Host card emulation
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Host card emulation (HCE) is the software architecture that provides exact virtual representation of various electronic identity (access, transit and banking) cards using only software. Prior to the HCE architecture, near field communication (NFC) transactions were mainly carried out using hardware-based secure elements.[1]
HCE enables mobile applications running on supported operating systems to offer payment card and access card solutions independently of third parties while utilising cryptographic processes traditionally used by hardware-based secure elements without the need for a physical secure element. This technology enables the merchants to offer payment cards solutions more easily through mobile closed-loop contactless payment solutions, offers real-time distribution of payment cards and allows for an easy deployment scenario that does not require changes to the software inside payment terminals.
The term "host card emulation" (HCE) was coined in 2012 by Doug Yeager and Ted Fifelski, the founders of SimplyTapp, Inc., to describe the ability to open a communication channel between a contactless payment terminal and a remotely hosted secure element that contains financial payment card data, to pay at the point-of-sale.[2] They implemented this new technology on Android. At that time, RIM had similar functionality, called "virtual target emulation", which was supposed to be available on the BlackBerry Bold 9900 under the BB7 operating system. Prior to HCE, card emulation existed in hardware only: a card could be replicated with a multiple-purpose secure element, housed inside a smartphone.[1]
By including HCE in Android, Google hoped to accelerate adoption of Android payments and to increase adoption of Google Wallet by mobile network operators. At the time, Android's share of the mobile operating system market was 80%.[3] However, even with the inclusion of HCE in Android 4.4, the banks still needed the major card networks to support HCE. Four months later, at Mobile World Congress 2014, Visa and MasterCard announced their intent to support HCE.[4][5] On December 18, 2014, less than ten months after Visa and MasterCard announced their support for HCE, Royal Bank of Canada (RBC) became the first North American financial institution to launch a commercial implementation of mobile payments using the HCE technology.[6]
Impact
The new HCE architecture supports payments, loyalty programs, card access, and transit passes.
Before HCE, adoption of NFC in payment systems was low, due to lack of infrastructure (terminals), due to the high capital cost of deploying secure elements, and due to the need for complex partner relationships.
By supporting HCE in Android 4.4, Google enabled companies to adopt NFC at a relatively low cost.[citation needed]