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Perspective: Pros and Cons of NFC-Based Wallets with an Onboard Secure Element

In a recent blog post, I mentioned that there are currently three dominant types of mobile wallet technologies. Today, we’ll look at NFC-based solutions with a secure element to store credentials.

Two or three years ago, this technology configuration was considered the minimum to support a mobile wallet system, largely because it most closely replicates the current plastic card environment. A secure element inside the phone stores the payment credentials, thus providing card emulation.

The phone is also equipped with an NFC chip and a radio frequency antenna. When the user presents the phone at a POS or acceptance device that has an NFC reader, the payment credentials are securely transmitted from phone to reader. The phone acts just like a card so this is considered a card present transaction.

The initial release of the Google Wallet in 2011 is perhaps the best known example of this technology interface. Because of the hardware dependency of the NFC and SE chips, wallets based on this kind of configuration are often driven by the owner of the handset or the MNO that supports the handset.

The scenario of a mobile wallet system that utilizes a technology interface based on both NFC and a secure element has its positive aspects and its drawbacks.

On the plus side:

  • Continuity: This solution most closely replicates the existing model for card provisioning and security and utilizes existing payment schemes.
  • Security: This is one of the most secure options for mobile wallets because of the secure element.
  • Proven: With Google Wallet live in the market for some time, the technology interface and the processes behind them have demonstrated usability, stability and security.
  • Ease of use: For the consumer, an NFC interface requires less effort to simply wave the device in front of a reader (compared to a QR code that must be lined up with a reader).
  • Extensible: This type of solution is well suited to support multiple service providers in the mobile wallet.
  • Simplicity: Consumers don’t need to learn anything new: “Tap and pay” is intuitive and works just like a credit card does today.

But the drawbacks include:

  • Infrastructure complexity: This solution has greater infrastructure requirements than some other forms of mobile wallets.
  • Scarcity: Few handsets today are equipped with NFC, and even fewer have a secure element (or a secure element that is accessible). On the merchant side, few merchants have deployed NFC readers to date, but the upcoming move to EMV is likely to increase deployment of readers that also support NFC.
  • Control: One entity controls access to the secure element, which can create a choke point or bottleneck in the ecosystem.
  • Confusion: Consumers may become confused and/or frustrated that not all handsets and carriers can support a particular mobile wallet. 

Chris Cox is vice president of mobile solutions at First Data.