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72 billion to 195+ billion a year by 2020. Yes, you read it right the first time! This is how much the mobile payment industry will grow as per a recent report by Juniper Research (Source: Juniper Research – Mobile Commerce Markets: Key Sector Strategies, Opportunities & Forecasts 2014-2019 – This finding is the latest evidence that mobile payments will continue to gain traction despite the large number of consumers who continue to resist mobile commerce.

The predicted surge is credited to multiple factors including Near Field Communication (NFC)-enabled Apple and Android devices, smartphones with GPS capabilities, cheaper/reliable/faster cellular data networks and the evolution of Host Card Emulation (HCE) technology – the secret ingredient of this ecosystem. It will result in increased adoption of new proximity payment solutions by banks, retail stores and travel/transportation organizations alike!

With the launch of Android 4.4 mobile operating system, developers now have the option of designing mobile apps that can leverage HCE technology. HCE allows for NFC reader to engage with a secure element, which in turn talks to the appropriate application on the user’ smart phone. Apple and other mobile OS firms are expected to follow suit and help set this as a standard for contact-less NFC-enabled payments.

Here are four real world applications using HCE – enabled proximity payments for 2015:

Host Card Emulation (HCE) technology will drive mobile payments in 2020

  • Not just payments, but engagement – Financial institutions (cards, banks, retailers and payment firms alike) would benefit from thinking beyond the obvious contact-less payments. Ease of payment will be achieved throughout the eco-system but the real benefit can be realized by engaging the customer. Think big data. Think insights. Think coupons. Think impulse. Basically, it’s all about influencing the buying experience based on customer location, context, buying behavior, weather, demographics and lifecycle.
  • Digital transit cards – We can expect public transit systems in all leading economies to deploy HCE-enabled applications that will enable customers to simply tap their devices for access into and out of the transit system. No more buying tickets/cards or recharging your cards. This approach will enable transit firms to directly link the customer’s bank account or debit card to pay for usage. Micro-payments. Transit firms will be able to avoid credit card fees all together. Better efficiency ratios for them. Maybe we will experience reduced fares in 2020. More savings for the customer!
  • Digital loyalty cards – Imagine, no more key chain tags. No more QR codes. No more sharing your phone number in public places to do a reverse lookup of your customer ID at the cash register. No more carrying around loyalty cards. Just HCE-enabled apps on your phone that automatically sense iBeacons/NFC readers and pop-up notifications on your mobile device to showcase preferred customer loyalty discounts/coupons and weekly specials. In short, think about a redesigned Starbucks loyalty app that does everything without launching or clicking anything!
  • Digital monetization via media-meshing and media-stacking – With the advent of the “free web”, digital content (music, content, video, entertainment) has been the most difficult to monetize. This is bound to change. Not because of HCE or NFC, but because of deep user engagement, loyalty, coupons and because of the customer’s new found comfort in mobile (micro) payments. We are all being prepped over the past few years to vote on American Ideal (Media-Meshing). We also multitask occasionally while watching TV. Now, just imagine watching TV or listening to the new Meghan Trainor “All about the bass” mega-hit song on the radio and being prompted an offer to read/view an exclusive interview with Meghan where she explains how/why/when/what motivated her to write this song? Your cost for this exclusive interview – $0.05 cents! Don’t know about you, but I would buy it. So would at least 10% of the millions of fans she has right now! That’s $5K for a piece of content for which the publisher gets nothing today.

We will begin unearthing new customers – those who had never engaged in buying digital content in the past. We are talking about all sorts of folks here – the obvious under-banked, un-banked, currently unserved, and folks that did not earlier have a credit card or were lazy about typing their credit card number to make a purchase or were simply afraid to share credit card details online.

The possibilities are endless.

Read to know more:

4 Reasons Why Digital Wallets Are Disruptive


About the Author

Indy Sawhney
General Manager & Client Partner Banking & Financial Services

Indy Sawhney anchors Mindtree's strategic account relationships across Americas. Over the course of his career, Indy has helped various clients with conceptualizing and delivering game changing strategic solutions spanning enterprise digital strategy, testing & automation strategy, infrastructure solutions/services, cloud services, end user computing, master data management, enterprise integration/service strategies, enterprise mobility solutions, data analytics services, new integrated supply chain, trade promotions management/analytics, etc. Indy works closely with client stakeholders across leadership, technology and functional roles. His experience & hands-on approach helps him better understand clients' business needs/issues to conceptualize IT solutions that can provide a strategic advantage to client's business. Indy is an engineering graduate and a post-graduate in management from Kellogg School of Business, Northwestern University, Illinois.

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