Google’s release of Android KitKat 4.4 was a highly significant development in the mobile payments market because it enables NFC-based transactions through host card emulation. In order to understand this further, it is important to understand standard card emulation before discussing host card emulation.
What is card emulation?
Card emulation allows a mobile device to mimic a payment card, enabling users to make card transactions using a mobile device. In essence, the device becomes a contactless card that can be used to make purchases, display tickets, vouchers and present identification. It works by transmitting the data received from the terminal, the point of sale for example, between the near field communication (NFC) controller to the physical secure element which is either embedded in the phone or contained within the SIM card/UICC. There are a number of downsides to using a physical secure element such as the complex business models required to gain access, the capacity of the secure element and the processing speed.
What is host card emulation?
Host card emulation enables the secure element to be placed in a remote and hosted cloud environment, rather than inside the mobile device. Application issuers can therefore take control of their deployments by in-sourcing a Secure Element in the Cloud platform, easing the launch and use of NFC based mobile payment services. This model has a number of benefits, including increased flexibility, greater storage and processing power and no need for certification of the SIM as it does not house the payment application. With pure cloud solutions, the device does not require a physical secure element as the transaction is processed remotely. It is also possible to implement a hybrid solution where a physical secure element is used in collaboration with a cloud platform, offering advanced security.