Credit card companies, mobile service providers, banks and retailers have been attempting to figure out how their own part of the retail payments ecosystem will emerge as the provider of the greatest value to end users.
Mobile service providers have pinned their hopes on near field communications for the device to terminal communications, using the subscriber information module as the data store, in order to create a new role for themselves in the retail payments ecosystem.
Now Visa and Mastercard have thrown key support behind a cloud-based approach using Google's Host Card Emulation (HCE) platform.
HCE allows any NFC application on an Android device to emulate a smart card, letting users wave-to-pay with their smartphones, while permitting financial institutions to host payment accounts in a secure, virtual cloud.
By doing so, Visa and Mastercard mobile payment systems simply bypass the SIM card and NFC chip, and will instead verify mobile transactions in the cloud, using the HCE technology in Android.
By doing so, Visa and Mastercard also leverage the huge global Android installed base of devices, a huge factor in an ecosystem that relies crucially on critical mass for success.
Fully 78 percent of smartphones sold in Q4 2013 run on the Android operating system, and Android is enjoying strong gains in markets outside the U.S., including in China and Latin America. Android also recently became the fastest platform to reach one billion users worldwide.
By using HCE, the credit card firms are able to operate globally with a single platform.
In a clear sense, mobile operators are finding that success in mobile payments, machine to machine service, the Internet of Things, content services, messaging and other applications now requires working as part of an ecosystem, not as closed providers of fully-owned apps.
That might require a shift to horizontal provision of functions, not vertical ownership of full services.
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