Out-Law News 2 min. read

Cloud-based contactless mobile payments scheme backed by Visa and MasterCard

Visa and MasterCard have announced their backing for a new cloud-based contactless payment scheme.

The companies said their payment mechanisms will operate in conjunction with host card emulation (HCE) technology, which allows for contactless payments to be made directly between consumers' banks and retailers using 'near field communications' (NFC) technology.

HCE allows the sensitive data used to facilitate transactions to be stored on, and accessed from, cloud servers rather than a mobile device. At present banks rely on mobile network providers acting as an intermediary to transmit the necessary data to sanction contactless payments using NFC technology.

NFC technology allows contactless payments to be made using radio waves to transmit data between those devices and NFC-enabled point-of-sale terminals – this has become common on plastic cards, but relatively few mobile devices currently support it. To effect a payment, the compatible device and terminal must be in close proximity in order for there to be a connection and for the data transmission to work.

Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that Visa and MasterCard's backing of HCE technology could help to grow backing for NFC-rooted mobile payments following uncertainty about its cost-effectiveness and take-up.

"Adoption of HCE will make it easier for NFC to work through phones as there will be one less technical hurdle to overcome to facilitate each payment," McFadyen said. "HCE removes a bit of the hardware involved in the current payment process from the phone and places it into the cloud."

McFadyen said that Visa and MasterCard's backing of HCE and NFC technology could help encourage mobile device manufacturers to enable payments by NFC.

"What this does do is put mobile payments back into control of the schemes, which some will see as limiting, but it will make it an easier sell to persuade phone manufacturers to include an NFC component," he said. "It should bring increasing consumer adoption, but these changes will be incremental rather than revolutionary. Hopefully standardisation will be easier and less troublesome as the technology involved in the NFC payments process is going to be more software, rather than hardware, focused."

James Anderson, group head of emerging payments at MasterCard, said: "Consumers are now shopping and paying in whatever way best fits their needs and lifestyles – and from every device they own. To meet their expectations for convenience, we need to accelerate the availability of services in the market. The use of HCE provides a very attractive way forward to launch an increased number of NFC-based offerings. We continue to set standards and deliver solutions to our partners and customers that deliver great experiences for safe and secure digital payments.”

Visa said that its HCE-conforming payment systems would be protected by "several layers of security".

"One-time use data, real-time transaction analysis, payment tokens and device fingerprinting technology make up a multi-layered defence against unauthorised account access," it said.

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