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Credit Card Companies Endorse Contactless Transactions



Credit card companies could change the way you handle business transactions. Visa and MasterCard both made announcements in February 2014 that they are endorsing Host Card Emulation or HCE software technology. This will allow customers to purchase goods and services by waving their smartphones near a contactless reader, instead of handing over their credit card.

“Consumers are now shopping and paying in whatever way best fits their needs and lifestyles – and from every device they own. To meet their expectations for convenience, we need to accelerate the availability of services in the market. The use of HCE provides a very attractive way forward to launch an increased number of Near Field Communication-based (NFC) offerings,” said James Anderson, Group Head, Emerging Payments at MasterCard. “We continue to set standards and deliver solutions to our partners and customers that deliver great experiences for safe and secure digital payments.”

HCE contactless transactions work with NFC apps that run on Android-enabled smartphones. With HCE, the apps can emulate a smartcard, letting users pay with their phones.

Currently, only those smartphones with the Android operating system - which are 78 percent of smartphones sold in the United States - can use this feature.

“The Android HCE feature provides us with a platform to evolve the Visa payWave standard, support the development of secure, cloud-based mobile applications, while at the same time offer greater choice to our clients,” said Elizabeth Buse, Executive Vice President, Global Solutions, Visa Inc.

This technology is much different from other contactless pay systems, like Isis, which requires that credit card data be stored directly on the phone. HCE transactions are stored on a virtual cloud, making it more secure since the encrypted card number can be disabled if the phone is lost or stolen. The cardholder’s identity and details are never transmitted, preserving privacy and security.

Visa stated that it will deploy several layers of security to protect payment accounts in the cloud, including at the Visa network, application and hardware levels. One-time use data, real-time transaction analysis, payment tokens and device fingerprinting technology make up a multi-layered defense against unauthorized account access.

Visa is extending help to financial institutions and partners that want to take part in offering HCE contactless transaction systems. Its Ready Program provides new standards, tools, services and implementation guidelines. Visa also stated that it will ensure that cloud-based applications with Visa payment functionality are compatible with Visa’s requirements and payment industry security standards.
MasterCard plans to publish its secure remote payment specifications for financial institutions and partners during the first half of 2014.

HCE contactless transactions could be the new way to pay. There are already more than two million contactless-enabled merchants in 63 countries around the world. In fact, MasterCard stated it has seen the number of merchants that use contactless transactions increase 180 percent since 2012. These include major retailers and quick service merchants to convenience stores, gas stations, grocery stores, pharmacies, vending machines, parking lots, mass transit and taxis. Auto recycling could be next.

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