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Host Card Emulation: A solution for the 90 percent

I was surprised to read the other day that despite all the hype, still only about 1 percent of commerce transactions happen in mobile devices according to eMarketer. Even total e-commerce, around from the early days of the Internet, still represents barely 6 percent of total retail commerce.

These numbers are consistent with the numbers published by the National Retail Federation from the U.S. census bureau. eMarketer even projects that by 2018 e-commerce (of which m-commerce is a part) will still represent less than 9 percent of total commerce. And those numbers are for the US, the birthplace of the Internet, iPhone and Uber. We can only assume the number will be considerably lower on average internationally.

The numbers provide a perspective on how much we still shop "offline" at brick and mortar stores with our feet and our good old plastic cards. For all the hoopla that companies like Uber are generating for connecting mobile users with physical world resources, there is a long, long way to go to enable the physical world for mobile commerce. We need a better connection between the mobile consumer and the retail stores where we perform the other 90 perccent plus of commerce transactions.

Host Card Emulation (HCE) helps close this gap in 3 ways:

  • With HCE consumers will be able to make secure payment transactions at merchant locations using their mobile phones and payment cards stored in the cloud. Unlike remote cloud-based payment used by Uber or other mobile commerce apps, HCE payment doesn't need network coverage at the time of transaction. It happens seamlessly, riding the existing acceptance network at merchants leveraging NFC and other proximity technologies (barcode).
  • HCE allows existing mobile apps to be enabled for payment. So a merchant or bank can enable their existing mobile app for payment and roll it out as an app update. Consumers have a better user experience as they won't need to download a new app, or even sign-up for a new card as existing cards can be provisioned. Banks, merchant and other app owners can leverage their investment; protect their brand and their customer relationships.
  • Even though cards are stored in the cloud, HCE payment is a card-present transaction. Of course only after complying with EMVco guidelines and passing the stringent approvals of MasterCard and Visa. This reduces the interchange costs and enhances its appeal to merchants.

HCE is no panacea. It won't make mobile commerce in the physical world become a reality overnight. But it will definitely be a step in the right direction targeting the great majority of commerce you and I make happen every day.


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