MasterCard is rolling out Host Card Emulation, a cloud-based mobile payments system, to more than 15 new countries on the heels of Visa’s announcement that it will offer consumers more options of using the wave-to-pay capability, suggesting it could be a technology to watch in 2015.

As Apple Pay continues to gain traction with many brands, more financial services and institutions are turning to cloud-based HCE payments, which enable consumers’ Android devices to emulate smart cards and allow for secure transfer of funds. Any NFC application on an Android smartphone can simulate the smart card, therefore permitting guests to wave their phones at a payment device while financial institutions host accounts in a virtual cloud.

“MasterCard is committed to supporting an array of emerging payment options for our customers, and in support of consumer and merchant choice,” said Brian Gendron, vice president and senior business leader of Worldwide Communications, MasterCard, Purchase, NY. “In addition to MasterCard’s longstanding support for embedded and SIM-based SE implementations, MasterCard’s HCE-based specification offers a software-based alternative to deliver faster-time-to-market for mobile contactless payment solutions.”

More payment options
MasterCard’s cloud based payments solution is said to speed up the deployment of contactless mobile offerings for financial providers and card-issuing institutions. This has resulted in more than 25 pilots being rolled out in worldwide locations, including the United States, Russia, Italy, Spain, Canada, France, Germany, Australia and the United Kingdom.

Banks such as Santander have joined the launch, with the goal of offering guests new and more secure payment experiences. Users with Android devices will be able to select HCE as a payment solution, although Google is also attempting to enter the payments sector by teaming up with Softcard, resulting in more competition (see story).

However, experts believe that HCE may be a good option for many consumers. Host Card Emulation offers tap-and-wave payments without requiring access to a secure NFC chip that many wireless carriers blocked.

“By enabling secure communications between a mobile device and a merchant without the need for hardware in the device, HCE opens up a wide range of potential use cases, both in payments and in other areas of commerce,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA. “It is still very early days, however; there are only a few live instances in place globally that are not pilots.

“With yesterday’s announcement that Google will be enabling a solution that doesn’t require a secure element in the device, we should expect fairly rapid expansion of merchant and bank awareness of the potential for HCE,” he said.

“As to attracting more consumers, I think the focus will probably be around adding value to merchant and issuer value propositions which can lead to either increased customer retention or incremental cardholders.”

Visa’s market stake
Last week, Visa announced its intent to begin offering customers the ability to access Visa payWave-enabled accounts from a secure cloud. While consumers will be able to pay with the tap of a finger, HCE also benefits financial institutions, as they will have more choices in offering secure payment methods.

Visa believes that the HCE feature on Android devices will help evolve the payWave standard, offer more options to clients and support further development of cloud-based applications.

Due to the popularity of Android smartphones in international markets, such as China and Latin America, investing in HCE may be a sound tactic.

Visa is also expanding its Visa Ready Program to support partners interested in deploying cloud accounts.

“Contactless mobile transactions, with or without the secure element in the device are poised to explode, thanks to the momentum created by Apple Pay, and now Google Wallet,” Mr. Peterson said. “I expect that there will be an explosion of activity around HCE with competitors and startups creating offerings that will change the commerce landscape going forward.”

Final Take
Alex Samuely is an editorial assistant on Mobile Commerce Daily, New York