Host card emulation

Host card emulation (HCE) is the software architecture that provides exact virtual representation of various electronic identity (access, transit and banking) cards using only software. Prior to the HCE architecture, NFC transactions were mainly carried out using secure elements.

HCE enables mobile applications running on supported operating systems to offer payment card and access card solutions independently of third parties while leveraging cryptographic processes traditionally used by hardware-based secure elements without the need for a physical secure element. This technology enables the merchants to offer payment cards solutions more easily through mobile closed-loop contactless payment solutions, offers real-time distribution of payment cards and, more tactically, allows for an easy deployment scenario that does not require changes to the software inside payment terminals.

The term "host card emulation" (HCE) was coined in 2012 by Doug Yeager and Ted Fifelski, the founders of SimplyTapp, Inc., describing the ability to open a communication channel between a contactless payments terminal and a remotely hosted secure element containing financial payment card data, allowing financial transactions to be conducted at a point-of-sale terminal. They have implemented this new technology on the Android operating system. At that time, RIM had a similar functionality, calling it "virtual target emulation", which was supposed to be available on the BlackBerry Bold 9900 device through the BB7 operating system. Prior to HCE, card emulation only existed in physical space, meaning that a card could be replicated with multiple-purpose secure element hardware that is typically housed inside the casing of a smart phone.

After the adoption of HCE by Android, Google had hoped that by including HCE in the world's largest mobile operating system (which by that time covered 80% of the market), it would offer the Android payments ecosystem a chance to grow more rapidly while also allowing Google themselves to deploy their Google Wallet more easily across the mobile network operator ecosystem. However, even with the inclusion of HCE in Android 4.4, the banks still needed the major card networks to support HCE. Four months later, at Mobile World Congress 2014, both Visa and MasterCard made public announcements about supporting the HCE technology.

On December 18, 2014, less than ten months after Visa and MasterCard announced their support for HCE, Royal Bank of Canada (RBC) became the first North American financial institution to launch a commercial implementation of mobile payments using the HCE technology.

...
Wikipedia