2014 – The Year Apple Pay, Host Card Emulation (HCE) & Tokenization Move Mobile Payments Forward

In Host Card Emulation, Insights, Mobile Solutions, Tokenization by Paul Brandner

Carta’s top leaders talk about the most important things that happened in payments in 2014


by Paul Brandner
Director of Marketing

It has been a big year in payments. Mobile apps moved beyond balance-checking and took a huge jump towards replacing your wallet. I spoke the Carta’s leadership team to get their reflections on the highlights:

1. Mobile payments go mainstream

It’s easy to say that Apple Pay is the biggest thing to happen in payments this year. But what really matters, says Carta’s CTO Rui Mendes, is that it’s a very loud proclamation that 2014 is the year mobile payments matured and hit the mainstream.

“Thanks to the weight of their brand, the arrival of Apple Pay brought a huge shift. Apple carries a lot of trust and, regardless of their approach, them moving into the space gives credibility to mobile payments,” says Mendes. It means consumers are increasingly at ease moving beyond simple closed-loop transactions at the Starbucks till, towards higher value transactions at any local vendor.

“Mobile payments are here to stay,” Mendes affirms. “They’ve been around for ages, but this year they stuck.”

2. Best practices established

There’s something else Apple contributed this year—their decisions solidified best practices, and a model that should be expected from other payment products from now on. The industry was collectively holding their breath, explains says Carta’s CEO, Brian Semkiw. “No one was charging forward until Apple moved.” First, he says, Apple’s use of tokenization established the de facto benchmark for security in mobile transactions. Second—though there was much speculation as to whether they’d use beacons or some other contactless tech—Apple chose NFC and declared it the only method. And thirdly they designed Apple Pay to be open to all the networks.

These three things will be hallmarks of any successful digital wallet in the future, Semkiw predicts. “Apple made it clear: the method of contactless will be NFC, it will tokenized and it will be open. Now everyone else can build their systems.” But he warns: “From here, merchants are the key: they need to put the physical technology in place to accept this form of payment.”

3. First HCE transactions performed

The year kicked off with big news at Mobile World Congress: Visa and Mastercard announced their support for HCE technology. “And right on on the heels of that announcement, the first live commercial transactions using HCE were performed—on Carta’s platform,” says Semkiw. Soon after the announcement, two major banks—Westpak New Zealand and Banco Sabadell in Spain—were performing HCE transactions, in the wild. Both banks were able to move their credit cards into handsets, without the complexity of including a handset manufacturer.

4. Banking the world

The 75% of the world’s population with no credit card and no bank account simply have no use for Apple Pay or similar products. This group does, however, have mobile phones, and for them, prepaid is bread and butter.

“Prepaid has been on a growth rate of 100% per year for some time now. Its growth is meteoric, but consistent,” says Semkiw. What set 2014 apart is wide scale adoption of prepaid on mobile applications. Now payroll, remittances and daily payments are all happening from simple feature phone applications. For unbanked populations, a mobile is becoming akin to a personal, portable bank.

Most will agree, 2014 was a very exciting year in the payments world. This isn’t something that has happened overnight though, it is the fruit of a lot of development and hard work. We can’t wait to see what’s in store for 2015.