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HCE and Tokenization in 2015

The movie Back to the Future II, shot in 1989, projected the year 2015 as an era of flying cars, hoverboards and food hydrators. Some in the payments industry have predicted NFC to be the next big thing for several years. Were these predictions as inaccurate as the Hollywood ones? While Back to the Future seems to have been out by many years, it does look as though we can expect a lot of exciting developments around payments in 2015. Last year, host card emulation (HCE) came to the fore and tokenization promises to be the next big innovation. These are the two areas where I think we will see a lot progression in 2015, the year when we can finally say that NFC has arrived in a big way.

Tokenization

In 2015, tokenization will take the headlines. This is being driven by the recent developments in HCE and Apple’s entry into mobile payments with Apple Pay. Far from being confined to Apple Pay, tokenization is good mobile payment security practice and has been part of our work for some time.

Apple Pay

Banks will make decisions on how to obtain token service provision. For HCE implementations, this could be in-house, from a service provider or from the payment schemes. From an Apple Pay perspective, Apple endorsed the use of tokenization but restricted issuers to the services provided by the schemes. This will change in 2015. Banks will demand tokenization alternatives in the Apple Pay ecosystem and I think that Apple will soften its stance.

Token Service Provider

Additionally, we will see the schemes further encroaching on the role of the service providers as they broaden their own serviced solutions, creating an even more competitive marketplace. The banks will therefore be able to consolidate their Apple and HCE offerings around one tokenization solution, whether provided by the schemes, processors or based on in-house functionality. This will give further endorsement to the investments already made in HCE.

Far from derailing these strategies, we will look back at the end of 2015 and note that Apple helped to drive the market forward and endorsed good practice in mobile payments security. This time next year, we will be able to count the multiple large scale roll outs of HCE solutions in a production environment, making mobile payments available to millions of consumers.

 

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