Start-ups Are Transforming the Payments Industry

by Pradeep T Moudgal 0

Every day we wake up to a news story aboutanother innovative new concept in the payments industry, mostlyfrom companies such as Google, PayPal, and Square etc. But morerecently there have been a spate of news announcements from smallstart-ups that are capturing the imagination of this industry andbeginning to transform it in one of two ways: Either the innovationmakes large organizations (from banks to nonbank providers) standup and take notice, or these organizations are collaborating withthe start-ups to leverage their technology within theorganizations’ products to bring new concepts quickly to marketwithout incurring huge costs.

One such start-up is Austin, Texas-based SimplyTapp, Inc. Thiscompany with just six employees was responsible for a Near FieldCommunications (NFC) workaround recently announced by Google forits Google Wallet service that allows Google to skirt the secureelement, a chip that stores cardholders’ payment credentials, byfacilitating a direct connection to initiate a mobile payment via aprocess called Host Card Emulation (HCE).

The telcos’ control of the SE that stores cardholders’ credentialshas hindered the growth of NFC mobile payments. Using HCE alsosaves others in the payment ecosystem a lot of money that wouldhave gone to mobile carriers in usage fees to access the SE. HCEenables NFC transactions on mobile devices that may or may not havea SE chip or SIM card. What makes this technology exciting is thatit allows point-of-sale terminals to recognize the mobile phone asif it were a contactless card accessing cardholders’ credentialsstored on a remote server (“in the cloud”) and not on the SE. Thisbasically solved Google’s frustration over the lack of uptake ofGoogle Wallet service. Before SimplyTapp’s HCE workaround, theunderlying technology infrastructure within the telco framework wastoo difficult to navigate since the telcos controlled all theaccess to the SE and thus cardholders’ payment credentials.

The next move by this small start-up was brilliant. SimplyTapp isnow in active conversations with various banks to integrate itscloud-based payments tools into the financial institutions’ mobilebanking systems so customers can use personal mobile devices toinitiate tap-and-go payments and redeem and collect rewards atmerchant locations. Many consumers are active on their bank’smobile banking app and trust its safety and security. SimplyTappwill integrate its technology into these platforms and also ensurecertification from the card networks and others and therebycontribute to offering a safer and secure payments system.

Innovative companies like SimplyTapp are “simply” what makes theU.S. a leader in technology and business.