Equens: HCE mobile payment service

By combining forces and mobile technologies Equens takes the next step in mobile payments and digital wallets.

Being able to keep up with the market and stay relevant in the mobile payment area is a major challenge for many banks. Consumers who are always online expect 'anywhere, anytime, anyhow' services that are simple and safe. Wallets and in-app payments will come to account for a substantial part of all transactions. The mobile ecosystem is becoming more complex, new regulations are popping up and at the same time less traditional 'new' players are entering the payment market. These challenges are difficult, but there is some good news too, as mobile technology also provides opportunities, new revenue streams and enhanced user experience.

Mobile phones have become increasingly important in the lives of consumers. The next big challenge is to introduce a secure way of paying using a mobile phone without the business model becoming too complex. The solution that seems to be most promising is host card emulation (HCE): a software-based solution where payment credentials are stored in a remote/virtual cloud, using near field communication (NFC) technology. HCE emulates a card payment on a mobile phone via a remote, secure element and provides the functionality to complete a payment transaction using a common and standard EMV contactless payment terminal.
Too complex and too expensive

Mobile payments were introduced years ago. Initially, the solutions were mostly focused on hardware secure elements such as the SIM card or embedded technology to store the payment credentials. This approach still required the cooperation of telecoms providers or handset manufacturers, making the mobile payment chain unnecessarily complex and expensive. To speed up mass market adoption there was a need for a more autonomous solution. Cloud solutions that made it possible to store payment credentials virtually online began to gain traction.

There was some hesitation in the market at first due to standardisation and safety concerns. These are mostly dealt with by the implementation of additional security measures such as white-box cryptography. The adoption by MasterCard and Visa, followed by the establishment of regulations for HCE/cloud solutions and Samsung's announcement that it would support HCE, formed the definitive push towards a modern and robust mobile payment solution, making mass market adoption irreversible.

A software-based solution in the cloud

HCE is the technology that allows a payment card to be simulated on a mobile phone. This makes it possible to carry out contactless EMV transactions using a mobile phone that supports HCE technology (mainly Samsung devices) on a NFC point of sale terminal in a store. It relies on data that is pre-loaded onto the mobile device by a credential management system (CMS). This means that part of the secure element (where the payment credentials are stored) is now stored safely in the cloud as a so-called software-based solution.

Equens' HCE mobile payment proposition consists of a modular portfolio that contains various service building blocks:

  • Mobile card issuance and management: all necessary issuance and life-cycle management activities needed to provide banking consumers with the real-time use of virtual cards are provided in a secure way.
  • Transaction conversion or authorisation on behalf of the bank: to prevent a bank from putting too much pressure on its authorisation host, Equens can convert all HCE-specific peculiarities into a regular EMV card transaction. In addition to this conversion, Equens can also provide full EMV authentication and/or authorisation on behalf of the bank, depending on the bank's requirements.
  • M-wallet services: Equens can provide a highly customisable, 'ready to use' mobile wallet with an integrated mobile payment function (currently based on HCE). This wallet has a user-friendly installation process, provides a clear overview of transactions and can be expanded to include additional functions such as a P2P payment service, budget control functions, loyalty and couponing services, and more. The wallet can be easily integrated within an existing mobile banking app on request. This is also possible if a bank already has a third-party wallet provider, as the various mobile payment services have been developed in such a way that they can be easily integrated into an existing wallet. This also enables banks to choose their specific set of required services.
  • HCE plug-in: if a bank would like to use a wallet developed by another third-party supplier, the software developer can provide a so-called 'HCE plug-in'. This service can be easily integrated into an existing mobile wallet using a software development kit, and can communicate securely with a CMS and the POS.
  • Value added services: Equens can also provide additional services such as data analytics, dispute management, and risk and fraud services.

Minimise impact with a 'one-stop-shop' approach

Equens can deliver all of these services, and by choosing it as a mobile payments provider and future-proof business partner, banks can benefit from the minimisation of pressure on the bank's systems, ensuring seamless mobile payment services within a robust and trusted environment. Equens ensures risk mitigation and shortens the time to market.

One bank in the Netherlands saw the possibilities and recently signed a contract for this HCE mobile payment service. It's the first time that this portfolio is being implemented in the Netherlands. Equens will provide mobile card issuance and management, and transaction conversion to ensure that the bank's authorisation is not affected. In addition, a HCE/MPA plug-in is provided, which ensures that the service can be easily integrated into the bank's mobile wallet. Other banks in Finland, Germany and Italy have also implemented parts of the mobile payments portfolio mentioned above.

Embracing innovation by combining forces

However, the innovation doesn't stop at the current portfolio. The EU market is opening up to new players such as ApplePay and SamsungPay, which are using EMVco tokenisation. These parties are allowed to introduce payment services through their wallets. With these big players entering the EU market, the banking community is preparing to shift to the next gear in order to face and embrace this fierce competition.

This could result in companies teaming up with innovative suppliers of wallet technology, HCE software and tokenisation experience. When these services do not form part of the core business, it is wise to bring together the benefits of different suppliers in an efficient way. Equens does exactly that, and with over 40 years of experience in processing payments and combining forces with third-party developers and suppliers such as BellID and Vipera, it can act as an aggregator to keep developing conforming new technologies. Access to this comprehensive portfolio can relieve banks of the complexity of combining and managing all the different elements themselves, enabling them to focus on their core competences.

As the demands and possibilities in the market are changing rapidly, Equens is taking its efforts to become a future-proof business partner to the next level, and is currently expanding its mobile payments portfolio, not only with the white-label wallet and HCE, but also with secure EMVco tokenisation services, a P2P mobile payment service and a remote/online mobile payment service. The initiatives that are being undertaken in the European context show that Equens is capable of following the latest trends in mobile payments and is at the forefront when it comes to integrating innovative technology.

Equens can provide a highly customisable, ‘ready to use’ mobile wallet.