VDC Research: RFID, Barcode, Retail Automation & Self-Service Market Blog

MBTA Gets Onboard With Mobile Ticketing

The MBTA, greater Boston’s public transportation system, just announced plans to deploy a mobile barcode-based ticketing solution across its entire commuter rail network. This solution, which will operate on Android, iOS and Blackberry devices, is expected to be operational by year’s end and will facilitate the ticketing process both for passengers and conductors. While passengers will benefit from an additional, always-accessible fare purchasing option, conductors’ jobs will be facilitated by reduced ticket punching and cash collection duties.

Mobile ticketing is not a new concept, despite that its relative nonexistence in the US suggests otherwise. In fact, mobile ticketing solutions enabled by mobile barcode and NFC have existed for years in other regions, including Europe and Asia. As is often the case with the adoption of new technologies (or, in this case, technology applications) the US is simply a laggard. In fact, some media sources claim that the MBTA initiative is the first of its kind in the country.

From a technology selection/system specifications perspective, we are not surprised the MBTA selected a mobile barcode-based solution rather than one that leverages NFC. Although NFC is certainly gaining traction as an enabling technology for contactless ticketing applications, the fact is that most consumers, particularly in the US, are not yet familiar with the technology—never mind own an NFC-enabled smartphone. Mobile barcode scanning, however, is a technology that is both highly accessible and very familiar to consumers.

Keep in mind, however, that mobile barcode has its limitations, with a key issue (in the context of transportation ticketing) being throughput speed. In the case of this MBTA solution, throughput is a non-issue, because the system will be used exclusively on commuter trains, where there are no turnstiles and fares are collected onboard. However, should the MBTA evaluate mobile ticketing for its subway and/or bus networks in the future, we think a mobile barcode-based solution would be a poor choice.

Whereas subway/bus networks have higher ridership volumes and passenger queue points (i.e., turnstiles on the subway, door-based readers on the bus), a mobile barcode-based solution would considerably slow throughout and create longer queues. Just imagine the time required to take out a smartphone, open up the MBTA app and then display and scan a barcode—relative to the contactless and paper tickets currently used, this would certainly reduce throughput, not to mention create a requirement for barcode imagers/scanners at all ticketing portals. In the case of subway and bus ticketing, NFC-based solutions, which can leverage the existing HF contactless ticketing readers in place throughout many public transport networks (including the MBTA), are a more logical choice.

Early NFC ticketing pilots are already underway here in the US (and the rest of the world), such as the one led by New York City’s MTA in partnership with Nokia. As NFC smartphones increasingly reach the hands of consumers over the next 24-36 months, we expect NFC ticketing activity will gain momentum. In the interim, however, considering the respective strengths and weaknesses of mobile barcode and NFC, we expect ongoing mobile ticketing opportunities will exist for vendors utilizing both of these technologies.

US EMV Migration…Opportunity Abounds, but Will it be Fulfilled?

With April upon us, the one year countdown to the first step in the US EMV (Europay, MasterCard, Visa) migration mandate has begun. The April 2013 deadline, which requires acquiring banks to upgrade their systems in order to accept EMV transactions, primarily impacts the financial institutions that process card payments on behalf of merchants. Next year’s milestone, which is the first point on the migration roadmaps of Visa, Mastercard and Discover, primarily impacts acquiring banks, which function as an intermediary between the merchant and the card network (e.g., Visa). As a result, we expect this imminent requirement, along with others looming further ahead in April 2015, will precipitate a rapid increase in compliance-driven demand across the US during the next several years.

From a hardware perspective, EMV migration in the US creates an obvious need for contact/contactless chip cards, EMV capable payment terminals and EMV reader modules that can be integrated into self-service solutions such as ATMs, self-checkout solutions and kiosks. Leading EMV vendors such as Oberthur Technologies have anticipated this emerging need and already have begun shipping limited volumes of EMV cards and related solutions. Whereas the majority of EMV hardware demand will be driven by the April 2015 deadline, when merchants must upgrade their payment solutions and card issuers will move to EMV-capable cards, VDC expects the preceding 2013 directive—which affects only acquiring banks, not merchants or card issuers—to have relatively little impact on the EMV hardware market. On the other hand, as April 2015 approaches and merchants work towards EMV compliance, we expect demand for EMV payment solutions will increase significantly.

In contrast to hardware vendors, EMV software providers should expect significant demand growth during the entire migration process.  This increase will be driven by all payment value chain participants, including card acquirers, merchants and card issuers.  Near term opportunities will be driven primarily by acquiring banks making compliance-related upgrades to their systems on the back-end of the payment value chain. As the 2015 deadline approaches, however, demand will be driven largely by merchant upgrades of front-end payment solutions and integration of these systems with adjacent transaction automation, customer engagement and inventory management solutions.

The greatest market opportunity US EMV migration creates may be for services and integration providers—those with the knowledge to deploy EMV and the ability to make it work across each step in the payment value chain. Unlike EMV hardware and software, integration knowledge and experience cannot simply be manufactured—it must be learned and developed. We think this could lead to an EMV knowledge gap within the US, resulting in a backlog of unfulfilled demand for EMV service and integration. During our recent visit to Cartes North America, EMV software and service providers from the UK and Brazil described similar phenomenon during the migration processes in these regions.

Considering the US is an EMV laggard, we see no reason circumstances will be any different here. Accordingly, as EMV gains momentum in the US, VDC believes in-house integration and service capabilities will be significant differentiators for hardware/software vendors.  Suppliers looking to capitalize on this emerging opportunity should position themselves as a complete end-to-end EMV solution provider—rather than simply as a source of hardware/software.

Company Spotlight: austriamicrosystems Seeks Growth by Tapping the NFC market & Acquisition

Austriamicrosystems is a rapidly growing provider of RFID reader ICs. In stark contrast to many RFID chip vendors, austriamicrosystems ignores the tag market entirely, focusing strictly on more sophisticated reader ICs that highlight the company’s considerable R&D and manufacturing abilities.  Two recent strategic moves, in conjunction with the company’s vertically integrated operational structure and well-established track record of innovative, high-performance ICs, have led to rapid share gains and revenue growth. Although austriamicrosystems might not yet be among the “household” names in the RFID market, don’t be surprised if that changes during the next 1-2 years. Despite the low profile austriamicrosystems has historically maintained, VDC expects the combination of rapid growth with ongoing innovation (especially in regards to the performance/size ratio its ICs offer) will drive increasingly strong awareness of this company in the near term.

Over the course of the past 24 months, austriamicrosystems has pursued a multifaceted growth strategy that encompasses cooperative partnerships with complementary technology suppliers (e.g., Infineon, NXP), acquisition and product portfolio expansion. We believe this strategy, combined with the company’s operational and product differentiation, has been instrumental in driving its recent market share and revenue growth.

Unlike many fabless IC/semiconductor firms, austriamicrosystems operates its own manufacturing and testing facilities at its Austria-based headquarters, resulting in a vertically-integrated organizational structure that affords complete control over the R&D, manufacturing, testing and QC processes. Due in large part to the end-to-end visibility and deep product knowledge the company’s vertically integrated model affords (and its ownership of all IP used in its products) austriamicrosystems’ reader modules are among the highest performing offerings on the market. The company is further differentiated as one of the few providers that offers ICs for multiple frequencies, including HF, UHF/EPC and NFC.

In regards to inorganic growth, in July 2011 the company completed the acquisition of Texas Advanced Optoelectronic Solutions (TAOS), a provider of optoelectronic sensors that simplify the measurement and analog-to-digital conversion of light for a range of devices, including smartphones, tablets and notebook computers. The addition of TAOS materially extends the breadth of austriamicrosystems’ product line and already has resulted in significant contract wins with smartphone OEMs such as Samsung. We expect this accretive activity, combined with in-house product development, to drive significant near-term growth.

From an internal development perspective, austriamicrosystems recently introduced two NFC IC offerings, leveraging its expertise in RFID ICs to develop enabling components for the nascent (but rapidly growing) NFC market. The company is targeting its NFC IC at automotive, payment, ticketing and access control applications. In our opinion, entering the NFC market was a strategically sensible move for austriamicrosystems. Not only does NFC overlap with the company’s existing RFID business, it also positions the company to capture a share of the exponential near-term growth expected in the NFC market.

For 2012, austriamicrosystems faces some strong expectations. In its 2011 consolidated year-end financial results (representing all its businesses, not just RF), austriamicrosystems issued guidance that forecasts 25% revenue growth for 2012, after posting 32% revenue growth during 2011, representing annual revenues exceeding $383 million. While this is certainly an ambitious goal, VDC expects this target will be met, if not exceeded. Not only is the company riding its 2011 momentum, the aforementioned Samsung contract (to provide light sensors for the Galaxy smartphone lineup) won in late Q4 ’11 is expected to drive additional growth not reflected in last year’s results. Provided austriamicrosystems does not deviate significantly from the strategically successful path of innovation, partnership and acquisition that it has pursued thus far, we think it has a bright future ahead.

IEEE Standard to Enable Greater Global Adoption of Active RF Solutions

The IEEE is about to publish its 802.15.4f standard.  This amendment is designed to create a more open, global active RFID standard that is capable of supporting multiple products and frequencies.    The first iteration of this standard – 802.15.4a – was overly complex, frequency restrictive and required dedicated silicon (chips) … it was not very capable of supporting the increasingly robust solution sets being offered by the ever diverse vendor community.  The 4f amendment directly addresses these limitations and is a critical step in the right direction toward full solution interoperability.  The 4f standard is designed to be more open, enabling the use of discrete components from multiple vendors across more active RF frequencies (i.e.: UWB, 2.4 GHz and 433 MHz).  It is more capable of supporting hybridized solutions that are leveraging multiple technologies and frequencies. 

This means that active RF solutions will become less proprietary and more standardized – a critical stepping stone toward true globalization.   Because there is no need for dedicated silicon, more solution types can now be used and interoperate, which will not only provide adopting enterprises with more options, but also enable them to develop more effective and customized systems that are more capable of meeting application and installation requirements.  In order to achieve greater globalization and world-wide usability, the 4f amendment will need to be integrated into other global standards such as ISO (which is already in progress).   This will help enterprises mitigate risk and ease concerns associated with the investment in and adoption of active RF technologies and their ability to leverage them globally.   

Upon publication of the standard, there will not be a tremendous amount 4f compliant product available – Zebra will be the first to market with its DART UWB RTLS solution; however, we expect to see active RF vendors rapidly embrace this standard and begin introducing offerings within 6-12 months.   This standard could provide the additional momentum active RF needs to become a truly global solution used throughout world-wide value chains and look forward to the innovation and broader deployment in the years to come.

RFID Journal – Day 2 Blog

On the final day of the show, I met with more exhibitors and anxiously waited to hear who had won the RFID Journal awards this year.  For those of you who don't know about the winners, we tweeted them yesterday.  http://twitter.com/#!/vdc_rfid

Cubic: If you are not familiar with the government sector, then you might not know about this Cubic.  This company is a market leader in Asset Management and Supply Chain solutions to the military ... and they are beginning to get into the enterprise side of the market.  Cubic offers long range asset visibility and management in a diversity of environments (including very harsh ones) via a mesh network that can be rapidly deployed.  They have been adding a tremendous amount of benefit to the military as seen in this Washington Times article   I am eager to learn more about this company and its capabilities.

RedPine: Haven't heard of this company?  You will soon.  They have developed a dynamic multi-frequency RTLS solution integrated with a mesh network platform.  In other words, they have introduced a solution that can be function at 2.5 & 5 GHz while offering highly accurate location and sensing - in a very cost effective manner.  2.5 GHz is a high traffic frequency (i.e.: Bluetooth), so offering an enterprise the additional flexibility to work on the 5 GHz band is an attractive value proposition.  This company's RF expertise and innovative solutions have really caught my eye.  I'll be following this company closely.

William Frick: The speciality tag manufacturer, already well known in the labeling and converting communities, is beginning to garner more attention due to their ability to customize their transponders ... not only with a growing diversity of form factors and materials, but also because they are willing to develop and produce these tags in much lower volumes than their competitors.  In a time when most deployments can still be characterized as requiring customized tags at small volumes ... this business model makes a lot of sense.  And let's not forget that they have capacity, so they can grow with their clients. 

BTW ... congratulation to RFID Journal on their 10th anniversary of this show.  As always, a special thanks to Mark Roberti, Debbie Hughes and Deb Lambert for putting on another great show.  Looking forward to next year.

 

RFID Journal – Day 1 Blog

More vendors, more foot traffic and more dynamic solutions.  Unfortunately, I didn’t have time to visit them all on Day 1, but what I did get to see was exciting.  Here are a few highlights …

Murata:  The company is a large player in the electronics space, but has been flying under the radar in the RFID industry.  Not any more … Murata demonstrated some of the smallest reader modules and tags available today.  For example, they showed me the smallest NFC antenna and NFC reader modules I’ve seen to date.  To give you an idea of the size, the NFC reader module they showed me was only slightly bigger and thicker than the actual chip and the antenna was about half the size of the typical one used.  And there was no real sacrifice on performance.  Keep an eye on this company … you’ll probably see their products being integrated into a diversity of devices over the next 12-18 months.

Intermec:  We’ve been saying for a while that there is significant opportunity for tool tracking on vehicle fleets … there are millions of dollars worth of tools that are left behind or lost by employees.  Intermec has developed a unique and high performing solution that enables highly accurate reads in dense tag environments within the back of the vehicle by placing their latest antennas on the interior roof of the vehicle.  The system will most likely be connected to a mobile device or in-vehicle computer used by the driver.  This is not a solution for tracking the vehicle, but the tools and products within it. 

Aeroscout:  Up until about a year ago, Aeroscout was perceived primarily as a health care company, offering RTLS solutions to hospitals and other health related facilities.  But this is rapidly changing as the company continues to penetrate non-health care markets, such as industrial/manufacturing.  It seems as if there are many synergies between their solutions used in healthcare and those that need to be used in manufacturing (i.e.: tracking assets, ensuring compliance or calibration, etc.).  The company is very focused on Wi-Fi, so most of the increased activity is expected to be within the 4 walls of an enterprise. 

RFID Journal Live! 2012 – Preconference Blog

Today was the preconference for the 2012 RFID Journal Live show in Orlando … the show officially opens tomorrow.  Although we didn’t get to see many exhibits today (the exhibit show floor was closed most of the day), I did have the opportunity to get a preview from NXP on their latest and greatest NFC applications. 

NXP demonstrated an NFC application for home video game systems for the Wii and Xbox.  This application enables the user to save game progress or change characters by simply placing an avatar figurine on an NFC accessory for the gaming system (see the picture below).  The avatars and accessory have embedded NFC chips in them, which hold the gamer’s progress for that specific character.  The figurines are capable of being used at other gamers houses as long as the NFC accessory is present, which means you can take your characters with you to play at other locations.  Although limited to a specific game at this time, it could be easily developed for other character-based games.  Cool factor … very high!

They also showed an authentication application for alcohol.  The level of alcohol counterfeiting in some parts of the world is massive.  For example, they stated that 80% of a specific wine brand in APAC was counterfeit, and in Europe, deaths actually occurred due to toxic counterfeit solutions being used.  For this application, the NFC tag is embedded in the cap or seal of the bottle at the point of manufacture.  Although this isn’t new and is actually mandated in specific markets such as Korea (for tax purposes), what is new is that the consumer can authenticate their purchase in the retail store by simply placing it on a countertop reader.  Also new to this solution is the tamper proofing of the tag.  Once the bottle is opened, the tag is ripped and will identify itself as being compromised.  This provides the added protection from counterfeiting by preventing the refilling of brand bottles with counterfeit solutions.

More blogs to come as I get to see more of the show floor … stand by.