Third-party apps like Apple Pay, Android Pay and Samsung Pay have garnered much of the attention when it comes to proximity mobile payment. However, that does not mean financial institutions plan to sit on the sidelines. Banks have had much success with mobile banking and person-to-person payment apps in the last five years, but few offer consumers the functionality to make in-person payments.
Citibank was one of the most recent entrants when it announced in November the launch of Citi Pay, which will enable consumers to make online, in-app and proximity payments, which leverage Near Field Communications. Not more than three years ago, such a feat would be a long-shot for banks. Like all aspiring mobile wallet providers, banks would need to negotiate with mobile network operators to gain access to the secure element deep inside the phone where all the important information needed to execute an NFC payment, including personal details and card information, is stored.
That all changed in 2013 with the arrival of Host Card Emulation, or HCE for short. Android, which is the operating system used on 81% of the smartphones sold globally in 2016, first enabled this functionality on its phones when it rolled out the KitKit operating system in November 2013 joining Blackberry in support of this new technology. In February 2014, both Visa and MasterCard announced new specifications for NFC mobile payments using HCE, thereby opening the door to a plethora of NFC mobile wallets, including those from financial institutions.
Leading up to those announcements, both Visa and MasterCard conducted pilots with issuers around the world. Two of the banks — Capital One in the U.S. and Banco Sabadell in Spain — that MasterCard piloted the technology with have since rolled out the product commercially. In October 2015, Capitol One became the first bank in the U.S. to launch a mobile app with in-person mobile payment functionality, joining others like Barclays, Royal Bank of Canada and Taiwan’s E. Sun Bank in the marketplace.
Banks have three routes to the consumer: integrate into the mobile banking app; build a separate mobile payments app; or do both and integrate them. Capital One chose a separate mobile app dubbed Capital One Wallet. The in-person mobile payments functionality came as an update to the app, which had been used primarily to help customers stay on top of their spending. Bank customers with an NFC-enabled Android phone can transact payments at NFC-enabled POS terminals. Besides payments, the Capital One Wallet app offers additional features, including real-time notifications for all transactions, instant rewards redemption options, and easy access to balance and transaction history.