Isis expects a lot of banks will leverage host card emulation (HCE) to build their own mobile wallets, though the telecom-led mobile payments scheme also hopes the technology will add breadth to its own service.
"With HCE, a lot of banks will take a long look at enabling their own mobile applications for mobile payments," says Scott Mulloy, chief technology officer of Isis, an initiative led by AT&T, T-Mobile and Verizon Wireless.
Host Card Emulation is quickly becoming a major topic in mobile payments, particularly since MasterCard and Visa added support for the technology. Visa is using HCE to support Visa PayWave contactless payments from smartphones, while MasterCard plans to publish an HCE specification developed with Capital One and Banco Sabadell.
Since HCE allows mobile apps to bypass the phone's secure element to make Near Field Communication payments, the technology is seen as a way to reduce reliance on mobile carriers to build mobile payment programs. "We will be dealing with a lot of mobile wallets published to the app stores," Mulloy says. "There is no way that HCE will not accelerate mobile payment adoption," he says.
Isis will be challenged by HCE, says Jordan McKee, an analyst at Yankee Group. "While I do agree that HCE will be a sizable catalyst that drives NFC forward, I see it causing a world of difficulty for Isis," McKee says. "Operators that have chosen to insert themselves into the value chain by monetizing real estate on the secure element will find it difficult to justify such a business model moving forward."
But Isis still views the mobile phone's secure element as the best way to store the most sensitive information for payments transactions. "The secure element is safer than HCE," Mulloy says. "The secure element is tamper resistant."
Isis is also building uses for HCE, Mulloy says, such as storing loyalty programs or coupons, a challenge because the secure element has finite capacity. "We tested up to 20 loyalty cards and 40 coupons, so the secure element is not highly constricted, but we are looking for the participation of hundreds of merchants. So the secure element is not the best place to store all of that," Mulloy says. Adding a HCE solution for coupons or loyalty cards would free up the secure element for additional payments development by the mobile carriers, Mulloy says.
Prior to the introduction of HCE, mobile wallets that rely on NFC for contactless payments had to get mobile carriers' approval before being granted access to the phone's secure element. Google Wallet, for example, faced resistance from Verizon and other networks until Google added HCE to version 4.4 of its Android system, called KitKat.
Isis plans to support a wide range of partnership models with card issuing-banks, though it retains a preference for hardware for the actual payment credentials. "That's still a part of my solution," Mulloy says, adding Isis is still developing technology that enables consumers to access HCE wallets and Isis' hardware-based wallet.
"We're a firm believer in the experience of aggregating all of your data into one mobile wallet, just like you do a physical wallet. That is a winning consumer experience," Mulloy says. "My challenge is if banks store their credentials via HCE instead of a secure element, we will need to work to bring that together for a seamless customer experience."