A new report published by Research & Markets states that the global NFC transaction market will grow at a CAGR of 55.23% during 2016-2020. The report also names host card emulation (HCE) as one of the “latest trends” leading to market growth.
Put simply, mobile payment credentials have traditionally been stored in a smartphone hardware component known as the secure element (SE). The SE can perhaps best be described as a tamper resistant hardware platform, capable of securely hosting applications and storing confidential and cryptographic data. However, the physical presence of an SE in the device creates dependencies and complexities that make it difficult and expensive within the NFC ecosystem to interact efficiently. For example, an application issuer would require agreements with a number of SE issuers who, in turn, need to connect with different types of mobile handsets.
HCE provides a bridge between the point-of-sale (POS), the remote SE and service provider, such as an issuing bank. Moreover, HCE does not require any changes to acquiring infrastructure nor optimization to specifically support NFC. Indeed, HCE is a technology that emulates a payment card on a mobile device using only software. By moving the SE to the remote environment of the cloud, the cost and complexity of managing a physical SE can be reduced significantly. HCE also allows consumers to make contactless payments, even without an internet connection, by using preloaded tokens.
“The introduction of NFC platforms based on HCE has potentially high implications for NFC stakeholders, provided it would reshape both; the value chain and the attendant business models,” Research & Markets analysts explained in a recent press release. “Also, the additional security provided by the inbuilt security feature of smartphones such as fingerprint reader, and iris scanner act as an additional layer of security for HCE.”
According to Research & Markets, the extensive use of mobile devices for payments will be a key driver for market growth.
“Mobile payments have become popular with the increased adoption of mobile devices and wearables. Vendors are deploying NFC POS terminals as they are flexible and facilitate hassle-free mobile payments,” the analysts added. “The NFC POS terminals also increase the value proposition and effectiveness of their marketing efforts. Thus, the growing implementation of NFC POS terminals at retail outlets is expected to boost the growth of the market during the forecast period.”
As we’ve previously discussed on Rambus Press, mobile payments offer a plethora of benefits for consumers, retailers and financial institutions. For consumers, mobile wallets provide a convenient, “tap and go” frictionless commerce experience that seamlessly integrates loyalty cards, boarding passes, ID cards, coupons, ID cards, event tickets, alerts and notifications. For retailers, mobile wallets offer businesses the ability to engage users with an immersive, in-app experience that starts at the beginning of a retail journey and continues indefinitely with notifications, reminders of upcoming expiration dates, archived digital receipts and a real-time tally of current loyalty bonus points. For banks, digital wallets, which are far more secure than credit or debit cards, have fast become a strategic focus as consumer interest ramps up.
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