Sberbank, the largest bank in Russia, will soon begin testing Host Card Emulation for mobile payments, making it the largest bank so far to embrace the burgeoning solution for making tap-and-go payments more widely available.

Android’s cloud-based HCE protocol, which was introduced last year, eliminates requirements to access a secure ship in phones to enable near field communications payments. It has already been embraced by Visa and Mastercard, with a growing number of banks also giving it a close look to see if it is a fit for their own mobile payments strategies.

“HCE makes sense for banks because it gives them more flexibility when launching mobile payment initiatives,” said David Brudnicki, chief technology officer at Sequent Software, Mountain View, CA. “Host Card Emulation and the issuance of credit and debit credentials to the cloud allows banks to launch mobile wallets services independently of secure element owners.

“What we have seen in the case of Sberbank and others is that they are opting to leverage all technologies, both secure elements and cloud/HCE,” he said. “At the end of the day, banks, mobile operators and other players don’t want to be restrained by technology but use it to deliver convenient, easy to use and highly secure mobile payments to their customers.”

“HCE is having a major role in bank’s strategies for mobile payments. It has lead most major banks to re-consider their mobile wallet strategies and re-think their plans.”

Sberbank is using Sequent’s cloud-based Digital Issuance and Open Wallet APIs platform for the HCE-enabled payments play.

Summer spending
The Russian bank is already piloting NFC payments on a small scale in Moscow leveraging the secure element in phones.

This summer, the bank plans to also initiate a much larger test using Sequent’s platform to enable NFC using the HCE protocol.

The test will reportedly include a mobile wallet with the ability to load cards from other banks.

Users will be able to wave their phones next to contactless terminals in retail locations to make a payment from their phones.

The right role
As mobile payments grow, it is opening up opportunities for alternative payments providers, with financial institutions under pressure to find a way to play a meaningful role in the ecosystem.

The potential benefits for banks of HCE include that it can enable them to turn their existing banking app into a payments app while also providing access to their card to a merchant to use in their own mobile wallet.

The challenges include the security of transactions in the cloud.

“Sequent provides simple APIs so that apps can access the cards stored in the cloud or secure element,” Mr. Brudnicki said. “That way banks can enable their existing banking apps to become wallets for payments anywhere.

“But banks know that to really ensure the usage of their cards, they actually want to provide their cards to be used by all apps. That way, if for example I am at Macy’s using my Macy’s app to help me shop, the bank can provide Macy’s access to their cards to turn that app into a wallet as well.

“For the consumers it is seamless. They use the apps they already know and trust or transactions anywhere, no matter what technology is powering it – HCE, cloud, NFC, secure element.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York