It was really a matter of time before the Secure Element was bypassed. The Cellular companies as a payments gatekeeper does not encourage innovation. Google wallet had faced a lot of issue with non-compatibility thanks to ISIS and carriers backing it. Although EMV and Wireless EMV (NFC) is mandated by Visa and MasterCard by the end of 2014 for all US merchants to receive the most favorable terms, there has been slow adoption on wireless devices. Of course there is ISIS and this method, but Google has started the de-emphasis of NFC from the last year.
Apple has continued with a number of head fakes that lead many to believe that they will just use Bluetooth LE and WiFi. However Apple has significant patents for hundreds of use cases for NFC systems. I will state once again that it is clear that Apple will use Magnetics, NFC, Optical, Bluetooth, WiFi and Cellular in a meaningful way that will enhance and change the retail payments experience. The use of iBeacons is just one element.
With the release of Android 4.4, Google introduced a new platform support for secure NFC-based transactions through Host Card Emulation (HCE), for payments, loyalty programs, card access, transit passes, and other custom services.
With HCE, any app on an Android 4.4 device can emulate an NFC smart card, letting users tap to initiate transactions with an app of their choice. Apps can also use a new Reader Mode so as to act as readers for HCE cards and other NFC-based transactions.
Android HCE emulates ISO/IEC 7816 based smart cards that use the contactless ISO/IEC 14443-4 (ISO-DEP) protocol for transmission the existing EMVCO Wireless NFC payment infrastructure.
Google states “Support for HCE is already widely available on most NFC controllers, which offer dynamic support for both HCE and SE transactions, Android 4.4 devices that support NFC will include Tap & Pay for easy payments using HCE."
It will be interesting to see how Google will use this system. It is a clear shift from the barriers that stopped the company from deploying NFC on all modern Android devices. This new change will be of particular use in non-US markets in Europe and Asia. But will become increasingly more important in 2015 in the US.
- Written by Brian Roemmele.