Even if it takes the payments industry months to respond to Google's use of Host Card Emulation, which simulates the signal from a Near Field Communication chip, the technology is a potential game changer.

HCE allows virtually any application to bypass the secure element in a mobile phone to make NFC payments. Most importantly, it leaves payment credentials off the phone itself. The technology is getting more attention since Google added HCE to its Android 4.4 operating system, nicknamed KitKat.

Google uses NFC for its Google Wallet app's payment function at the point of sale. NFC is also at the heart of the Isis mobile wallet, a venture of AT&T, Verizon Wireless and T-Mobile. These companies have resisted supporting Google Wallet, citing security concerns over its use of the phone's secure element.

Isis issued a statement that indicates it isn't sure how to react — but that it is taking Google's move seriously.

"We are still evaluating the news," Isis states in an e-mail. "Our tech teams have been reviewing documentation, digging into the details." Isis says it is discussing the HCE development with the mobile operators and card issuers it works with.

To some observers, HCE is a clear move to unshackle Google Wallet from the carriers' restrictions. To others, it's seen as a move to undermine Google's competitors.

"Where Google is going with this is making a company like Isis change the way they look at the mobile wallet," says Doug Yeager, CEO of Austin-based SimplyTapp, an HCE vendor.

"Isis is one mobile wallet, with aggregated issuers in that wallet," Yeager says. "HCE makes the phone the wallet, with individual apps inside it that could use HCE for payments."

Google has long sought a way to get card provisions to the payments network in a simpler fashion, says industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC.

"We have expected for some time that Google would find technology to route around the secure element, but also have the card network infrastructure in use," Ablowitz says.

Prior to this HCE development, Google was trying to get dual apps on a secure element, Ablowitz says. "But this is an easier way to deploy contactless NFC," he adds.

Google did not respond to inquiries about its HCE application interface.

Yeager says much of what happens next will depend on how the card networks view HCE.

"The card networks all knew this was possible, but how do they go about approving it?" Yeager says. "It's a domain not yet addressed by the card networks."

Neither MasterCard nor Visa responded to inquiries by deadline.

Ultimately, HCE will likely make its move into the payments forefront through mobile banking apps, Yeager says.

"Mobile check deposit has been around for some time, but is now becoming a popular feature," Yeager says.  "It's all driven through the mobile banking app. In the same way, if mobile pay is going to make it, it has to be through the mobile banking app."

Even though HCE replicates the secure element in a payments service system, it doesn't guarantee that merchants and consumers will move away from plastic cards and cash, says Adil Moussa, payments strategic marketing analyst at Omaha, Neb.-based Adil Consulting.

"This is certainly a different perspective on NFC, but getting consumers to adapt to new technology remains the hardest thing to do," Moussa says. "A merchant does not really care about specific payments technology, he just wants to get paid."

Banks have the biggest opportunity to drive adoption among merchants, he says.

"If issuers develop an app that sends customers to a specific merchant, then they'd really have something of value," Moussa says.

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