The arrival of host card emulation (HCE) has led to a re-think of online payments giant PayPal’s famously anti-NFC point of view, company president David Marcus has revealed. “I’m moving from being a massive skeptic of NFC, to being cautiously optimistic on NFC HCE take-up in very specific shopping use cases,” he says.
“Lately, I’ve been looking at three technologies that might truly change the retail experience as we know it,” Marcus writes in a blog post called Three Trends That Might Transform the Retail Payments Experience — and picks out Bluetooth Low Energy (BLE), smart watches and other wearables, and NFC with HCE as the three to watch.
“For years I’ve been saying NFC was a technology in search of a problem, designed and embraced by companies thinking about their own interests rather than solving a problem for consumers,” he explains.
“Year after year, at the Mobile World Congress, the industry has been issuing press releases about the advent of NFC the following year. And year after year, I’ve been very vocal about NFC not becoming mainstream. So far I’ve been right. Have you ever seen a consortium of mobile carriers, banks, OEMs, and associations, who each want a piece of the action delivering a good consumer product experience? Me neither.
“The crux of the issue of the original approach of NFC was the secure element. The secure element, as its name indicates, is meant to keep financial information secure. The problem? Everybody keeps fighting over who gets to control it, because the entity that controls it becomes the toll master for every transaction that takes place. This led to interesting battles between financial institutions, OEMs, and carriers. And this is main reason why Google Wallet on NFC only launched on the Sprint network. The other carriers wanted their own solution, Isis, to be the only one available to their subscribers.
“But something changed late last year. The Android team at Google started supporting and pushing another standard (not exclusively for payments) called NFC HCE, or host card emulation. The beauty with this move is that it doesn’t require the whole industry fighting over control for the secure element.
“The Android team approached us with this initiative late last year to collect our feedback on implementation. For the first time ever, I saw a glimmer of hope for NFC in some shopping configurations. Those where you need to be at a specific place in the store to pay — think multi-lane grocery versus the Apple Store experience of paying wherever you are.
“Two more events are worth noting. One is the accelerated pace to move to EMV — chip and PIN versus mag stripe on a card — since the major credit card breaches with large retailers, which will lead to more NFC-enabled terminals by 2016. And the second one is Visa embracing the HCE approach. It’s worth noting that our approach to security is somewhat different, as we don’t share your financial information when you shop.
“The bottom line is that I’m moving from being a massive skeptic of NFC, to being cautiously optimistic on NFC HCE take-up in very specific shopping use cases. But I still passionately believe that paying hands-free through a BLE beacon and notifying the merchant you’re in the store through that method will enable more transformative experiences for consumers and retailers alike.”