Innovators’ Spotlight: SimplyTapp

The startup behind three little letters that could be a very big deal in contactless payments. 

By Adam Perrotta, Assistant Editor, Paybefore

Over the past year, host card emulation (HCE) has been hailed by many as the miracle cure to resuscitate NFC, which had been on life support in the U.S., and finally bring contactless payments into the mainstream. Should HCE fulfill that outsized potential, Austin, Tex.-based startup SimplyTapp will deserve much of the credit. The company’s co-founders, Doug Yeager and Ted Fifelski, invented HCE in 2011, while tinkering with Android’s open-source code.

By emulating a smartphone’s secure element in the cloud, rather than embedding the secure element in the phone, HCE enables developers to create NFC functionality without needing to involve a mobile network operator (MNO), thus avoiding the development fees and restrictions MNOs often impose. The resulting spate of third-party development will supercharge the growth of the NFC ecosystem, according to HCE proponents.

Cracking the Code

“From working with NFC chipsets in the past, we knew it was possible for the emulation capability to exist and presumed it was not being exposed because of operating system- or mobile network operator-imposed limitations,” says Yeager, who serves as SimplyTapp CEO. “Because Android is an open-source OS, we also knew it was possible for anybody to see the code and, potentially, expand it to expose the emulation capability.”

With that goal in mind, the duo got to work. Utilizing Yeager’s knowledge of NFC—a technology he’d been working with since 2005—and “a little bit of luck,” they built the code for HCE from the ground up, finally hitting pay dirt when they successfully emulated a payment card on a Vivotech reader in Yeager’s home office. “That was the real oh wow moment,” recalls Fifelski, now SimplyTapp president. “We knew we’d done something that had never been done before. We’d opened the door to a whole new technology.”

Keeping an Open Mind

Despite the magnitude of their creation, it was clear to Yeager and Fifelski that they couldn’t keep HCE to themselves as a proprietary technology. “We knew from the beginning we would have to donate the HCE functionality to the community at large if we wanted to see an open ecosystem where our company could thrive,” Fifelski says.

The first major step toward growing HCE was convincing Google to incorporate the coding into the Android OS. In June 2013, after submitting the code and describing HCE functionality on the Android developer Website, Yeager and Fifelski were invited to Google headquarters, where they pitched company engineers on adding HCE to Android. “Then, we just had to wait and hope,” says Yeager. Finally, in early November 2013, Google revealed it would incorporate HCE into its new 4.4 KitKat version—an announcement Yeager calls the company’s “happiest day.”

Other major milestones followed. In February, MasterCard and Visa threw their official support behind HCE, and American Express followed suit in August, announcing an HCE pilot in Croatia. SimplyTapp also garnered the interest of venture capital, landing a $1.4 million Series A investment, led by Lightspeed Venture Partners, in November. And in February, card manufacturer ABnote announced it would integrate SimpyTapp’s HCE technology into its trusted service manager platform. Meanwhile, even longtime NFC skeptic David Marcus, the former PayPal president who’s now with Facebook, said he’s grown “cautiously optimistic” about NFC’s prospects after Google’s HCE deployment.

Banking on Banks—and Beyond

With the HCE infrastructure settling into place, SimplyTapp now is in position to capitalize on the new ecosystem. The company offers a self-service platform that enables clients to develop and pilot their own HCE applications. “Today, our focus is on payments, so our main targets are financial institutions and sometimes processors,” notes Yeager. While large financial institutions tend to move a bit slower in getting up to speed on new technologies, SimplyTapp’s founders often find that the buzz around HCE often precedes them when speaking to prospective bank clients. “The term ‘HCE’ brings in a known context to the conversation,” he says. “People already know about it. And banks are very receptive to cost-effective, scalable software that comes from an agile development methodology.” In fact, one of SimplyTapp’s earliest partners was Royal Bank of Canada, which worked with the company on HCE well before Google came on board, Yeager notes.

But HCE’s potential goes beyond NFC. Another contactless technology generating buzz throughout the industry, Bluetooth Low Energy (BLE), also is compatible with HCE, Yeager says. HCE can even be leveraged beyond retail payments, into verticals including building access, transit and ticketing. And while some industry groups have voiced concerns about HCE’s potential security risks, Yeager says HCE security is “different, but equivalent” to the SE model.

In the wake of HCE’s fast rise to prominence, interest in the technology has surprised even its inventors. “We opened the door to HCE technology, but the end result has exceeded our initial expectation,” Yeager says. But SimplyTapp’s founders are quick to share the credit for what could be one of the most transformative developments in payments over the coming years. “HCE came about with a lot of help from many other people all coming together,” Yeager notes. “Just like HCE now is a community asset, its creation was a community effort.”