Why So Slow? Historical Barriers to Mobile Payment Adoption

In Host Card Emulation, Insights, Mobile Solutions, Other Secure Element Models by Giles Sutherland

It’s something those of us in the financial industry have questioned dozens of times, and one of the most perplexing puzzles in payment technology: if smartphones are ubiquitous and point-of-sale contactless acceptance is prevalent in so many markets, why have we not seen any truly successful mass-market NFC mobile payment deployments?

by Giles Sutherland
Vice President Strategic Alliances

Indeed, each year more and more pieces fall into place for mobile payments to become a widespread reality, and pundits have been heralding the sweeping uptake of mobile payments for a decade, but to no effect.

It’s been said many times before, but I’ll go on record to say 2015 is the year that will truly change. New technologies, and in particular Host Card Emulation (HCE), are delivering the tipping point we’ve been waiting for.

But what’s prevented mass adoption up to now? Let me unravel it. There are three barriers that have stood in the way of mobile NFC payment adoption:

1. Too many middlemen

Banks, telephone companies, handset manufacturers… Historically the number of big players required to integrate payment technology with smart phones has introduced layers of clunky bureaucracy, technical complexity and legacy software. That old model relies on elaborate partnerships between banks, telcos and third-party service providers, which not only makes for an expensive and lengthy process, it also leads to fragmented offerings. Under the old model banks can only serve the fraction of their customers who happen to subscribe to a certain mobile service provider—hardly a compelling proposition for the banks who are funding.

2. Bad user experience

With each new layer banks lose control—over the services they provide and the experience they can offer customers. Rather that seamless integration with existing mobile banking apps, historic models required users to install new SIM cards, download and use additional apps, and jump through endless hoops to activate the product. Introducing so many barriers negates the ease of paying with your phone. Furthermore, all of the energy expended on bridging the technical and commercial gap between banks and MNOs leaves little room to drive added-value features like loyalty or rewards. Real consumer adoption requires a model that’s streamlined, scalable and reliable—one consumers know will work every time, everywhere, and offer valuable perks.

3. Hardware Secure Element Constraints

The SIM card has been the default Secure Element for many years now. It seems logical: they are highly secure and every phone has one. But integrating payment credentials with the SIM means complicated negotiations around SE access and ownership of end user. And because SIM cards have limited storage, there are significant constraints on the services that can be (economically) made available to consumers.

For mobile payments to reach mass scale, banks need to be on board; and to really get behind mobile payments, banks need to know they can offer a service that’s valuable enough to keep them top of wallet. HCE gives players at every level a secure and affordable platform to move mobile payments from a technical fantasy to a mainstream reality.