The Brand Power of Apple and Samsung, Plus HCE, Are Lending Momentum to Contactless

The role of EMV in pushing tap-and-pay solutions is well known, but research released on Tuesday indicates the brand value of Apple Inc. and Samsung Electronics Co. Ltd. can’t be underestimated. At the same time, a cloud-based technology called host card emulation is also playing a role in spreading contactless payments, the research indicates.

Some 148 million consumers worldwide will make mobile payments with their handsets using near-field communication (NFC) this year, according to Juniper Research, a London-based research firm. Of those that are new to the form of payment, which now undergirds most tap-and-pay solutions, nearly 70% will be Apple Pay and Samsung Pay users, Juniper’s report says.

Apple Pay in particular has proven to be popular. The mobile-payments service has now been introduced in the United Kingdom, Australia, Canada, and China, in addition to its U.S. debut in October 2014, and will be launched in other markets, including France, by the end of the year. The February launch in China saw 10 million credit and debit cards registered within the first hour, and 38 million within the first day, Juniper reports.

“The industry has already received a strong stimulus from the launch of Apple Pay and Samsung Pay in selected key markets,” Juniper says in a statement announcing its research.

To be sure, other recent research has raised caution flags, at least with respect to Apple Pay. A report last month from First Annapolis Consulting, for example, showed that, in the U.S. market, usage was off. Only 20% of the iPhone 6 users in December reported having used Apple Pay at least once, down from 22% in a spring survey. Among those that have tried Apple Pay, 15% said they use it regularly or frequently compared with 19% earlier in 2015. The firm surveyed 1,279 consumers, of whom about 600 had an iPhone 6, the device that is capable of performing Apple Pay transactions.

Aside from the Juniper research, the migration to EMV has also been credited in the industry with helping to establish NFC in the U.S., since nearly all EMV terminals come with NFC capability built-in. Juniper’s research indicates almost one in five U.S. terminals are now at least NFC-capable.

Host card emulation is also responsible for some of the momentum behind contactless payments globally, Juniper says. Some 55 banks were offering mobile wallets based on HCE by mid-January, up from just seven at the end of 2014. All but one of these institutions are outside the U.S., with the Far East and China accounting for 21 of them and Eastern and Central Europe another 16. The most recent financial institution to adopt HCE is Barclays Bank, in January.

Banks have responded to HCE because its cloud configuration stores and manages payments credentials, bypassing the secure element in the phone. This allows banks to introduce tap-and-pay mobile-payments services more quickly because it eliminates the need to negotiate terms with mobile carriers and device manufacturers to gain access to the secure element. At the same time, the cloud-based credentials can be tokenized to protect them from hackers.

“The combination of HCE and tokenization is extremely attractive to banks,” says Windsor Holden, who co-authored the Juniper report, in a statement. “HCE means that they are not dependent on a mobile operator to enable the service; [and] tokenization reduces the burden on the issuer and allows them to use their existing infrastructure.”