Visa, MasterCard back technology for cloud-based mobile payments

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Visa and MasterCard are backing host card emulation, or HCE, technology that will enable the credit card companies to offer cloud-based mobile payments, in effect bypassing hardware-based mobile payment initiative backed by mobile operators.

The open architecture HCE enables payments and other near-field communications, or NFC, services to be provided without the secure element, or SE, embedded in the smartphone's SIM card.

The HCE technology is currently incorporated into the Android 4.4 (KitKat) operating system as well as the BlackBerry OS.

The move is seen by some analysts as a move by the credit card companies to thwart mobile operators' efforts to charge fees for the SE. "We believe this is partly an effort by the card issuers (MasterCard, Visa) to circumvent the MNOs [mobile network operators] who could potentially charge fees for the secure element. On the other hand, liberalization of payments with HCE will drive NFC adoption," Sterne Agee analyst Vijay Rakesh is quoted by our sister publication FierceWireless as observing.

Eden Zoller, a principal with Ovum, calls the move by Visa and MasterCard "highly disrupted" of the mobile operators' SIM-centric NFC mobile payments model.

"The prospect of a mobile proximity landscape dominated by cloud based deployments is not a scenario that operators relish. Mobile operators are driving NFC implementations based on the SE embedded in SIM cards, because this gives them maximum control over service provisioning, the m-commerce business model and revenue flows," Zoller observes.

"HCE effectively severs the dependency of NFC payments on an SE embedded in an NFC device or SIM card, in preference for a virtual SE on remote servers in the cloud. This implementation supports a more open model for NFC deployments and makes service provisioning much easier for banks, issuers, developers and other third parties. This has the potential to open up the NFC market up to more innovation and competition, but at the expense of mobile operators," she concludes.

For more:
- see releases by Visa and MasterCard
- read Zoller's comments

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