The Gimlet Eye: The Missing Link in Mobile Payments

This month, we examine a relatively new technical maneuver that a number of issuers, merchants, and tech providers see as a critical breakthrough for mobile payments. The technology is called host card emulation, which delivers payment credentials to a consumer’s mobile device by way of a cloud configuration, rather than locking them down in the phone’s secure element.

Indeed, HCE, as it’s called, completely bypasses the secure element, a chip usually controlled by the mobile carrier. And that’s what has excited anyone who has felt stymied by carrier fees for access to that chip. Now, they say, near-field communication can finally move forward. You can read more about HCE in “NFC’s Cloudburst.”

But, while cloud-based NFC may be just the ticket for getting digital cards (in the form of tokens) into phones, and for merchants to participate, as well, with private-label programs, ultimately the success of mobile payments is going to depend on a party besides banks and merchants. The forgotten man and woman here is, of course, the consumer. As we said in this space last month, host card emulation represents remarkable innovation. But it does nothing to get phone users to substitute their devices for leather wallets.

Consumers have proven to be stubbornly unwilling to play along with contactless payments, either with physical cards or with handsets. Just last month, JPMorgan Chase & Co. officially killed its blink card, a contactless program it launched nine years ago with much fanfare. Real-world consumer usage of both Google Wallet and Isis, the two leading examples of contactless mobile wallets, has been similarly uninspiring.

Even wallets that don’t depend on NFC have languished. No sooner did Chase drop blink than Square Inc. deep-sixed its 3-year-old Square Wallet, which let consumers pay without pulling their phones out of their pockets.

Part of the problem is that payments aren’t enough. Unless wallets deliver relevant coupons and offers, they don’t improve on swiping a card, which is pretty quick and easy. Also, consumers will never leave leather wallets and handbags at home so long as mobile wallets contain only payment cards. It’s as if the payments industry has forgotten all about items like driver’s licenses. After all, would you leave home without ID?

A recent study by payments processor Total System Services Inc. (TSYS) found that, among all items in their purse or wallet, 73% of respondents saw their drivers’ license as important, five points higher than payment cards. Insurance cards were a close third, at 59%.

So, tech gurus, find a way to get those cards into your apps, and then maybe we can talk about completing the mobile-wallet revolution.

John Stewart, Editor

john@digitaltransactions.net