think consumers will jump on board. (Visa and MasterCard)

AMAZON EXPANDS ROLLOUT OF AMAZON COINS. Amazon Coins can be used to purchase apps and other digital content from Amazon’s app store. It’s part loyalty program, part gamification strategy — you can win coins for downloading content, for example — and part a means of bypassing having to make frequent low value purchases with a credit card. Now, Amazon is expanding the program. The company announced yesterday that Amazon coins can be used on Android devices in the U.S., U.K., and Germany. Previously, Amazon Coins could only be used on Kindle Fire tablets. (Amazon)

VENMO ADDS LOCATION-BASED PAYMENTS. PayPal-owned Venmo added a new feature to its iOS 7 peer-to-peer payments app, which allows users to see and make payments to people who are near to them. The feature uses the Bluetooth LE communication frequency, which we covered in a recent report on beacon technology. This is a big step for Venmo because previously payments required users to search for the recipient’s name — now Venmo users simply have to be within a small distance of payment prospects. Meaning, the app could potentially be used for consumer-to-business transactions. (Business Insider)

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THE BITCOIN WINKDEX IS HERE: Yesterday, the Winklevoss twins — famous for their lawsuit against Mark Zuckerberg — made a regulatory filing with the SEC for their Bitcoin Index, called Winkdex. The brothers are currently moving forward with launching a Bitcoin exchange-traded fund as well. (New York Times)

FORTUMO SIGNS CARRIER BILLING CONTRACT IN THE PHILIPPINES. Carrier billing platform provider Fortumo announced a new partnership with Smart Communications. With 57 million subscribers, Smart Communications is the largest mobile carrier in the Philippines. Carrier billing allows mobile users to purchase digital goods like games by adding the cost of the purchase directly to their mobile bill. The Philippines is a prime market for direct carrier billing because of a lack of alternative payment methods and high smartphone penetration. (Fortumo)

INGENICO REPORTS EARNINGS. The French payments technology and hardware provider Ingenico reported “very strong” 14% revenue growth in 2013, rising to €1.371 billion ($1.88 billion). One highlight was a 42% increase in revenue in the company’s North America business segment. Ingenico attributed the growth to increased technology and hardware sales driven by the upcoming 2015 EMV or “chip-and-PIN” deadline set by the major credit card networks. The chip-and-PIN deadline requires merchants to update their points-of-sale to a higher standard of security meant to reduce fraud. If merchants do not do this, they will have an increased fraud liability burden. (Ingenico)

STARTUP RELEASES MOBILE PAYMENT SOLUTION THAT IS ACCEPTED EVERYWHERE. Boston-based Loop has a new way to pay with your smartphone. The company’s hardware solutions — a smartphone case and something called a “Fob”, which looks similar to Square’s card reader — effectively trick card readers into thinking a payment card has been swiped. Both technologies accomplish this by transmitting a magnetic signal to credit card readers in close proximity. The result is a mobile payment solution that can be accepted at any point-of-sale that can swipe payment cards. It gets around the problem many mobile wallets face — needing merchants to adopt hardware that can accept smartphone point-of-sale payments. The problem with Loop’s solution is that merchants probably aren’t going to want people using a strange device near their card readers in the wake of the Target data breach. Also, the Fob costs $US39, a price consumers may not want to pay simply to be able to use their smartphone as a universal payment mechanism. (Loop)

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Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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