Virtual NFC Tech Will Prove Disruptive, ABNote's CEO Says

Host Card Emulation technology, which allows mobile devices to emulate a secure Near Field Communication transaction, is catching on fast so fast that it would be unwise for any company to ignore it, says ABNote CEO Steven Singer.

"Until recently, NFC mobile payment required the presence of a physical secure element in the smartphone. Interest in NFC has grown rapidly and is becoming highly disruptive to those that banked on NFC," Singer said during the Cartes America 2014 conference last week in Las Vegas.

ABNote recently announced a partnership with SimplyTapp, an NFC technology provider, to support Host Card Emulation (HCE). HCE eliminates the requirement to access a mobile device's secure element, which is typically guarded by the carriers. Google uses HCE in its Google Wallet app, and Visa and MasterCard are encouraging banks to use the technology as well.

But not everyone is on board with HCE. SIMAlliance, a SIM card manufacturers'  association, recently published a paper claiming HCE is "vulnerable to malicious attack," and the telecom-led Isis mobile wallet venture plans to use HCE only for non-sensitive accounts such as loyalty programs.

Singer thought little of their security concerns, calling them "a misguided effort to protect turf … I suspect the last company that sold horse-drawn carriages says the same thing about the automobile," he says.

Cloud-based technology can quickly respond to security threats, as well as mitigate risk for the user's device, Singer says, and security is improved even more when HCE is paired with another payments technology such as beacons and EMV-chip cards.

"It's possible to disable the payment remotely. This combined with EMV gives consumer the peace of mind they are seeking for mobile payments," he says.

Beacons, which are driven by Bluetooth Low Energy (BLE), are devices that are placed within a store to communicate with an app on a shopper's phone. Beacons have a longer range than NFC and have drawn the attention of PayPal, shopkick and many other payment companies as a way to support payments and targeted marketing. Apple's version of this technology is called iBeacon.

"A convergence of HCE and iBeacon can offer a better experience for NFC end users," Singer says. "That is what I suspect Apple had in mind." (Apple does not support NFC in any of its iPhones, but is reportedly planning to use NFC as part of an upcoming service in China.)