10 February 2016

Sberbank preps SE and HCE mobile wallets

09 June 2014  |  7767 views  |  7 NFC 3

Russia's Sberbank is preparing to introduce both Secure Element- and Host Card Emulation-based mobile NFC payment wallets in a decision that reflects the different "risk profiles" of the two technologies.

Testing of the Secure Element-based wallet is already underway in Moscow, with the bank working with manufacturers Samsung and HTC to embed the SE within the handset, rather than the SIM. Pilots of the HCE-based system will begin soon.

Both systems use recently launched digital issuance technology from Sequent Software, a US vendor in which Sberbank's VC arm, SBT Venture Capital, led a $12 million funding round last summer.

Sberbank's MD of digital ventures, Mircea Mihaescu, tells Finextra that the bank is not testing both secure element- and HCE-based wallets in order to decide which to launch commercially. Rather, the two are likely to be offered side-by-side because they have different "risk profiles".

Although cloud-based HCE has been gathering momentum and credibility in recent months, there are still questions about its security, with SE advocates such as the SIMalliance arguing that the new technology is inherently less safe.

The Sberbank SE wallet will have a higher transaction limit, says Mihaescu, reflecting the robust nature of its security while the HCE offering will be used for lower-value transactions.

Meanwhile, the bank hopes to encourage usage of the wallets by tapping into Sequent's APIs, which can give third party apps access to customer cards for payments.

The pilots are the first major exercise for Sberbank's new digital ventures unit, which operates outside the bank and is tasked with launching controlled experiments in the real world. Mihaescu stresses that, in this context, both pilots are formalities, "stage doors," to commercial roll outs.

Comments: (7)

Alexander Peschkoff - TEDIPAY - London | 09 June, 2014, 11:36

It's not about "side-by-side". There are only two or three smartphones with embedded SE. Hence, the rest have to rely on HCE.

If eSE were available in every phone (and mobile operators did not stand in the way), it's a no-brainer for banks.

There are many strong reasons why SE beats HCE hands down. Mass transit is one of them. Wearables is another.

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A Finextra member | 09 June, 2014, 14:52

Alexander - good point.  Do you think its worth the investment for banks to toggle between technologies(HCE/SE) based on whats available on the handset?

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Alexander Peschkoff - TEDIPAY - London | 09 June, 2014, 14:58 That is exactly the problem! Almost non-existent base of phones with eSE, (still) limited availability of NFC, iron fist of mobile operators - your choices are limited. To achieve wide adoption you need ubiquity. To achieve ubiquity, you need some "common ground". That's why banks are excited about alternative form factors (such as our smartwatch with eSE and contactless interface).
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Charmaine Oak - Shift Thought - Bristol | 01 July, 2014, 06:58

Interesting, but how does the consumer choose. As a consumer, I would hate to be faced by two alternatives with different "risk profiles" - I would want someone to choose the safest and give me just that. Reminds me of the multiple mobile payment standards launched in China, before they decided to go for NFC.

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Karl Weaver - Newport Technologies - Woodinville | 02 September, 2014, 06:28

Hello Alex,

Good post and also good feedback.  Here is what I think, since I just delivered an HCE presentation in Seattle and uploaded it to You Tube: https://www.youtube.com/watch?v=hxfivClqR3k, if anyone would like the slides, let me know.  

I believe there needs to be a mobile device ecosystem specialist in the Chinese handset sector who can take the concept of a hybrid SWP NFC uSIM + HCE NFC Android OS (KitKat) Smartphone solution and drive the concept of a dual device to the OEM/ODM handset manufacturers in China and Taiwan to start working with Banks more agressively, and my previous expertise working @ Gemalto from 2008-2013 from Beijing, China performed this function with OEM Handset manufacturers.  

Banks are not equipped to run with the ball and start courting Handset OEMs, MNOs will not do this, thus, I propose to evangelize pitching a hybrid designed Smartphone, and I'm looking for serious companies to hire me as am employee to do this.  Any serious companies out there must realize what's going on again is a "Chicken and Egg" situation.  Before it was MNOs and OEM Handset vendors, and now it appears to be Banks and CHinese OEM Handset manufacturers.  I'm a master at bridging Western company mobile technologies with Greater CHinese OEM/ODM Smartphone/Tablet PC manufacturers for design-in and enablement of a new HCE NFC mobile payments ecosystem.


Karl J. Weaver

Mobile: +1-425-260-4378

Email: karljweaver@gmail.com


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Arjeh van Oijen - IBM GBS - Amsterdam | 02 September, 2014, 07:58

I fully agree with Alexander's assessment on SE and HCE in his opening comment. What suprises me though is that value of SE/HCE is only put in context of NFC (payments). There is a huge economic value to be gained from the use of SE/HCE for other security related purposes like authentication, digital signatures, KYC and secure embedded transactions in mobile Apps as well as the internet. The value it can deliver ranges from new revenue streams, operational efficiencies, fraud reduction amongst others. In addition the convenience for the end user improves strongly which stimulates the acceptance and usage. I think the economic value is that big that more involvement from governments is involved to open up the technology for mass usage. A first good step is regulation that eliminates the obstacles with respect to the access to the SE (which was addressed by Alexander with his comment ´... if mobile operators did not stand in the way´).

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Alexander Peschkoff - TEDIPAY - London | 02 September, 2014, 10:31

Apple will lead the way very soon: iPhone 6 will have NFC and eSE. Though I am not sure that would solve the other problem: it's one thing to get three card networks to collaborate, it's a TOTALLY different matter to (a) sign up the banks and (b) ensure consistent user onboarding experience - each bank has its own KYC and TSM procedures.

As for the card networks: if they treat iPhone transactions as "cardholder present"/"PIN verified", other OEMs (Samsung, Xiaomi, HTC) will - rightly - ask for that too.

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