NFC allows seamless distribution of coupons, deals and other information nuggets by directly tapping the panel with an NFC device.

More OEMs will focus on Secure Elements as mobile payment options expand.

The demand for hardware-based solutions for mobile payments is growing steadily as smartphones and other portable devices are increasingly being used for shopping and payment applications.

The international chip card association, Eurosmart expects shipments of Secure Elements or SE for NFC components to reach 435 million units in 2014, which is more than four times the number of devices shipped in 2012.

Mobile phone operators across the world are launching NFC-centric mobile payment services, and as a result, the industry is seeing a huge volume of Single Wire Protocol or SWP-based SIM cards being issued.

“In 2013, we witnessed a large number of SWP-SIM cards – that provide various NFC applications – sold in South Korea, Japan, Russia, Turkey, Europe and the US,” said Ben Wang, embedded security marketing manager, Greater China & South Asia region, STMicroelectronics.

Late last year, the China government issued a 4G TD-LTE license to all three mobile operators in the country. These mobile operators now have in place an active NFC deployment plan scheduled for 2014.

During the same period, the government also issued licenses to 19 Virtual Network Operators, which allows a diversification of services catering to consumers via a new breed of markets, for instance, NFC-based mobile payment.

However, while mobile carriers are one of the key drivers of NFC mobile payment, they require strong cooperation and support from OEMs.

“We anticipate that SE will draw attention from more OEMs as it can help to implement various innovative applications on mobile devices and broaden OEMs’ cooperation ties with various industry partners,” STMicroelectronics’ Wang said.

But there a few stumbling blocks, he acknowledged. For instance, Google’s Host Card Emulation or HCE, which supports online transactions, may become a competitor to mobile operators’ SWP-SIM-based NFC application deployment.

“Eventually, we think it may help speed up the deployment of NFC applications that will need card emulation functionalities,” Wang added.

VC Kumar, manager, NFC products, Texas Instruments Inc., is also optimistic about Google’s HCE initiative. “The open architecture of HCE in Android 4.4 will drive innovation and increase the deployment of NFC for mobile payment solutions,” he said. “This is because the open architecture now enables a smartphone app to emulate an NFC card without depending on the SE in the device or the SIM card. This makes the ecosystem easier to manage.”

The top 10 OEMs, especially Samsung, have been providing NFC phones for more than three years now, resulting in a large number of NFC phone users in the consumer market. As a result, mobile phone operators, banks and even OEMs themselves are all trying to leverage on the mobile payment market through deployment of various NFC applications.

“We see MasterCard launching the MasterPass NFC online payment service on NFC-enabled mobile devices with embedded SE, which provides a highly secure and user-friendly alternative online payment channel for banks to compete with third-party online service providers such as PayPal, Alipay and TenPay,” STMicroelectronics’ Wang said.

Dual-interface, contactless payment cards to lead

Card readers have already started to adopt NFC chips that support multiple RF protocols in compliance with the NFC Forum so they can accept various NFC devices and tags.

NFC is also being introduced into commercial panels for distribution of coupons, applets and other information by directly tapping the panel with an NFC device. This is more user-friendly than scanning a QR code.

Sebastian Ong, regional marketing manager, Infineon Technologies Asia Pacific Pte Ltd, said that both dual-interface and contactless payment cards using NFC technology to transmit data will dominate the market in the near future. In dual-interface cards, which are generally MCU-based, the chip hardware resources—memory and crypto-processors—can be accessed via both interfaces.

Current NFC-enabled devices combine a Contactless Front-end or CLF modem together with an SE in different form factors to suit the requirements of handset manufacturers and service providers. For other specific business models, NFC functionality can also be supplied via a microSD card with its own CLF and SE.

“Over time, the CLF modem in the handset will be replaced by the RF connectivity device,” Ong said. “This will certainly follow the typical path of smartphone integration in which all RF communication protocols, such as Wi-Fi, Bluetooth and now NFC, are supplied by one single communication device.”

The requirement to support several business models in the NFC ecosystem as described above will lead to an NFC architecture that features more than one SE. That could be provided in several form factors. For instance, SWP-UICCs in a SIM card format or SE ICs for embedded formats.

“We believe that Infineon’s flexible approach to SE implementation can effectively help its partners to meet their goals,” Ong said.