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

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.

To Reach NFC Contactless Payments, Follow the EMV Roadmap...

Put EMV (EuroPay, Mastercard and Visa) migration near the top of the list of factors that could spur NFC adoption among US merchants.  VDC has been actively communicating why we believe non-payment NFC applications, such as smart marketing, loyalty and couponing will drive merchants’ NFC adoption and that contactless payments will follow. Speaking strictly in the context of NFC applications, our views on this topic remain unchanged. During our visit last week to Cartes North America in Las Vegas, however, we validated our belief that EMV migration represents another potential catalyst for merchants’ NFC adoption.

EMV, short for EuroPay, Mastercard and Visa (also commonly known as “chip and pin”) is the payment card standard used across most of the world, with the major exception being the US, where magnetic stripe cards are dominant. However, in an effort to curb fraud, both MasterCard and Visa have issued merchant migration directives that mandate support of EMV in the US. These directives are presented as “roadmaps” comprised of a series of milestone deadlines, with the first looming on the horizon in April 2013. After the final October 2015 deadline, non-compliant merchants will be held liable for any fraudulent mag-stripe transactions processed by their business. For many merchants, we think this potential liability will be a powerful motivator that spurs investment in EMV-capable payment infrastructure, most notably payment terminals.

How will migration to EMV-compliant infrastructure facilitate NFC adoption? VDC believes that merchants upgrading their payment acceptance solutions to achieve EMV compliance are highly likely to “future-proof” their solutions to the greatest extent possible in order to avoid any foreseeable upgrades or refreshes, which will result in NFC readiness (if not capability) being included in the solution specifications. Although merchants might not actually utilize NFC functionality until several years from now, the incremental cost of adding this capability will be justifiable for most enterprises if it means avoiding another solution upgrade in the short term.

For payment solution suppliers like Verifone and Ingenico, the upcoming migration to EMV technology in the US presents a great opportunity to drive NFC adoption/readiness via education and “future-proofing” messaging. Respondents to VDC’s 2011 NFC Enterprise End User Survey cited “lack of awareness/understanding” as one of the top barriers inhibiting enterprise NFC adoption, with the need for information being particularly acute among lower-tier, less technologically-sophisticated enterprises.  Payment terminal suppliers and channel organizations, take note: it’s time to prepare your NFC lesson plans.

Better Late Than Never...Apple Gets Involved with NFC

Apple may be arriving to the party fashionably late, but if its recent patent activity is indicative of its future plans, the company is readying itself to join the list of device manufacturers offering NFC smartphones. Last week Apple was granted a patent for “Parental Controls,” which initially sounds like a fairly innocuous, ho-hum development. Upon closer examination, however, this patent is actually related to a virtual wallet application, which, not surprisingly, is called “iWallet.” This patent, in conjunction with many others similar in nature granted to Apple over the recent past, indicates that the company is establishing groundwork to enter the contactless payment game.

In typical Apple fashion, no definitive announcements have been made, but this most recent development suggests that the company could formally launch its NFC entry with the iPhone 5 expected to reach the market later this year. While a new entrant to the NFC smartphone market is generally not groundbreaking news at this point in time, a NFC-enabled iPhone is a clear exception that would generate considerable media buzz.  If Apple does in fact include NFC in the next generation iPhone, we believe it has potential to be a watershed in the evolution of contactless payment and e-wallets for several reasons:

• Apple has clout with the MNOs (AT&T, Verizon, etc.) unlike any of its competition due to the desirability and hugely successful track record of the iPhone.  While other tech giants such as Google have faced considerable headwinds in their early attempts to bring NFC payment to the masses, Apple will likely encounter fewer barriers because of the significant recurring revenue its devices bring to MNOs. For example, it is difficult to imagine AT&T or Verizon will block iWallet from operating on devices using their networks, a tactic both operators used with Google Wallet—as doing so could jeopardize their relationship with Apple.

• The iPhone is the top-selling smartphone in the world. While robust shipment volumes alone will not precipitate enterprise investment in/consumer adoption of contactless payment, establishing a critical mass of NFC devices is an important part of this evolutionary process. As the saying goes, there’s “strength in numbers,” and an NFC-enabled iPhone has potential to sell 80+ million units in its first year on the market.

• Apple announced its iTunes store had over 200 million registered users as of Q1 2011. Each of these accounts has a credit card tied to it, which Apple could theoretically leverage to facilitate an introduction of a mobile payment solution.

• An important factor impacting consumers’ willingness to use contactless payment is the ease and intuitiveness with which they can pay with their smartphone instead of their wallet. A well-designed, intuitive-to-use software solution and graphical user interface are key variables in the ease-of-use equation, and are areas where Apple has traditionally excelled. If Apple does ultimately offer a contactless payment solution, we expect it will be as intuitive and easy to use as its other products.

As NFC industry observers, we believe Apple’s entry into the NFC smartphone market will be the kick-start that the NFC industry needs. Not only does the company represent the last major manufacturer yet to support NFC, it also has a fiercely loyal user base that would significantly increase awareness for the technology almost instantly. Taking into account all these factors, we think Apple has the potential to bring NFC and contactless payment to the masses like no other company possibly can.

Join Us for a Hot Topic Webinar with RFID Journal: Real-World Solutions for RFID Security and Privacy

This Thursday, March 8, from 2-3 PM EST, VDC’s Vice President of Auto ID, Drew Nathanson, will be participating in a webinar moderated by RFID Journal’s founder, Mark Roberti, focused on the critical issues of security and privacy in RFID implementations.  RFID systems and applications consistently gain in maturity, become increasingly automated and continually enable new heights of process sophistication. The consequence is an improved and more convenient world in which logistical streams of goods become transparent, individuals and objects can be uniquely identified and transactions take place at high speeds.

With these new and innovative capabilities, however, come threats to privacy, denial-of-service and replay attacks specifically designed for RFID, and other dangers. Imagine attackers cloning your tags to pose as you when entering your office, or possibly even your home. Likewise, there would be consequences of someone reprogramming your 96-bit EPC Gen 2 tags so that each unique serial number was erased or changed. Even in a regular distribution warehouse, the consequences could be devastating.

During this webinar, presenters will discuss this new environment and its ever-changing landscape of vulnerabilities, in the light of specific applications to identify a number of real-world solutions currently available on the market.

Click here to register

The New Read on Metal Tag Market

Its basic physics: liquids and metals cause interference and distortion with RF waves..  And if RFID is to be used pervasively throughout the enterprise and value chain, it needs to work in the presence of these materials.   Awareness of this problem and the opportunity available to those who can address it aren’t new - companies have developed transponders designed specifically for this purpose and that market continues to grow (see our previous blog on the Read On Metal (ROM) Market).  What is new is that the ROM market is now suddenly about to change. 

The words “Read-on-Metal transponders” have been synonymous with durable, bulky plastic housed tags leveraging materials designed to reduce RF interference (RFI) … but all that changed a few weeks ago when two leading ROM tag producers – Xerafy and Omni ID – introduced label form factors.  The label form factor is preferred in many instances due to footprint/size, flexibility and cost, as well as already being the form factor of choice for many high volume industries (i.e.: CPG, Retail, Pharmaceuticals). 

Of equal importance is that these labels will be available on rolls. This means that the label conversion community can leverage their high volume, roll-to-roll production lines to produce these tags - rapidly realizing economies of scale and boosting manufacturing capacity – and that the rolls of converted media can be used in RFID-enabled printers and applicators be used in the field. 

The origins of the ROM tag market are rooted in the desire to use a passive Gen2 label. The introduction of the ROM label form factor is a game changing event and we expect it to dramatically impact the Total Available Market (TAM) for ROM transponders, as well as the revenues of those vendors capable of producing them.  The current ROM market that is served by ruggedized tags will continue to grow at a respectable rate; however, VDC expects the label will rapidly become the dominant ROM form factor as there are a significant number of applications requiring ROM performance that have either been unable to cost-justify the solution or use the ruggedized form factor (i.e.: IT asset tracking, tool tracking).

What’s the bottom line?  The ROM tag market is about to be opened up and the pent up demand is about to be released.  Some readers may recall the early years of the RFID industry, when rugged, plastic-housed tags accounted for the vast majority of all transponders until the Gen2 label was introduced.  We expect history to repeat itself, this time in the ROM market.

Cartes North America: Day Two in Review from Las Vegas

Today was day two of Cartes North America in Las Vegas. The VDC AutoID team had another full day of meeting vendors, listening to panel discussions and strolling the show floor. EMV migration and NFC again were the dominant themes, as we met with a number of services, hardware and end-to-end solution providers catering to every stratum of the payment value chain. Before we catch the redeye home to Boston, we wanted to share some of the most interesting offerings we saw during the day:

• Payment terminal leader Verifone demonstrated its entire portfolio of payment solutions, which encompasses a spectrum of products ranging from traditional stationary payment terminals to compact mobile payment sleds that enable payment processing via consumer devices like the iPhone, iPod Touch and Android smartphones. These mobile offerings, which are called Payware Mobile and Payware Mobile Enterprise, are the result of Verifone’s recent acquisition of Global Bay, a payment application provider. We were impressed by both Payware solutions and believe Verifone could expand its addressable market further by bringing this product directly to customers, as companies such as Square have done already.
• NXP, in its usual fashion, demonstrated its NFC ICs by showing off all the great applications their partner companies have created using their chips. Our favorite application featured at the booth was a NFC-enabled mini kiosk that allows university students to order and pay for their food remotely prior to arriving at the dining hall. We’ve been talking about the significant opportunity NFC has to improve service and throughput in QSRs (quick serve restaurants) and think this solution could be adapted easily for such applications. Imagine being able to order and pay for your morning coffee via a single tap of your smartphone—service speed and throughput could be increased dramatically, which translates into a stronger bottom line for the operator and better service for the customer. Sounds like a “win-win” to us…
• The US is a laggard when it comes to EMV migration, but if the activity Oberthur has been seeing in its EMV card business is any indication, momentum is starting to build in the US market. Oberthur has partnerships with a number of card-issuing financial institutions within the US, and during 2011, shipped approximately 2.5 million EMV-enabled cards to these organizations. While 2.5 million cards is a proverbial drop in the bucket in the context of the global EMV card market, we think this data point is an encouraging sign that some US financial institutions are beginning to take a proactive stance on EMV migration. Now it’s time to get to work on the merchant side of the equation…
• For Mastercard, 2010 and 2011 were dedicated to getting its NFC initiative, PayPass, up and running—in other words, establishing actual commercial deployments at major Tier 1 merchants. For 2012, the company is focused on scaling its existing deployments and spreading adoption of its PayPass solution to smaller regional and independent merchants. Mastercard, like Visa, has issued merchant guidelines that detail its expectations in regards to compliance with EMV migration initiatives. The company believes that as these deadlines loom increasingly closer, merchants that have been unwilling to migrate proactively will be likely to upgrade their infrastructure to EMV/NFC all at once in an effort to “future proof” their investments.

That concludes our visit to the inaugural Cartes North America show. It has been an interesting, informative and well-attended event. Hopefully we will be back for the 2013 edition.

Cartes North America...Recap from Day One in Las Vegas

Greetings from Cartes North America here in warm and sunny Las Vegas! The VDC AutoID team is here at the conference to learn about the latest and greatest in the smartcard solutions market and will be blogging regularly during our visit to keep you abreast of what we have been seeing and hearing at the show. Today was a busy first day of vendor meetings and panel discussions. Not surprisingly, many vendors were talking about solutions and services related to NFC and EMV migration, two of the hottest topics in the US (and in the case of NFC, worldwide) payment ecosystem. Here are several of the interesting solutions we saw on the show floor today:

• Datacard, a leading provider of payment card printers debuted two new printer models today. Its CR500f and CE870 printers are intended for non-centralized printer card creation (i.e., in a local bank branch as opposed to a card printing center). Both solutions accommodate both magnetic stripe card printing as well as EMV/smartcard printing and encoding. Each model sports relatively compact footprints for deployment in branch locations with limited space availability.
  
  
• Device Fidelity, a provider of NFC bridge solutions that bring “smart” NFC payment capability to Android and iOS smartphones lacking native NFC capability, demonstrated its SD card and sled-based products. We were impressed by how seamlessly the company’s product incorporated a host of e-commerce related NFC applications into phones such as the iPhone 4 and 4s which lack embedded NFC chips. At present, Device Fidelity only offers applications related to commerce, including payment, loyalty and promotions, however, the company is looking to other use-cases such as transportation as potential points of expansion. Furthermore, the company recently announced a partnership with Datacard, whereby Device Fidelity will leverage Datacard’s significant installed base of financial institutions to cultivate new clients.
  
  
• 3M is leveraging its expertise in materials engineering and development for smartcard applications. Specifically, the company showed off a new range of non-metallic foils that enable smartcard manufacturers to offer the same eye-catching design their magnetic stripe counterparts have offered for years. Historically, smartcard manufacturers have by necessity had to avoid incorporating flashy foil-based graphics into their card designs as this material interferes with RF signals. Using materials technology borrowed from a TV-screen image enhancement product the company already offered, 3M developed this material with all of the shiny, eye-catching benefits of foil but with none of the RF interference-related downsides. It’s certainly a basic product, but one we think has tremendous market potential considering the majority of the world is using EMV—and the US seems to be drifting (albeit slowly) in that direction.

We have another big day tomorrow filled with panel presentations and vendor meetings, so stay tuned for more from Cartes in Las Vegas.

"Marvell-ing" at the Competition in the NFC IC Market

Could commoditization already be looming on the horizon for the NFC hardware market? VDC thinks it is closer than many industry participants realize. The competitive landscape of the NFC chip market is becoming increasingly crowded, with Intel entering the market in January 2012, Texas Instruments following suit in mid-February, and earlier this week, Marvell Technology Group announcing its entry.

With competition in the NFC chip market heating up, device manufacturers will increasingly be presented with a host of new products offering new/varied feature sets, enhanced performance and aggressive pricing structures.  Increased IC competition is a good thing for the NFC market, as it will surely facilitate innovation and price reductions, but we caution device manufacturers not to be seduced by heady specs and low pricing and to remain focused on providing the best performance for their target device and application markets.  We’re not just saying don’t buy technology for technology’s sake—we are saying that the applications first have to work in a fundamental sense before you can consider adding the “bells and whistles”.

The NFC market, although garnering significant media coverage and growing rapidly, is still nascent.  There are a limited number of installations, consumer devices and applications.  In instances where NFC is currently used, the applications it serves are generally less complex (e.g., ticketing, access control, and marketing) and do not require high performance ICs with robust feature sets.  At present there is no real need for a highly advanced, feature rich IC – the market needs to get off the ground before such requirements emerge. As the old adage says, you have to walk before you can run.

At this relatively early stage of NFC’s technology lifecycle, device manufacturers should be looking for a chip supplier that not only has a portfolio that delivers best-in-class performance for targeted devices and applications, but that is also willing to partner to continually develop and deliver premium solutions for current AND future markets. 

RFID Inside of Me?

Have you heard about this?  A Stanford medical researcher recently discovered that, contrary to common belief, HF frequencies actually transmit quite well within the human body. This realization prompted her to develop a micro-sized antenna which she then used to power an RF device capable of ‘swimming’ within a person’s bloodstream.  (See original article here.) On one hand, this discovery borders on being disconcertingly sci-fi, and conjures thoughts of Isaac Asimov’s ‘Fantastic Voyage.’ At the same time, an intravascular RF device is an exciting development that could eventually open a new world of possibilities for medical treatment and research, although such applications are a long way from becoming reality. Still, we believe this concept holds tremendous promise, as it could provide significant, undeniable value to all healthcare stakeholders—including the patient.

Using RFID in the human body and healthcare is not a new concept.  Sub-dermal tracking transponders have been around for a long time, medical device implants monitoring is gaining traction, and there have been a number of R&D projects pertaining to RF-enabled medication administration. Companies such as Versus Technology and Awarepoint offer patient monitoring systems, while Censis Technologies and Clearcount provide surgical tool tracking solutions (because nobody wants to find a forceps or sponge left inside of them post-operation).  However, this particular innovation is different, as it could eventually enable internalized, personal care giving. Not only would an intravascular device be capable of performing all of the aforementioned applications, it would also provide a physician unprecedented visibility into a patient’s body and make a number of medical procedures less invasive.

Several weeks ago we wrote about a recent NFC-in-healthcare event held at MIT. The majority of the solutions presented at that conference, as well as those we’ve heard about in our recent research, are intended for patient (as opposed to doctor/medical professional) use, and generally involve some kind of monitoring and/or tracking functionality. Our main criticism of these solutions is that they offer a weak value proposition to the person responsible for making sure they're used—the patient. Of course health insurance companies and doctors would love to monitor your blood pressure or adherence to a prescribed course of medicine in real-time; however, the key question is, how does using a solution that provides such visibility benefit the patient—the person ultimately determining whether it is used at all? If there is not a clear-cut, undeniable benefit, we think it is unlikely many patients will remember—or be willing—to use these solutions.

In the case of an intravenous RF device, the benefits for all stakeholders are readily apparent. Healthcare providers would have a new, versatile and valuable weapon in the battle against various ailments, while health insurance companies could potentially reduce payouts if this solution reduced the need for more traditional and complex procedures. Patients stand to be the greatest beneficiaries of all, as this technology could enable the precise treatment of ailments that were formerly addressable only by indirect or highly invasive methods.