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Rising Contactless Payment Infrastructure Deployment

Contactless payment technology is applied when the user fulfills a transaction by tapping a card or mobile phone handset against a Chip & PIN machine, rather than swiping a debit or credit card through the Point of Sale (POS) terminal.

According to the latest market study by Juniper Research, the number of contactless transactions via mobile handsets will exceed 9.9 billion globally by 2018 -- that's up from just over 3 billion this year.

Their study findings found that two key disruptive factors -- HCE (Host Card Emulation) and the anticipated launch of Apple’s iWallet -- were likely to spur additional contactless transaction growth in the medium term.

HCE transforms a smartphone app into a virtual smartcard, so that for NFC (Near Field Communication) transactions, the SE (secure element) no longer has to be physically present in the handset.

How Standards Enable Market Development

According to Juniper's assessment, utilizing a remote HCE-based SE can reduce time-to-market and means that banks can retain control of their customers without needing to partner with mobile network operators.

They also observed that the recent decision of Visa and MasterCard to endorse HCE standard should reassure banks who may have been concerned about the relative security of transactions.


Meanwhile, Juniper noted that it's increasingly likely that Apple will introduce an iWallet in Q4 2014 -- which enables secure contactless payment via BLE (Bluetooth Low Energy) and a second air interface.

Juniper believes that Apple’s entry into proximity payments could drive growth in the wider contactless space by increasing consumer awareness of the process, which may indirectly benefit the adoption of NFC.

Mobile Network Operator Opportunity

However, to put the upside opportunity into perspective, Juniper warned that while the industry as a whole would receive a boost from these factors, mobile network operators would likely lose out.

"With the emergence of HCE, the operator role at the heart of the NFC value chain is no longer sacrosanct. Banks can now go it alone and as a result the scale of the operator opportunity is significantly diminished," said Dr Windsor Holden, research director at Juniper Research.

Once again, mobile network service providers must attempt to add-value to the mobile app ecosystem -- beyond their prior attempts to become the go-between gatekeeper. In developed markets, they need to find creative ways to ensure that they aren't merely the transport for contactless payment transactions.

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