The Simple Yet Complex Future of Mobile Payment Systems

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In the age of smartphones replacing everything from computers to cd players to cameras, it seems natural that it would be easy to make mobile payments from your smartphone. Not so much. There are many obstacles blocking the ease of making mobile payments for many consumers. However, it is possible that in the near future making a mobile payment will be as simple as downloading a song.

Most believe that this is because of a lack of Point of Sale (POS) systems, which is partly true. However, other issues have plagued NFC as well; one of them being that the payments industry chose a path to NFC-based payments that strangled its potential. The chip and PIN app traditionally has to be stored in a secure element in the handset’s SIM card or an embedded element, requiring the card issuer to rent space for the secure element from the Telco. This has proved to be too complex of a model for issuers and mobile network operators. What this means in laments terms is that the current chip and PIN system is too complex for smartphones to operate without the risk of someone being hacked, as well as the simple fact that banks and Telco’s did not work well together.

However, a few weeks ago MasterCard and Visa jointly announced that they would be testing NFC payments through Host Card Emulation, eliminating the need for issuers to rent a secure element from Telco’s. This could be a big boom for mobile payments as it transforms the model for deploying NFC-based apps and wallets. With Visa and MasterCard offering Host Card Emulation (HCE), issuers will be able to directly place their MasterCard and Visa branded cards on apps in the Android 4.4 operating system without partnering with Telco’s. Retailers will also be more interested now in NFC that the business model has been simplified, and the tap-and-go technology enables a better in-store shopping experience.

While it seems plausible that mobile payments would have already occurred, chaos and banks and Telco’s refusing to work together shut down the idea. However, thanks to Mastercard and Visa’s presumed streamlining of future mobile payments, the idea looks close to coming to fruition. While there will likely be kinks along the way, the simple fact that mobile payments – simplified mobile payments – are soon to arrive is fantastic news for all consumers and vendors.

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