How HCE helps banks leverage the mobile app revolution

Marcelo, great post! This is one of the reasons why, I think, banks will generally be reluctant to provide third party access to their issuers via HCE. I think banks will focus on providing payment capabilities within their own apps - this will also ensure that banks collect much more customer data and improve loyalty. Actually, this is likely to appeal to customers too - as a consumer you would know that there is one app (you bank's app) that can be used to pay at ANY retail location.

Hi Andrei, thank you for your comment. Let me tell you I agree with you 100% in the short term. Yes, they first need to focus on their apps and enabling their apps to become repeat use transaction tools for consumers, protecting their brand, improving their customer engagement and adding lucrative VAS. But that's only the first step. The app ecosystem is very, very big, and banks, as powerful as they are, are only one actor in the payments ecosystem. Merchants for example, by their role in acceptance hold trump cards that banks need. It is in the bank's interest to bring them and others into programs and enable them and their apps. Banks need to think how they can scale their mobile commerce initiatives and increase card distribution, usage and differentiation. The back-end tokenization, cloud-based and on-device SW and risk management that enable secure HCE transactions allow banks to think of their app, not only as a single app, but as a hub for mobile commerce innovation. If banks don’t enable the ecosystem at large, someone else will.

Yes, some segment of customers will look first to their bank's mobile application when they think about secure payments at retail.

Other segments of customers will be actively engaged in the merchant's application during the shopping experience and merchants will work to keep them there when the shopping experience moves to a payment event.  Whether for the delivery of ads and offers to drive up revenue per visit or to steer towards low cost payment options, the merchant will have an incentive to keep payment within the app where they can shape behavior.

Said differently, great point of view Marcelo.  As much as one might want the payment to be linked to the bank app in all cases, it's not likely to work that way and the points raised in the article about the secure distribution and management of the payment credential are spot on.

thanks.

Exactly Hartung! Thank you for your comment. It's not intuitive to think about that looking from a bank's perspective of today's challenges. But when you look at the booming app ecosystems and how every brand wants control over their customer relationships, there is no way a bank can hold that. But they can enable if they so choose...

Gentlemen, sorry, but I will have to disagree with your comments strongly – and this is why.

1. Merchant wishing to enable NFC payments within its own app will have to establish HCE link with EVERY issuing bank in the country before it can tell its customers that all can use it. This is not going to happen because a) it’s a huge effort which is going to be extremely expensive even for tier 1 retailers even in compact markets and b) not all issuing banks will support HCE even in the next 7-10 years. Otherwise, say, Walmart app will end supporting cardholders of, say, three issuing banks and the marketing message will be: “Walmart app with in-store mobile payments – now available for cardholders of Bank A, Bank B and Bank C!” J That’s not going to go down too well… I know, I know, Marcelo – this where Sequent is supposed to come in J
2. Banks have absolutely no incentive to provide retailers with access to cardholders via HCE. By doing so, they lose out on loyalty, on customer data and – most importantly – on higher card-not-present interchange fees. All that an additional cost of supporting relationships and, potentially, reduced security. I just don’t see an attractive value proposition here, sorry.
3. Finally, think about me as a consumer. Am I going to waste time thinking whether I can pay with the retailer’s app at its store for each retailer and load my card into each app? Definitely not for all – perhaps for one or two most regular ones. But I will be happy to use my bank app knowing it is accepted universally at every outlet where my card is accepted.  

 So the way I see it for the next 7-10 years: retailers have no access via HCE and develop own app using card-not-present via own hardware infrastructure – like Starbucks or Powatag.

Andrei,

Thank you for your comments and candor. I guess we will agree to disagree.

Banks do not operate in a separate bubble from other players. They have strong partnerships throughout the ecosystem and enabling these partners as the first step towards an open platform is an obvious first step. The technology to federate cards easily to apps is out there. And as I mentioned the app ecosystem is too dynamic and if they don't enable the ecosystem at large, someone else will...