With every major device out on the market now containing an NFC antenna, one of the hottest topics in the mobile industry right now is mobile payments. The idea of being able to leave your wallet at home and strut around paying for things with your phone is an inherently intriguing proposition, one that taps into that desire many of us have to experience the future we imagined as kids. Much like the jump from paying with cash to being able to pay with a credit card, or your first experience with Uber and just walking out of the cab, it just feels cool to be able to leap to that next level of paying for something. But while the majority of smartphone users may think that reaching this next evolution in payments is as simple as installing something on their phone that talks to that NFC antenna, the reality is that, under the hood, supporting mobile wallets is extremely complex.
“Not helpful..Need an NFC enabled SIM. Galaxy Note 3 has NFC built in, I should not need to get a new SIM!”
“C’mon [bank] where are the Nexus devices? The devices the helped pioneer NFC on mobile.”
“Serious lack of cards You need to add much… much more cards. 1 star.”
The above comments are taken from a handful of mobile wallets that are out on the market at the moment, and they touch on a lot of the complexities that make delivering functioning mobile wallets so difficult. In particular, the necessity of NFC-enabled SIMs in some wallets, device/carrier support, and a lack of support for multiple banks in a single app, are all road blocks in the current landscape that prevent mass adoption of mobile wallet use. While the industry continues to evolve and work on ways to bypass many of these issues (a topic for another day), there are still products on the market and companies out in the wild that face the challenge of educating users on the why’s behind the error messages users see on their screens. So let’s lift up the hood and take a look.
The Necessity of NFC-enabled SIMs
One of the most frustrating experiences for a first-time mobile wallet user is finding out that they have everything they need except for an NFC-enabled SIM. The mere idea of an NFC-enabled SIM is most likely totally foreign to them. After all, if they have a NFC antenna on their phone, what’s the point of having a special SIM as well? To understand, here is a quick rundown of how most mobile wallets on the market currently work.
In order to safely send and store sensitive information like payment credentials, you need a safe place to put them. NFC-enabled SIMs provide a safe area, known as a Secure Element (SE), where these credentials can be stored. This allows banks to pass information to your carrier, who can then send the information straight into your SIM’s SE. From there, only apps with the correct security information are allowed access to talk to those specific credentials – so even if you have two mobile wallets with separate credit cards added, each wallet would only be able to talk to their specific card. All of this adds as an extra measure of security to keep your payment credentials safe and in the right hands.
As you’re now aware, it is the SIM card that stores the credentials for most mobile wallets out on the market today. This means that the device’s ability to communicate with the SIM’s SE and the carrier’s ability to push your bank’s credentials to that SIM are now factors that need to be taken into consideration.
In Android’s case, there is a key library that allows a device to communicate with a SIM’s SE. This library is simalliance’s Open Mobile API, and by default it is included in several manufacturers’ versions of Android software – Samsung, LG, HTC, and Sony usually include it. Google, however, is primarily in favor of app makers taking a newer approach to NFC payments that do NOT involve SIM cards*. As a result, Nexus devices and any Android phone running stock Android will not have this library included, and as a result the device is unable to access the SIM’s SE. Without this key link, it becomes impossible for the affected mobile wallet apps to access a user’s payment credentials.
Since the carrier is responsible for pushing credentials down to the SIM card, banks need to form working relationships with carriers in order to set up the necessary contracts to support the pushing of credentials from the bank to their customer’s SIM card. Since these arrangements can often be complex and/or expensive, it can be difficult to secure contracts with every carrier available in the American or Canadian market place. As a result, many apps launch with only one or a handful of supported carriers.
*The Nexus 6, surprisingly, does have the Open Mobile API.
Lack of Support for Multiple Banks
Lastly, in the Canadian market it seems like every major bank is coming out with its own mobile wallet. “Why”, most consumers think, “does there have to be a separate app for every single bank… why isn’t their support for all banks in a single app?”. The answer, once again, lies in the complexity of banks and their back end systems. Every single bank has its own unique way of managing user credentials, and as a result there is no single solution that can automatically hook up to every bank’s back end. Integrating even two bank’s systems together to work in a single app is a rather daunting task, let alone all of them. The result is several banks coming out with their own proprietary mobile wallets, while other entrants such as mobile carriers come out with apps that don’t support any banks at all. While this is ultimately a frustration for someone that may bank at two or more institutions, it is an unfortunate reality of the current banking landscape.
Though the above elements are road bumps for the current generation of mobile banking apps, the industry has already made large steps in directions that help alleviate several of these concerns. Host-Card Emulation (HCE) is a method of having the device itself act like a secure payment credential, and eschews the need for NFC-enabled SIMs and device/carrier restrictions, as the banks can then provision payment credentials directly to the device – no SIM card, no carrier support required.
While the current mobile wallets on the market may not be able to adopt this new technology immediately, it is the new direction that the industry as a whole is moving towards. In the near(ish) future, consumers will be able to look forward to being able to add their payment cards on any phone with an NFC antenna, with any SIM card, from any Carrier. Getting all of the banks to play nice and work with each other is a beast of its own, but the pieces are beginning to fall into place. Keep an eye out on the mobile payments industry, the future is closer than most of us think.