Friday, March 14, 2014

Host Card Emulation Series: Contactless Debit, A Merchants Advantage

Contactless Debit, A Merchants Advantage

Host Card Emulation (HCE) brings new opportunity for merchants. In a recent trip to Whole Foods, who installed contactless terminals some time ago, I decided to try my debit card using the Tapp mobile test wallet.  After grabbing some lunch I headed to the register, and proceeded to checkout.  I tapped my phone to the contactless terminal and VOILA! The terminal asked me for my pin, I entered it, grabbed my lunch and off I went.

So why is this important?  The answer requires a look back at where the dynamics of the payments industry was just a few years ago.

The “Way back Machine”

In the semi-beginning, circa 2011, NFC mobile wallets meant Google Wallet, ISIS and the MNOs controlled SE model.  The idea was pretty straight forward one device, one SE, maybe one credit card, and POW!!! BAMM!! Goldmine! Right...Wrong! What happened? A back lash by merchants, banks and just about everyone but the MNOs.  In front of the new push for mobile payments stood a number of hurdles that needed to be cleared.  One of the most sizable hurdles being the merchants feeling that Contactless = Higher Transaction Costs.

Merchants viewed NFC as a more expensive transaction form and in the SE model that was largely true. For example, the average cost of a debit transaction tops out at around $0.30 in the US compared to the potentially much higher cost credit transaction, roughly $0.10 + 1.7% or more.  So what happened? Merchants, led by Walmart, huddled together in an attempt to break down mobile payment progress and keep transaction costs down. They called it MCX. Their message could generally be summed up with the following statement “Hell No, We Won’t Go!”  This stance led to a lot of head scratching as how mobile payment adoption would or could progress. But quietly the ground began to soften and HCE took root. 

“Bing, please enter PIN”

Coming back to my experience at Whole Foods and why it is important. 

The goal of any merchant is to sell goods or services to customers in exchange for assets, typically money, that has a greater value to the merchant than the goods and services being sold.  Pretty straight forward, but how that exchange actually takes place is where we will have our conversation. 
When it comes to merchants convincing consumers to part with their money they want to make it as easy as possible. Today there are, generally speaking, a handful of payments options as presented below:

  • Cash – used often and easily accepted;
  • Check – rarely used anymore and rather hard and slow to use;
  • Credit – used often and extremely easy for both cashier and customer;
  • Debit – used most often and equal to credit for ease of use;
  • GiftCard/Stored Value – used on a regular basis and considered as easy to use as other plastic forms. 

Each payment option has advantages and disadvantages regarding availability, ease of use and cost of managing and accepting.   More importantly all these payment form factors excluding only cash and check can be all accepted over the contactless channel. This means that merchants now have increased opportunity to influence customers when it comes to selecting payment forms like debit and gift/stored value cards over their more expensive siblings.

It means the power of payment is now in the hands of the merchant.  To illustrate a practical example of this is the case study of Spec’s, a merchant that communicates to their customers the importance of selecting the right payment form.

Debit Strategy: Spec’s

Spec’s is a merchant in Texas that manages their transaction cost extremely well.  Every check out register displays the options and cost of the options and every cashier asks the customer if they would like a 5% discount for using Cash or Debit.  Pretty easy to make that decision for me.  I simply present my debit card and save the money up front.  It is not just Spec’s that takes this simplified approach but other merchants as well. 


HCE offers merchants and banks alike new opportunities to influence consumers’ payment behavior like never before.  As Spec’s demonstrates, customer are willing to pay cash or use debit when offered discounts at the register. Speaking from experience I know this is true. However, merchants should understand that offering consumers incentive to select the less expensive debit or gift/stored value card is a window that will not stat open forever as the pace of adoption continues to accelerate. There are already merchants implementing effective transactions cost reducing strategies.  Moving these same strategies into the mobile space only enhance the merchants’ position in a consumers mind at the time of check out.


  1. Debit card are the fastest growing consumer payment method despite being more expensive and less versatile than credit cards. Checking account data shows that debit card use is correlated with age, pay frequency, over drafting, and ATM use, but not income, gender, crime, or expenditure. With debit cards, you only spend money that's loaded on the card.

  2. Hi Ravindra, thanks for the blog on HCE. I am using SimplyTapp sdk as given in . But am facing 2 issues, one is a crash whose stacktrace is given below

    W/dalvikvm( 9324): threadid=17: thread exiting with uncaught exception (group=0x41efec08)
    D/MainActivity( 9324): Account is Disabled cardId=6164 code=24
    D/MainActivity( 9324): Account is Disabled cardId=6164 code=24
    E/AndroidRuntime( 9324): FATAL EXCEPTION: Thread-2714
    E/AndroidRuntime( 9324): Process: com.example.sampletapp, PID: 9324
    E/AndroidRuntime( 9324): java.lang.NullPointerException
    E/AndroidRuntime( 9324): at
    E/AndroidRuntime( 9324): at
    W/ActivityManager( 3042): Force finishing activity com.example.sampletapp/.MainActivity
    I/CardAgent( 9324): activated, tGetAccountParams is still accessing remote card applet, waiting...
    I/ServiceKeeper( 3042): In getseinfo pid = 3042 uid = 1000 seinfo= system
    D/CrashAnrDetector( 3042): processName: com.example.sampletapp
    D/CrashAnrDetector( 3042): broadcastEvent : com.example.sampletapp data_app_crash
    W/ApplicationPackageManager( 3042): getCSCPackageItemText()
    V/SmartFaceService - 3rd party pause( 3042): onReceive [android.intent.action.ACTIVITY_STATE/com.example.sampletapp/pause]
    D/SSRMv2:CustomFrequencyManagerService( 3042): acquireDVFSLockLocked : type : DVFS_MIN_LIMIT frequency : 1200000 uid : 1000 pid : 3042 pkgName : ACTIVITY_RESUME_BOOSTER@4
    W/ActivityManager( 3042): mDVFSHelper.acquire()

    In another issue, am trying you read card data using SoftPcd as below but transceiveWithCard() function is returning same value 6F00 in all the cases. Your help would be greatly appreciated.
    SoftPcd softPcd = new SoftPcd((short)5000);
    try {
    } catch (IOException e) {
    try {
    byte[] apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xA4,0x04,0x00,0x05,(byte)0x32,0x50,0x41,0x59,(byte)0x2E});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xA4,0x04,0x00,0x07,(byte)0xA0,0x00,0x00,0x02,0x77,0x10,0x10,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{(byte)0x80,(byte)0xA8,0x00,0x00,0x15,(byte)0x83,0x13,(byte)0xD0,(byte)0x80,0x00,0x00,0x00,0x00,0x00,0x00,0x00,
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x01,0x0C,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x01,0x14,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x02,0x14,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x03,0x14,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x04,0x14,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{0x00,(byte)0xB2,0x01,0x1C,0x00});
    apdu = softPcd.transceiveWithCard(new byte[]{(byte)0x80,(byte)0xAE,(byte)0x80,0x00,0x2A,0x00,0x00,0x00,0x00,0x00,0x01,0x00,0x00,0x00,0x00,0x00,0x00,0x01,0x24,
    } catch (IOException e) {


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