A Conference Note From Hartmut Leuschner

HCE Raises Questions on Mobile Wallets
This is the year to answer the question which technology drives mobile wallets in the future, according to attendees at the show, which attracted global experts for mobile payment, mobile security and messaging services. Although most network operators and leading banks worldwide have built their mobile wallet plans around NFC technology products -- led by NXP Semiconductor N.V. (chips), Gemalto N.V. (NFC-enabled SIM cards ) and  VeriFone Systems Inc. (POS terminals), the introduction of HCE technology has changed the plans of many players, said attendees of the London event, organized by Informa Ltd. (See OTR Global´s Jan. 8 note on the introduction of HCE technology.) 

Several banks in Canada, United States and Australia halted their mobile wallet rollouts in March and April, according to a European tech consultant. The decision was made shortly after Visa Inc. and MasterCard Inc. officially announced support for Google's HCE. Attendees said banks see HCE as an opportunity to eliminate carrier dominance since the carrier-controlled secure element would be obsolete in SIM cards and reside in the cloud instead. A carrier source confirmed that even in Europe, where several network operators have rolled out mobile wallet programs recently, network operators are determining if adoption rates would improve with NFC through HCE.  "The losers in this case would be the smart card vendors and the secure element vendors, as cards would be cheaper and there is not secure element necessary at all," a software consultant said. Currently NXP, Infineon Technologies AG and Inside Secure SA are the three main vendors for the secure element chip.  

Representatives of SIM card vendors, however, warned that HCE technology is not a proven security standard and believe the limited availability on "less than 5% of all Android devices," as one manager put it, may limit the success for HCE. 

Apple Could Go a Different Route
Several SIM experts at the conference expect Apple Inc.'supcoming iPhone to follow a different path. Although nearly all speakers commenting on the iPhone expect Apple to put an NFC chip in its flagship device for the first time, several chip experts said they expect Apple to use a secure element embedded into the device. That way, speakers said, Apple maintains control over users for mobile transactions and can determine which (bank) applications are allowed to reside on the secure element. (Also see OTR Global's April 17 note on NFC in iPhone6)

Representatives of several banks expect device makers that focus on the Android platform to eventually offer network operators a solution that embeds both, HCE and secure element on the SIM card. "Samsung [Electronics Co. Ltd. (005930 KS)] already did that in the past, and they just turned the secure element inside the device off if a carrier insisted," a carrier contact said.