Will HCE be a game changer for NFC mobile payments in Italy? by Davide Steffanini, Country Manager Visa Europe Italy

A new technology standard was set in 2014 that could make it easier for Italian consumers to make contactless mobile payments with their Visa cards: Host Card Emulation (HCE). HCE has the potential to help remove some of the barriers to NFC adoption in our country, thus allowing a higher penetration of mobile payments.

So what is HCE, and why do I think it will be successful in Italy?

HCE as a technology has been adopted by Google in its Android OS, enabling cloud-based payments through the virtualisation of a payment card into an NFC-enabled smartphone. Traditionally, the payment credentials have to be stored on a secure element, either within the device or on the SIM card. Cloud Based Payments with HCE on the latest Android OS is different – the credentials for the mobile payment app are cloud-hosted and this means that retail banks can implement a mobile payment proposition for their customers, in a relatively autonomous manner. Many argue that this leads to a reduced complexity in the payments supply chain, and could therefore encourage more services to market. What’s certainly true is that these new routes to market and increased service availability will help benefit the entire ecosystem.

Cloud Based Payments could definitely have a great impact on the Italian mobile payments ecosystem. In Italy the number of smartphones has increased dramatically over the last few years. 2013 represented a turning point when smartphones became more numerous than the traditional feature phones. This rate of growth is increasing at such a pace that by 2016, one out of two Italian consumers will have a smartphone*. If we combine this growing appreciation of smartphones, with the great success of prepaid payment cards we have seen in Italy, it’s impossible to avoid seeing the potential for delivering some amazing payments services through the mobile device in our country.

Many mobile payment trials and pilots have been carried out in Italy by banks in the last few years, both with bridging technologies and SIM-based implementations, in cooperation with different mobile network operators. Most implementations so far have focused on the well-established SIM-centric model, while others have adopted a “wait and see” approach while they waited for the market to mature further. The first Italian banks that have begun to move in the Cloud Based Payment territory seem to be those with a long history of working in mobile and internet banking, as well as those with the highest penetration of ‘early adopter’ customers. The first Cloud Based Payment services are expected to deploy very shortly, and we should see these services live through at least one member bank by the end of the year

Here at Visa we continue to welcome any secure, feasible, easy and convenient payment standard. We’re huge fans of Cloud Based Payment, which enables easy deployment to large numbers of end users. We’ve created tools and applications that allow our issuing banks to roll out cloud-based mobile payments – just like we do for all the other routes to market, whether it’s SIM-based, or using an embedded secure element.

There’s a lot of hunger for mobile payments in Italy. This is both an interested and an interesting market, which is more than ready to deploy across the different platforms, especially when they deliver the ability to target customers regardless of the phone they carry. As adoption becomes more and more prevalent, merchants and consumers will gain confidence in mobile payments – that offer not only opportunities for NFC transactions, but also for mobile commerce.

* Source: Mobility Report by Ericsson