HCE security issues remain to be resolved NFC chip vendors strongly promote secure elements

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Near Field Communication (NFC) solutions that use secure elements to implement mobile payment applications are still the mainstream this year. Although the NFC Forum and the two major credit card organizations Visa and MasterCard have expressed their support for the Host Card Emulation (HCE) technology promoted by Google, its insufficient security measures have caused concerns among mobile payment or identity recognition (ID) application manufacturers about its adoption. Therefore, in the short term, NFC solutions that are combined with secure elements such as user identity modules (SIM) cards and microSD cards will still dominate the market.

Ling Limin, technical marketing manager at STMicroelectronics, pointed out that NFC technology is a killer application for offline commerce (O2O), enabling ideal and fast small-value payments or electronic ticketing functions.

Ling Limin, technical marketing manager at STMicroelectronics (ST), said that HCE technology is still in its infancy, and although the Android 4.4 operating system KitKat application programming interface (API) supports HCE technology, there are still many weaknesses in the implementation of mobile payment applications. For example, consumers cannot perform mobile payment functions when their mobile phones are out of power, and electronic ticket applications in transportation require longer execution time than hardware solutions, all of which will hinder the popularization of this technology in the market.

In fact, the biggest headache for bankers and electronic ticket issuers is the lack of data security protection measures of HCE technology. The recent Heartbleed Bug incident has caused a lot of controversy, triggering global attention to information security issues. Similarly, if consumers use HCE technology to place transaction or identity identification data in the open operating system Android, they will have to bear high information security risks. However, Google is still in the stage of formulating and promoting HCE technology security standards with bankers and other payment-related industry representatives, and it will not be available in the short term. Therefore, mobile payment applications implemented using HCE technology will not be launched in large quantities in the short term.

Ling Limin pointed out that China UnionPay has cooperated with China Mobile to launch an NFC mobile payment solution using the SIM card as a security element. In other words, users must use a SIM card issued by China Mobile to activate the mobile payment function, and China Mobile can also obtain a small transfer fee.

The cooperation between China Mobile and UnionPay quickly led to a trend of imitation. At the end of March, Far EasTone Telecommunications and the Taiwan Cooperative Bank jointly launched Taiwan's first NFC Visa EasyCard mobile credit card, which put the credit card and EasyCard functions on the same NFC SIM card. Many mobile phones already support the above functions, including HTC Butterfly S, HTC One Max, Samsung GALAXY S4, Sony Xperia Z1, etc. This is undoubtedly an important declaration by telecom operators to defend the right to serve in the mobile payment market.

Ling Limin believes that the cooperation model between China Mobile and UnionPay has become an industry benchmark, and the two parties also have a complete set of standards for the flow of funds and information. Compared with HCE technology which is still in the drafting stage, bankers and telecom operators hope to follow the path of China Mobile and UnionPay, combining security elements such as SIM cards or microSD cards and NFC chips to create mobile payment solutions to ensure profit sources.

Ling Limin pointed out that STMicroelectronics is still optimistic about the development prospects of secure elements in the NFC mobile payment market, so it will recommend to customers both NFC controllers and NFC solutions suitable for secure elements. Starting from the second half of this year, NFC will become a standard feature of mid-to-high-end mobile phones, so the battle between telecom operators, bankers, manufacturers supporting HCE technology and related software developers will become more intense, laying the groundwork for future changes in the mobile payment market.

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