August 19, 2016
SimplyTapp Rides NFC Resurgence
By D.J. Murphy, Editor-in-Chief, CardNotPresent.com
When Apple made its typically understated iPhone 6 announcement last month, including the unveiling of Apple Pay , it seemed to finally validate NFC as the technology enabling in-store mobile payments. Until that moment, the dominant narrative regarding NFC consisted almost entirely of obituaries. And, indeed, several high-profile wallet initiatives for Android devices that leaned on NFC seemed stalled. But those wallets relied on storing payment details on the device in a secure element and squabbles among handset makers, carriers, issuers and merchants about who would control the information bogged the process down. And, while Apple Pay seemed to clear the air, NFC might be no further along if a company based in Austin, Texas had not developed a solution to the secure-element conundrum and then shared it with the world.
While Apple Pay has gotten large chunks of the ecosystem on board for its solution, it does not address Android devices, which by some measures account for more than three-quarters of smartphone users worldwide. To help capture that market, and give issuing banks a way to work around the ongoing turf wars, SimplyTapp developed the workaround that enabled a mobile app to access payment details stored in the cloud called Host Card Emulation (HCE). Without HCE, the world might still be talking about other technologies more suited to making mobile payments at the POS.
According to Doug Yeager, CEO of SimplyTapp, issuing banks that were interested in mobile contactless payments could partner with one of the major wallets, but they felt like they were being shut out because they didn’t have access to the secure element contained in the SIM cards of Android devices (and Android was the only game in town at the time).
“[The carriers, through] Isis—now called Softcard—tried to harness the SIM card and rent it to banks,” Yeager explains. “Isis felt push back because they weren’t giving banks an alternative. Their pricing was high because they were proud of their service, but issuers weren’t sold.”
At this point, says Yeager, SimplyTapp, which had been founded as a platform to enable contactless payment transactions began looking for those alternatives. The SIM card for NFC, he says, was a technical limitation and required a software workaround. The company developed HCE and donated the technology to the Android Open Source Project. Issuers finally had a way to develop a mobile app, but not everyone was on board.
“When SimplyTapp’s solution entered the picture, the card networks hadn’t approved it,” Yeager says. “Technically, it was feasible, but network approval was vital. After the launch, though, every issuer that had worked with Isis called the networks and asked about HCE.”
The groundswell got the networks on board quickly. HCE had debuted in November 2013 with the release of the Android 4.4 operating system by Google. Now all Android NFC-enabled devices would be capable of tap-and-pay via HCE at NFC terminals. By February 2014, Visa was on board with MasterCard soon to follow. Thus, the stage was set for Apple’s September 2014 announcement that brought iPhones on line with NFC as well.
While SimplyTapp is most closely identified with NFC, Yeager says the company is committed to enabling contactless cloud-based mobile payments via whatever technology its customers desire. While he thinks the prospects for QR codes as a payment technology are limited (Starbucks notwithstanding) due to their inability to communicate in two directions, Bluetooth applications will be perfectly viable in the in-store environment. Whatever the enabling technology is, however, Yeager feels cloud-based payments are going to explode, and SimplyTapp is positioned to benefit.
“You’ll see a lot of big guys in the secure element space go to cloud-based,” he says. “We’ll all be competing for the same slice of the Android business, but there are a couple things that would separate us out. We’re the only organization exclusively focused on cloud-based payments. We’ll have that nimble advantage and not have existing business relationships tied to the secure element.”
SimplyTapp, which raised a Series A round last year, is close to closing another multi-million dollar investment Yeager says will be used to build out its sales and marketing function, taking the company from its current headcount of nine up to 20 in the coming months.
In the meantime, Yeager says the ongoing migration to EMV means there will be a lot of NFC-enabled terminals being installed, driving a lot of business for SimplyTapp.
“All the manufacturers are shipping NFC terminals by default,” he says. “Some of the bottle neck had been taken care of. HCE started bringing NFC back from the dead and Apple put the nail in the coffin.”