Bell ID has been working with Host Card Emulation in Android and BlackBerry devices for more than a year and had been eagerly anticipating support for Host Card Emulation in Android KitKat 4.4. We were delighted to read the announcement and see the buzz spread across the industry.
What exactly is Host Card Emulation?
Host Card Emulation (HCE) is a technology built into the device operating system which allows a mobile device to emulate a payment (or other) card, enabling users to make near field communication (NFC) mobile payments and other NFC ‘transactions’. As we see it, this is a positive step forward for the industry as support for Host Card Emulation in Android 4.4 brings service delivery options to a huge segment of the smartphone market. Android dominates global smartphone shipments at 81% for the third quarter of 2013 meaning that service providers (SPs) will now be able to leverage remote cloud secure elements (SE) to offer services to an additional 81% of smartphone users.
Placing the payment credentials in a remote environment, communicating via the cloud, rather than in a Secure Element (SE) inside the mobile device, offers more control and direct access to application issuers and eases the launch and use of NFC based mobile services. With ‘pure cloud’ solutions, the device does not require a physical SE as the payment applications are provisioned into a ‘remote SE’ and accessed by the device during the transaction. An extension of this enables ‘tokenized’ transactions for use when the mobile network is unavailable and it’s also possible to implement a hybrid solution where a physical SE is used in collaboration with a cloud platform.
So what does all this mean?
The Google announcement means that pure cloud is now a viable alternative for many card emulation projects, where no physical SE is needed in the device. This means that Service Providers have more options on both the business models available to them and the partners they can work with. Some SPs will undoubtedly opt for a pure cloud solution, while some may believe that for higher value services they prefer to utilize an SE in either the ‘classic NFC’ model or cloud/SE hybrid; the beauty of HCE is the additional options it brings to the market.
Hybrid offers the numerous benefits of a cloud solution - increased flexibility, greater storage and processing power and no need for certification of the SIM as it does not house the payment application - combined with the accepted security of a physical SE. Looking to the future, the industry will also eventually progress to accept higher value contactless transactions authenticated via a PIN, which will be an ideal scenario for the use of a hybrid solution.
Additionally, what is certain is that HCE will offer a perfect solution for loyalty, couponing, access control, perhaps transit and other applications where issuers may decide that the use of a physical SE on the device adds insufficient value to justify the additional costs.
Both 'pure' and 'hybrid' cloud options are viable alternatives to the standard NFC/TSM model and we believe they will become prevalent in the coming months and years. Their initial impact of supporting the availability of 'pure' cloud in the market will be to offer choice to SPs and some encouragement to MNOs to cooperate on hybrid solutions which are less onerous to implement from the MNO’s perspective. This will speed up the development of NFC services and bring benefits to both the industry and the consumers they serve.
Where does Bell ID fit in?
Google's incorporation of HCE is wind in the sails of NFC and great news for Bell ID as we are already leveraging the platform to the benefit of our customers. We are in a strong position to offer our off the shelf solution to SPs looking to launch cloud-based mobile payments and VAS products on Android and BlackBerry.
Bell ID offers a complete range of solutions for the mobile market. We support the ‘standard’ TSM model with our technology solutions for SP and root TSM, we support cloud hybrid solutions which could be with SIM or embedded SE and we support pure cloud which will now be enabled on hundreds of millions of devices in the coming years.
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