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

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.

Could NFC "Tap" into the Popularity of Mobile Barcode?

Could a catalyst for consumer NFC adoption be another type of technology? We believe it’s possible. The rapid emergence of near field communication (NFC) during the past 12 months, particularly in the context of NFC-enabled smartphones, has vendors and developers working furiously to create solutions that they hope will be The Next Big Thing. While these efforts have resulted in numerous application concepts ranging from mobile wallets to e-couponing to social networking, no specific application (or application type) has yet gained widespread acceptance among consumers. What can developers and vendors do to increase awareness for their NFC solutions? VDC believes that integrating NFC with other recognizable, more frequently used solutions already present on a consumer’s mobile device — such as mobile barcoding — can improve awareness and understanding of the technology, facilitate adoption and extend the reach of NFC.

Let’s consider, for example, how mobile barcode and NFC could complement each other in the context of a customer-facing supermarket deployment.  Barcodes exist on virtually all products being sold in a supermarket and are increasingly used throughout these stores for a diversity of applications such as pricing, information retrieval/exchange, comparative shopping, promotions, couponing and customer loyalty—but are very rarely used for payment.  NFC is a rapidly emerging technology that enables and enhances many of these applications–including payment–but is generally not used for actual shopping at the shelf, because tagging every item is too costly.  The two technologies, working in concert, could create an all-encompassing shopping solution that unifies the strengths and capabilities of both technologies into a single application deployed on a consumer-owned device. Alone, neither technology is ideally suited for all shopping applications; however, when converged, the two technologies together enable a robust solution capable of supporting the entire shopping process.

Some developers, to a degree, have recognized the opportunity to marry barcode and NFC in a single solution. MobiLead, for example, combines the two technologies for mobile marketing and information access, while DigiMo created a mobile payment solution that allows users to choose between NFC and barcode enabled payment. However, we are unaware of any offering that leverages both technologies for unique, specific functionalities—for example, barcode for scanning and NFC for payment. In both of the aforementioned examples, barcode and NFC provide redundant capability. Although these applications are a step in the right direction, we think the real opportunity lies in using each technology for the specific purpose (or purposes) to which it is best suited.

We recommend NFC providers leverage other technologies and solutions currently used by consumers on their mobile devices (e.g., barcode, GPS). Not only will blending NFC with other technologies enhance a solution in regards to its functionality and value, but it also will facilitate NFC education and adoption. 

Nintendo Makes NFC Technology Vendors Say "Wiiiiii!!"

Nintendo’s Wii platform revolutionized the home videogame console with its motion-sensing controller, thereby enabling a more interactive gaming experience.  With its latest version of this platform, the Wii U, Nintendo is looking to push the envelope once again…and this time, NFC (Near Field Communication) is positioned as the big differentiator.  The Wii U features a NFC-enabled touch-screen controller, and will initially leverage its NFC capability for payment, player profile creation, game card management, and/or avatar/character creation and storage.  For example, a player can use NFC to pay for access to new game levels/features and save their progress. Provided the NFC concept is intelligently designed and executed, and well-supported from the developer community perspective, we view this as a very positive development for the overall NFC market for four reasons:

• The integration of NFC into the Wii U will introduce more consumers to the technology—resulting in increased awareness and market growth. The opportunities for growth and exposure are significant—Nintendo sold approximately 20 million Wii consoles in 2010 (4 years after its introduction). For many customers, the Wii U console will be their first exposure to NFC applications.  Furthermore, based on our end user research, the demographics of videogamers are well-aligned with those of early adopters of NFC. We think a positive experience with NFC gaming will pique consumer interest in other NFC devices and applications, thereby driving growth in the broader market.

• Nintendo offers application developers an entirely new platform for innovation and experimentation. We believe one of the keys to NFC market growth is a robust and engaged developer community that creates the applications that bring NFC technology to life. The emergence of NFC in videogames brings a large and experienced group of developers into the broader NFC ecosystem.

• If the Wii U follows the successful path of its predecessor, we expect competing platforms (namely, Playstation and Xbox) to follow suit with NFC integration. The video game market is highly competitive, and success is defined by innovation and technology advancement. If Nintendo’s integration of NFC is well-received, we think its competitors will be quick to embrace the technology as well—thus driving further awareness and demand for NFC hardware.

• A positive reception for NFC in videogames will pave the way for the technology to be integrated into other consumer electronics. Time and again, an innovation that takes root in one type of device soon spreads to others—consider gesture recognition and touchscreen technology, for example.

Unless something goes very wrong with Nintendo’s NFC implementation, we see it as a big step forward in NFC adoption, sowing the seeds for future NFC market growth.

Company Spotlight: Datalogic Shifts to Acquisition-Based Growth Strategy

Datalogic has historically been the European share leader in the stationary industrial scanning market, relying on revenues derived from sales in the region to maintain its position on the global leaderboard. The company’s presence in the US – one of the biggest markets for these products – has, however, been fairly low following marginally successful attempts to effectively penetrate the region via organic growth strategies. The company is now employing an acquisition-driven strategy to ensure it is able to capture and grow share within the region. This strategy is designed to achieve the following goals pertaining to the US market:

• Increase presence and share
• Broaden product portfolios that enable the company to compete in adjacent markets
• Establish strong partnerships with distribution channel organizations

Over the past couple of months, Datalogic has made two acquisitions – Accu-Sort (Industrial Scanning/ Imaging) and PPT Vision – in support of meeting the stated objectives, having declared their intentions to investors over the course of 2011. This will significantly increase Datalogic’s presence in the US market (based on VDC data), enhance and expand its patent and product portfolio, and give it access to well-entrenched distribution channels. In fact, with the acquisition of Accu-Sort, Datalogic should now be the region’s stationary industrial barcode scanner share leader. The following table highlights some of the key drivers, from VDC’s perspective, for each of these acquisitions:

In our opinion, it was time for Datalogic to change course with regard to its expansion and growth strategy in the US, and we are bullish on its two most recent acquisitions. In one fell swoop, they become a share leader, expand their technology portfolio, inherit well-established distribution channels and gain access to new markets.

Despite immediate gains in the region, we believe that Datalogic’s ability to continue to grow in the US will be dependent upon whether it can:

• Seamlessly and efficiently integrate the acquisitions
• Reassure their ‘acquired’ clients and partners that being part of the Datalogic family will only improve upon and add more value to their existing relationship
• Overhaul existing channel strategy in the US, which has only met with limited success
• Educate these new channels about Datalogic-branded products to realize full potential of acquisitions
• Employ effective regionally-specific growth and defensive strategies
• Build upon the momentum generated by these acquisitions
• Maintain a high rate of innovation

Datalogic has learned over the years that the success that they have enjoyed in Europe does not necessarily translate into the same in the US – primarily because of limited channel and marketing resources in the region. With these recent acquisitions – which we believe are not the company’s last – they do have a promising new product, technology and distribution platform to build on.

NFC at NRF

NFC was a pervasive theme at the 2012 NRF show held this week in New York City. Technology vendors of all types were talking about their plans for integrating NFC into their product portfolios and, in many cases, displaying their latest NFC-enabled solutions. Whereas NFC is a nascent, still-developing technology, its presence remains somewhat confined to a few key product categories, but as consumer adoption of NFC smartphones scales in 2012 and beyond, we expect to see an increasingly broad range of customer engagement/retail automation solutions incorporate NFC into their design. What follows is an overview of some of the notable NFC activity at this year’s NRF.

• ViVOtech introduced its ViVOtouch NFC solution, which is mobile marketing software platform that allows merchants to deliver targeted/personalized content, offers and loyalty programs to customers via their NFC-enabled mobile devices. This solution also allows for interactive shopping and NFC-enabled information retrieval on the store floor, further enhancing the shopping experience. Contactless payment is certainly a hot topic, but as a standalone application its ROI potential probably is not strong enough for most enterprises to justify investment. We believe solutions such as this will drive the adoption of contactless payment NFC solutions in retail.

• NFC payment terminal leader VeriFone introduced its PAYware Mobile Enterprise for Tablets, a secure payment acceptance solution that is compatible with the company’s GlobalBay Mobile POS solution. The solution is designed to run on Apple’s iPad 2, and provides the same functionality offered by the original iPod-touch based PAYware solution. PAYware for Tablets has the same fully secure encryption as previous versions of the solution, and enables the acceptance of traditional payment cards, PIN/EMV smartcards and NFC contactless payments. The solution adds further utility for merchants via a built-in 2D barcode scanner for item scanning, coupon acceptance and inventory management.

• INSIDE Secure demonstrated its NFC-based solutions for consumer and product authentication in retail. The solution enables shoppers to verify the authenticity of high-end/luxury goods and allows merchants to confirm the identity of customers. Whereas mobile devices, particularly smartphones, are becoming an increasingly prevalent element of retail marketing strategies and consumer shopping behavior, we expect that solutions leveraging NFC for brand and user authentication will become increasingly popular among retailers of luxury and other high-end goods.

Mobility and customer engagement have been pervasive themes with retail for some time now. NFC offers retailers a way to achieve both of these strategic objectives in a manner that is reliable, fast and easily-scalable. As consumer adoption of NFC gains momentum, we expect to see an increasingly diverse range of retail technology solutions support this technology.

Barcoding at the NRF

I’m back from spending an interesting day at the NRF Expo in New York City. The booths were teeming with activity, and an extensive array of products was on display – mobility, of course, continued to be the raging theme dominating the in-store customer engagement technologies market. 

The barcode scanners and printers showcased at this show set the tone for what we can expect to see from the supplier community in 2012 – tweaks to existing product lines based on internal assessment and customer feedback, as opposed to radical product innovations.

Barcode Scanners

• Motorola has marked its entry into the general-purpose linear imaging space with the cordless LI4278 (which can be mounted on the cradle used by its popular Laser Scanner LS4278), featuring high angular & motion tolerance, a fairly snappy decode performance and also capable of scanning 1D mobile barcodes. While not a low cost device, the company expects this to potentially upstage laser scanners in the long run. It’ll be interesting to see how Motorola pitches this product against its extensive 2D array imager portfolio, especially given the relatively low price differential between the two. For now, it looks like retailers with an exclusive focus on 1D barcodes (for their loyalty and marketing programs, for instance) might choose this product over 2D imagers.
• HP released its very first presentation scanner, with the ability to read both 1D and 2D barcodes, placing it in direct competition with the likes of Honeywell’s Genesis 7580, Motorola’s DS9208 and Datalogic’s Magellan series. The company’s products are targeted exclusively at the retail environment, and the introduction of this scanner plays well with setting HP up to be a one-stop shop for all of the retailer’s in-store technology needs. Retailers, particularly among the lower revenue tiers, are increasingly looking to source all their in-store technology solution requirements from a single vendor.
• Code Corp has decided to move away from its fairly exclusive focus on the healthcare vertical, with an aim to largely capitalize on the mobile barcode scanning opportunity. Their new low cost, entry-level area imager offering, CR900FD, comes out-of-the-box ready to scan standard 1D barcodes with retailers having the option to upgrade to support 2D barcode scanning functionalities at a later date, when the need arises. This concept was floated around by Honeywell in 2011, allowing end-users to pay for & unlock latent 2D capabilities post-purchase, future-proofing (and securing) their barcode scanning investments. VDC expects features such as these to enable a smooth & rapid transition to 2D imagers without significantly interrupting business processes and also minimizing the need to overhaul existing infrastructure.

Barcode Printers

• Source Technologies continues to be fairly aggressive with its strategy to expand and extend its product portfolio and stay competitive with barcode printing industry behemoths including Zebra and Datamax O’Neil. At the NRF, the company announced 2 new printer models – STp.1115 and STp.1125 – highlighting features including durability, ease of use/loading and print speeds. The company has a long way to go in establishing a name for itself in the thermal barcode printer market but seems to be headed in the right direction, establishing strategic partnerships with the channel community and actively marketing its new solution offerings.
• Brother Mobile Solutions officially released its 4” Motorola-certified, industrial-grade RuggedJet mobile printer (Bluetooth and Wi-Fi models). VDC’s end-user survey respondents have, over the past 12 months, continually highlighted the importance of multi-application support with their barcode printers and these models certainly address this need with the capability to print both barcode labels & small forms/documents, and featuring an add-on payment capture ‘sled’.

The key takeaway from this show is how suppliers are increasingly enabling retailers to look beyond the traditional track-and-trace & inventory control (back-office) applications, and leverage barcodes to support and strengthen their marketing initiatives, with an emphasis on enhancing overall customer experience.

Intel gets Involved with NFC

Intel has joined the ranks of companies looking to profit from the rapid growth expected in the NFC market during 2012. In Q4 2011, the company announced a partnership with INSIDE Secure, whereby it will license several of INSIDE’s NFC offerings for use in its own products. Today, Intel revealed at CES 2012 that its new Ivy Bridge chipset supports NFC, particularly for payment and e-commerce applications. The company further disclosed that Ivy Bridge will be featured in up to 75 ultrabook devices that are expected to reach the market during 2012.

While ultrabooks may seem an unlikely form factor to support payment and e-commerce applications, these devices could support some potential use cases beyond the typical “tap-to-pay” functionality, such as auto-form population during online shopping as well as authentication of payment credentials in online transactions. Of course, these devices can also support other non-payment applications like pairing, peer-to-peer, info-tainment and access control, which will broaden their appeal to both consumers and enterprises.

Intel’s entry further boosts NFC’s near-term growth prospects. While exponential gains in NFC smartphone sales have been broadly expected in 2012 for some time now, opportunity for growth in other consumer electronics categories has been limited in comparison. Intel’s entry into NFC (and the numerous ultrabook initiatives using Ivy Bridge chips) rapidly expands the potential market for NFC devices in the immediate term. We expect that as Intel further integrates NFC into its offerings, the range of NFC device types and form factors available to end users will continue to expand.

Verifone on Point with Recent Acquisition

Payment terminal solution supplier Verifone continues to pursue accretive growth. On January 3rd, the company completed its acquisition of Point, a leading provider of payment solutions in northern Europe. Point, headquartered in Stockholm, will continue operations under the same name, but as a wholly owned subsidiary of Verifone. Point represents the latest addition to the list of Verifone’s acquisitions over the recent past, which also includes WAY Systems, Gemalto’s payment terminal operations, Hypercom’s non-US operations and Global Bay.

The acquisition of Point has significant strategic importance for Verifone. The transaction rapidly increases Verifone’s presence in EMEA, particularly in Northern Europe, where the company has historically lagged behind the regional share leader, Ingenico. Combined with Verifone’s previous acquisition of Hypercom’s EMEA operations and Gemalto’s payment terminal business, Point further solidifies the company’s status as a serious threat to Ingenico’s market-leading position.

Furthermore, the addition of Point further extends Verifone’s portfolio of alternative payment solutions, including those for supporting NFC contactless payments and mobile commerce. EMEA is a particularly important regional market in the context of NFC payments, as historically stronger availability of NFC-enabled devices and a more robust installed base of contactless infrastructure could drive faster adoption of more advanced NFC solutions in this region.