Host Card Emulation

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Host Card Emulation (HCE) is an on-device
technology that allows a phone to perform card
emulation on an NFC-enabled device. The device
does not have to rely on access to a secure
element. Prior to the usage of HCE, Mobile
payment credentials were stored on the mobile
device inside the secure element. With HCE, the
secure element can be present outside the mobile
device. This in turn reduces both complexities
and costs. The technology can help a mobile
wallet application turn into a virtual smart
card. In turn, this means direct communication
between merchants and banks without any
intermediaries, i.e. mobile network operators.
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With sensitive data stored in cloud databases,
there is also a very high security standard set.
In order to prevent unauthorized access HCE
relies on four areas
Benefits
It eliminates dependence on mobile operators.
Payment providers can therefore create
NFC-enabled applications without seeking
permission from a mobile operator.
It enables bank to directly interact with the
card without network operators
HCE simplifies the overall payment process, as
payment credentials are stored in the cloud and
not in the secure element.
It is highly scalable
It reduces capex
It eliminates the need for network connectivity
at the time of payments
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With bigwigs such as Google, Visa and Mastercard
gunning for it, HCE has gained ground. However,
being a young technology, several challenges
still exist, including
Security
Although a number of security parameters are in
place, it is potentially less secure than NFC
using a  traditional SE primarily because of the
possibility of device rooting via a malware
application. If the device is rooted, anyone who
finds the phone can access all information.
High tap time
The time taken from when the phone is placed on
the terminal until the transaction is completed,
is found to be relatively higher.
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Certification
HCE requires an NFC controller and certification.
In case the handset does not have NFC controller,
a card-based transaction is not possible via this
technology. HCE wallets also required to be
certified by payment companies before payments
are made at contactless POS machines. Clearly,
despite these challenges, HCE is here to stay. It
has clearly laid the groundwork for the future of
mobile payments as well as other NFC services
including loyalty programs.
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Thank you

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