Digital Transactions Authoritative, insightful and timely information for payments professionals
All of a sudden, near-field communication is back on payments executives’ to-do lists. Executives are said to be examining the technology more seriously than ever, and the major payment networks are officially endorsing a version of it with detailed specifications. This after long years during which NFC was almost given up for dead.
The story is an interesting one, and points up more than ever the key role determination plays in payments innovation.
A promising technology that, in the blink of an eye, links mobile devices with merchants’ payment terminals, NFC fell out of favor after years of squabbling between banks and mobile carriers over transaction revenues and that inevitable bête noire, “ownership of the customer.” Even tech giant Google Inc. couldn’t make a go of it with its original NFC wallet, which it has had to re-tool extensively since the product debuted three years ago.
So what changed? Google last fall launched a new version of its Android mobile operating system that, among other things, incorporated support for a method of doing NFC that allows for command and control in the cloud and bypasses the dreaded secure element in the mobile device. The secure element is a chip in the phone that locks down card credentials and other sensitive data. Often, it’s the SIM card, which is controlled by mobile carriers.
This new Android version 4.4, known as KitKat, brightened the picture for NFC suddenly and radically. Now card issuers and merchants can offer payments and offers programs directly to account holders and customers without paying tribute to mobile network operators—and without ceding any part of that precious “ownership” of the customer.
Organizations that had been lukewarm at best about NFC’s prospects have rushed to get behind this new version, which relies on a protocol called host card emulation, or HCE, just to pile on yet another abbreviation. Visa Inc. released specs in February, and MasterCard Inc. expects to have its out by the end of next month. Both networks are setting out logic for tokenization to mask HCE-based transactions, since cloud configurations are generally considered less secure than hardware based in the mobile device.
MasterCard says bankers in particular are lining up for HCE. “What we’re seeing is quite a lot of enthusiasm for enabling transactions from mobile devices,” James Anderson, senior vice president for mobile, told our sister publication, Digital Transactions News. “Now they see a way forward.”
So, where there’s a will, there’s a way. The payment services we profile in this issue exemplify that spirit. We invite you to take a look for yourself in our sixth “Annual Field Guide to Alternative Payments”.
John Stewart, Editor
john@digitaltransactions.net
