Big banks like Canada’s RBC, Capital One and Wells Fargo are pouring resources into proprietary NFC-based digital wallets to outflank third parties like Apple, Samsung and Android and regain top-of-wallet status.

But for most smaller financial institutions, the "build your own" agnostic technology, host card emulation (HCE), has been too costly and complex. That's forced these institutions to stick mainly with third-party wallets that don't allow their cards to stand out.

Those days may be coming to an end as affordable new technology solutions emerge for smaller and midsize banks and credit unions looking to follow the big guys in using HCE to build mobile wallets under their own brands.

One example is Omaha, Neb.-based Prairie Cloudware, which this month unveiled the Digital Payments Guardian, an HCE mobile wallet solution the company touts as the first of its kind to use the Amazon Web Services cloud, while simultaneously covering all of a financial institution's PCI requirements.

Though the wallet can be scaled for any size of bank, Digital Payments Guardian already is generating “strong interest” from smaller and midsize institutions, said Doug Parr, Prairie Cloudware's chief revenue officer.

“Banks across the whole spectrum are beginning to realize the mobile wallet is going to be a very valuable piece of real estate for the future, and it will be vital to own and control it, and to capture the data that comes along with it,” Parr said.

Prairie Cloudware's wallet is available as a white-label, subscription-based approach; the company also offers a software development kit, which provides a bit more customization, according to Parr.

Initially Digital Payments Guardian is supporting only NFC-based mobile payments, but down the road the company could add other features, such as withdrawing cash from ATMs through the wallet, turning card activation on and off and enabling P-to-P payments, Parr said.

Adding an HCE wallet also could expand the overall audience for mobile wallets for many institutions, Parr suggested.

“Currently many smaller financial institutions for various reasons don’t have a mobile payment solution for Android,” he said.

Another reason banks are eager to add HCE wallets is the unpopularity of a toll of 10 to 15 basis points Apple reportedly charges financial institutions to participate in Apple Pay, Parr suggested.

“I believe we’re among the first to come up with a  turnkey HCE mobile wallet that’s quick to implement and costs no more—actually probably less—than what banks are paying now to support Apple Pay,” Parr said.

Costs to implement and use Digital Payments Guardian vary based on a financial institution's size and scope, he said, without disclosing a range.

Even after adding an HCE wallet, participating institutions likely will continue to support third-party wallets, in large part because Apple Pay is still a closed system that hasn’t opened up its NFC controller to outside developers, Parr noted.

“We continue to be hopeful that Apple will one day open up access to outsiders via NFC, but there’s no telling when that might happen," he said.

Outside the U.S., development of HCE mobile wallets is also on the rise.

Netherlands-based Bell ID, a subsidiary of Rambus, in 2015 partnered with RBC in one of the industry's first HCE wallet rollouts, and the company has seen “steadily rising demand” from financial services providers in various global markets ever since, said René van Rosmalen, Bell ID sales manager.

Bell ID has also built HCE wallets for financial institutions in Asia, Australia, New Zealand, South Africa, Finland, Italy and the Netherlands, and it will soon unveil another one with a large  U.S.-based financial institution, van Rosmalen said.

More smaller and midsize banks recently joined the HCE wallet movement.

One example is Eurobank Poland, which last month launched a proprietary HCE-based wallet in partnership with First Data Poland and Bell ID.

“Banks intent on pursuing mobile payments are not comfortable with giving up their own branding and having their cards compete with other issuers within a third-party wallet,” van Rosmalen said. “We’re still quite early in the HCE development cycle, but we see it gaining momentum for banks of all sizes, because ultimately the goals are the same for the smallest to the biggest players.”

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