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HCE: the decline of TSMs and the rise of NFC?

The news that VISA and MasterCard have decided to announce support of Host Card Emulation (HCE) appears to be one of those items you read sometimes where you suddenly realise that there has just been a quite dramatic shift in the industry.  For a number of years, instead of discussing the usual Payment Ecosystem: Banks, Processors, Cards and Acquirers, we've had to discuss an additional Eco-system: the one inhabited by MNOs, TSMs (both Root or SP), SIMs, and Embedded Secure Elements.  We've also had to engage in lots of serious discussions about how to solve the 'Business case issue' that arose from having this extra Eco-system around.

Well, that seems pretty much over.  VISA and MasterCard have announced their support for HCE, so Issuers need no longer be sweet to their local MNO, TSM, etc.  And Issuers no longer need to rent space on the phone's Secure Element so that they can keep their customers' credentials secure.  Issuers  can now host their customers' credentials in the cloud,  keeping them really secure as 'cloud' actually means a secure  IT server owned by the Issuer/processor.   Most of the changes needed are just the ones the Issuer needs to make in their own environment, with the payment application always kept within the control of the issuer.  There is still a need to perform a one-time provision of the applet to the phone, but this is far the complexity that TSMs were originally going to provide and can just be a function of a new cloud solution.

As for Smartphone support, Google has already come out with support of HCE in Android KitKat 4.4, and though Apple is yet to join the party, Android makes up 81% of third quarter global smartphone shipments seems to signify that the important players are onboard.

So what does all this signify?  It signifies the end to the complexity that was also associated with NFC.  It provides a solution to the issue of keeping consumer credentials secure.  And its provides a green light to EMV payments on smartphones, allowing usage of existing, proven, secure, payment  infrastructures and provides a faster way to market for a technology that consumers are getting more and more interested in.  About time.


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