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

What makes a smart city smart? It must be AutoID.

What makes a smart city smart?  That is a key question as our team researches smart cities and how AutoID technologies are enabling them. Although the term smart city means different things to different people and is used inconsistently to define various projects, I believe RFID, RTLS, contactless and NFC are critical elements of the smart city of tomorrow. The formal definition of a smart city generally includes variations of the following elements: a smart economy; smart mobility; smart environment; smart living; smart governance and smart technology. Enter RFID, RTLS, contactless and NFC technologies. In small towns and major cities throughout the world, these AutoID solutions are already being used to support a host of applications, including:

• Internet of Things
• Bike rentals
• Citizen ID
• Customer loyalty
• Electronic Vehicle Registration (EVR)
• Energy (e.g., smart meters)
• Library management
• Public transport (e.g., contactless ticketing, mobile payment)
• Risk prevention (e.g., public works, nuclear energy)
• Urban planning (e.g., smart building, intelligent traffic)
• Vehicle fleet
• Waste management

The concept of the smart city is increasingly being adopted by both cities (municipalities/localities) and enterprises,reflecting the growing importance of information and communication technologies
(in addition to social and environmental factors) in defining the competitiveness of cities and improving the quality of life of individual citizens through the management of natural resources and responsible participatory governments.

Not surprisingly, smart cities are notbuilt in day. They take time, money, awareness and most often government involvement (e.g., funding, mandates, recommendations, program development) to
build the foundation and then scale. As a result, municipalities/localities must think big (a vision for a smart city) but start small (one project/deployment/application at a time). Albeit slowly, smart cities are emerging with RFID, NFC, RTLS, and contactless payment, ticketing and ID technologies often part of the “construction.” According to one local official with whom I recently spoke under NDA, “The value propositions and benefits of RFID [and increasingly NFC] will be found around every corner – literally – and the application possibilities are limitless.”

Major RFID and contactless industry conferences are also recognizing the importance of RFID, NFC and related technologies to the development of a smart city. For example, in October, The 4^th Annual International RFID Congress event will be dedicated to applications RFID/NFC for a smart city and habitat. 

Smart cities will leverage many technologies, but most of them can be grouped into
five main categories:

• Authentication (RFID, NFC, mobile payment, etc.)
• Cloud Computing (remote back-up, wireless communication, etc.)
• Control (monitored data analyzed in real time to drive actions, alerts, controls)
• Monitoring (sensors, RTLS, RFID, etc.)
• Sensing (RFID, wireless sensor networks, video, biometrics, etc.)

As part of our 2013 research programs, the AutoID & Data Capture team will study the use of RFID, NFC and related technologies by municipalities/localities and determine how these solutions fit into the concept and vision of a smart city. Stay tuned for more on this topic and the impact of AutoID in creating these cities of the future.

NRF 2013: The Big Show Day 2 in Review

The VDC AutoID team’s second day at NRF was just as busy as the first, and was packed with vendor meetings, new product briefings and walking the show floor. Since our previous post focused on broader trends and observations gleaned from NRF 2013, this blog is dedicated to sharing some of the key vendor announcements and product introductions made during the event:

• NCR and PayPal announced a partnership whereby NCR will leverage PayPal’s leading cloud-based payment technology to augment the functionality of its mobile solutions targeted at hospitality enterprises, particularly restaurant/dining operators. Initially, NCR will integrate PayPal with its NCR Mobile Pay and NCR Aloha Online Ordering applications, giving customers an alternative to using credit/debit cards via enabling smartphone-based online (i.e., PayPal) payment. Besides the convenience and security benefits, PayPal will also bring social commerce features to the apps, including online check-in and reviews. Eventually, NCR also plans to integrate PayPal into its Convenience-Go (C-Go) and Endless Aisle applications. The NCR-PayPal partnership demonstrates NCR’s commitment to “making everyday transactions easier” for the consumer and merchant as well as PayPal’s leadership in the digital payment ecosystem.
• Zebra announced a new line of mobile receipt printers targeted at retailers and other B2C merchants that increasingly leverage consumer grade i-Devices (i.e., iPhone, iPad and iPod touch) as mPOS platforms. The new iMZ220 and iMZ320 are designed for easy integration with mPOS devices (including consumer grade offerings, such as those from Apple) and are among the first Link-OS-enabled products the Company plans to launch during 2013. Link-OS is a new operating system designed for use with Zebra devices which includes a SDK and core software applications that the company believes will make its hardware easier to integrate, manage and maintain from any location.
• HP debuted several new retail-focused POS products that address merchants’ increasingly strong interest in sleek, aesthetically-pleasing stationary terminals and rapidly growing demand for tablet-based mPOS solutions. For retailers seeking a more attractive alternative to clunky, traditional stationary POS terminals, HP introduced its RP7 and RP3 Retail Systems, both of which combine a sleek, modern appearance with the robust connectivity and build quality retail and hospitality operators require. HP also showed its new ElitePad along with a line of peripherals designed specifically for use with the tablet.

As usual, NRF delivered again in 2013 with many great exhibitors, vendor briefings and new product announcements. We look forward to attending next year’s edition, but until then, stay tuned to this blog for more AutoID-related news and opinions. Also be sure to listen to our upcoming NRF Quickcast, in which we will further discuss key takeaways from this year’s Big Show.

NRF 2013: The Big Show Day 1 Recap

The VDC AutoID team attended this year’s NRF in full force. With vendors representing all of the core AutoID markets, including MCET, RFID and Barcode, there were many new and innovative retail-targeted products to see relevant to each of the practice’s coverage areas. The following are a few broader observations from day 1 in the Big Apple:

• Hardware is becoming increasingly less important, and more vendors realize it. Conversely, software, and, more importantly, the functionality it enables, is the critical issue for retailers. Some hardware and solution vendors have been aware of this dynamic for some time now. Others, we think, have only recently awakened to this reality. This is more often (but not always) true in the case of large-scale, enterprise-focused vendors of retail automation and customer engagement solutions that have historically pursued differentiation via hardware ruggedness, lifecycle, and so forth rather than ease-of-use, intuitive functionality and application innovation. During conversations throughout the show, it was evident that several large-scale, traditionally hardware-focused vendors have pivoted to a broader focused strategy—one that seeks to differentiate on innovative software and functionality in addition to hardware.
• Traditional POS terminal refreshes contribute to mPOS growth. The common strategic drivers behind the recent explosion in retailers’ mPOS investment are well documented, and include improved labor utilization and efficiency, better customer service and employee empowerment. However, during our time at NRF 2013, we validated another, more pragmatic factor playing a role in mPOS’ rapid growth: stationary POS terminal refreshes. As merchants update traditional POS systems, vendors indicated that mobile terminals are usually included in their next-generation solution evaluation process. The stationary vs. mobile conversation is different for every retailer, and depends on variables including store format, sub-vertical and strategic/operational objectives, but increasingly the final solution is comprised at least in part by mPOS. While we expect this trend to continue throughout 2013 and well into the future, at the same time we believe stationary POS will remain relevant for many types of retailers as well. 
• The m.Wallet war rages on with no end in sight: The struggle to establish broader adoption in the m.Wallet and contactless payment ecosystem is as highly contested as ever, both in the context of which stakeholder(s) own the m.Wallet (a single retailer, a multi-retailer consortium, the MNOs, etc.) and in regards to enabling technology (mobile barcode, NFC, cloud-based). At this point in time, there is no certainty as to which of these entities and enabling technologies will be successful in the long term. Valid arguments exist both for and against these prospective m.Wallet owners as well as each enabling technology, and all were represented on the NRF show floor. Ultimately, consumers have the final say as to which stakeholders and enabling technologies win. Without consumers’ approval—i.e., their adoption and ongoing use—no m.Wallet or contactless payment technology will be successful in the long term. 

That concludes our recap from the first day at NRF. Stay tuned to this blog for another post highlighting some of the key vendor announcements and observations from day two.

Would You Pay Extra to Pay with NFC? Neither Would We.

Here’s a hypothetical decision: Would you pay $60 for an NFC-enabled iPhone case that enables you to pay via your smartphone—but only at ISIS partner merchants in Salt Lake City and Austin? Or, would you prefer to pay anywhere (at no additional cost) with old-fashioned cash or credit/debit cards? The choice seems absurdly clear—the vast majority (we would estimate 99%) of consumers will choose cash or card payment.

Still, despite a market opportunity that we believe is accurately summarized by the above choice, vendors with aspirations to cash in on mobile payment and NFC hype continue to introduce NFC retrofit solutions for smartphones lacking embedded NFC. Incipio is the latest entrant, having debuted its “Cashwrap” NFC-enabled iPhone 4/4S case earlier this week at CES. Incipio joins a market that seems crowded considering the nascent state of the NFC ecosystem in most regions. For example, companies such as DeviceFidelity, Flomio and Wireless Dynamics already offer (or are developing) similar accessories for both the iPhone and older Android devices. Frankly, given NFC’s weak support within enterprises and low awareness among consumers (not to mention that cash and cards are a free and highly effective alternative), we wonder: who is buying these products?

Among consumers, NFC contactless payment faces a daunting uphill battle to mainstream acceptance for at least two key reasons:

• Cash and cards’ familiarity with consumers across all demographics
• Security concerns, especially for solutions storing payment credentials on the device (as opposed to the cloud)

Keeping in mind the above factors, it is unlikely that the average consumer will spend additional money, time and effort to pay via NFC. If NFC-enabled contactless payment is to gain broader adoption, it must be absolutely frictionless to use (meaning no special cases, SIM or MicroSD card required) and offer incentives for ongoing use (for example, rewards or exclusive deals) to ensure consumers do not revert to cash or cards. Remember, cash and cards are accepted everywhere and cost the consumer nothing—in terms of money, time or effort—to use. We believe an NFC payment solution that cannot say the same has a highly challenging path to success.

VDC Research's 13 AutoID Predictions for 2013: Barcode, RFID & RTLS and Mobile Customer Engagement Technologies

Happy New Year! On behalf of the AutoID team and all of VDC Research Group, we wish you all the
best in 2013.

Although 2012 has just concluded, it is never too soon to look ahead. So to start the new year off in an interesting way, the AutoID team has taken out our crystal ball once again to offer 13 predictions for the AutoID market in 2013, including Barcode, RFID & RTLS and Mobile Consumer Engagement Technologies (MCET). They are presented in no particular order.  

1. Barcode: More market aggregation ahead – Expect continued consolidation of the barcode
   hardware landscape, particularly to achieve growth across following dimensions:
   • Regional – Vendors seeking to grow their presence in emerging country markets,
     particularly targeting barcode printer and scanner vendors based out of
     Asia-Pacific.
   • Vertical – Vendors looking to increase their proliferation into high-growth industry
     verticals – particularly healthcare.
2. Barcode: Vendors will learn to “accessorize” – More barcode hardware players will actively
   look to enter the “accessories” market – developing sleds and/or sleeves to support consumer-grade device usage in enterprise environments. This is particularly relevant to vendors addressing customer-facing applications with their devices in retail, healthcare, hospitality and commercial services. 
3. Barcode: Future with mobility, not without in software market – An increasing number
   of barcode software solution providers will extend label printing support to portable devices (both purpose-built and consumer-grade) – facilitating mobile applications such as field sales, field service and direct store delivery (DSD). Today, mobile barcode label generation software penetration is in a very nascent stage, but we expect that to quickly change. Mobility IS the way forward across verticals and industries and the entire barcode value chain must and will respond accordingly.
4. Barcode: Embrace the tech-savvy consumer – Scanning with and displaying barcodes on mobile device screens will continue to grow significantly among consumers. Barcode vendors and their enterprise and retail customers must continuously adapt to this explosive trend. We predict more QSRs (quick service restaurants), convenience stores, restaurants, theme parks/ entertainment venues and other consumer-facing enterprises will invest in and deploy barcode imagers and consumer-grade mobile devices to interact with consumers (e.g., coupon redemption, payment, loyalty/rewards programs).
5. MCET: Mobile point-of-sale (mPOS) will remain the hottest technology among B2C business operators – This trend will be most prominent in retail, but increasingly in dining as well, despite the fact that enterprises often lack clear strategic objectives guiding their investment in the same. In 2013, MCET solution providers must assume leadership roles in educating their customers on technology selection, software and security, best-fit use cases for specific mobile devices/form factors and total cost of ownership (TCO).
6. MCET: NFC as a broader ecosystem will make little progress beyond incremental gains in
   shipments of NFC-enabled smartphones – Yes, this means more NFC-equipped phones in consumer hands, and limited scale pilots and tests will continue, but 2013 is not the year when the technology gains global-level traction. However, expect more TV commercials for mobile phones and mobile network operators (MNOs) to advertise NFC and its applications – and more importantly, look for more commercials to specifically mention the term “NFC” in order to engrain the technology in consumer minds.
7. MCET: Merchants’ general focus on mobility - mPOS in particular - will bring great opportunity for vendors of adjacent peripherals – POS peripheral vendors (e.g., receipt printers, barcode scanners, payment solutions) are expected to drive growth via innovative, highly-portable versions of these traditional POS extensions. These vendors will be jockeying for competitive position more aggressively in 2013, responding to burgeoning demand among retailers, restaurants, hospitality and other enterprises wanting to differentiate and augment their systems by  “going mobile” at the POS.
8. MCET: Contactless mobile payment via NFC will not explode in popularity among consumers during 2013, but consumer usage and merchant support of this application will experience strong growth – Barcodes displayed on mobile device screens and core/traditional RFID (e.g., contactless tickets, smartcards) – not NFC – will continue to enjoy broader global support for mobile payments in the foreseeablefuture. For NFC to gain ground in 2013, more NFC-enabled devices must reach consumer hands, more NFC-compatible payment terminals must be deployed and more collaboration among invested parties must occur within the NFC ecosystem (especially in terms of consumer education, transaction fee negotiations/resolution, and application development).
9. RFID & RTLS: Vendors – especially RTLS solution providers – will develop the “healthcare
   stare” – The use of RFID and RTLS is on the rise in healthcare, most notably in the US thanks to the VA’s announced $540M+ contract to track equipment and supplies at 21 of its Veteran Integrated Service Networks (VISNs).  However, the contract award to HP was not met without controversy in 2012 as IBM filed a protest to the US Government Accountability Office (GAO) and won the decision. The contract will be rebid among, at least, the six original bidders.  This spark to the market (and sizeable contract) drew a lot of attention in 2012 and we expect the RFID and RTLS frenzy to continue in healthcare in 2013. However, we caution vendors (especially RTLS providers) to not focus solely on healthcare and to seek opportunities and market development in other vertical markets where the competitive field may be less crowded.
10. RFID & RTLS: Passive UHF EPC item-level tagging (ILT) in the apparel sector will
    pick up the pace after a somewhat slow 2012 – This past year was a mild disappointment in terms of retailer deployment of RFID for ILT of apparel. For example, no major reader or printer/encoder orders were delivered, several large retailers remain behind originally announced plans (e.g., Wal-Mart, JC Penney) and some newer programs were pushed to or will start in 2013.  So what to expect in the year ahead? Even more American Apparel stores will go live with RFID (a bright spot for 2012 as well), Wal-Mart will reassess its RFID plans but remain committed, Macy’s will make its anticipated move, JC Penney has bigger worries than RFID, international retailer Zara will play a key role in increasing tag volumes and RFID EAS will become a more critical part of the ILT in apparel conversation.
11. RFID & RTLS: Embedded RFID keeps the forward momentum – At the end of 2011 we
    noted the rise of “RFID inside,” or embedded RFID, as a key trend to watch for in 2012.  We are keeping it on the list in 2013 after seeing a great deal of progress in 2012. For example, ThingMagic released a new, smaller passive UHF reader module, Xerafy continued product development for embedded RFID specialty tags (e.g., tools), ICs and chipsets from players such as Impinj, NXP, Murata and AMS decreased their footprints, Coca-Cola Freestyle dispensers with passive UHF technology inside continued deploment, RFID and NFC made their way into consumer devices such as Keurig Vue coffee brewers and Nintendo Wii (Skylanders game) and much more. With price points declining and form factors shrinking, we expect to see solutions and applications such as these expand and new innovations to be introduced in 2013.
12. RFID & RTLS: Honeywell Scanning & Mobility will get strategic on RFID – and quickly
    – after announcing its first RFID product and the acquisition of Intermec in 2012 – After some exploration of RFID while acquiring several barcode scanner and mobile computing companies over the last few years, Honeywell made some eye-catching RFID moves in 2012. They made a subtle move in introducing an RFID reader and then made a major move in announcing the acquisition of Intermec (a major RFID IP holder and RFID equipment manufacturer). We predict Honeywell will aggressively develop its RFID strategy in 2013, becoming a strong competitor in select verticals and applications that play to the combined strengths of Honeywell and Intermec. What’s next for Honeywell – RTLS in 2013 or 2014?
13. AutoID: Governments in China and the EU continue to connect with the concept of the Internet of Things (IoT) – While the US government remains largely silent, China and
    the EU actively fund research IoT projects, create policies to govern the IoT and deploy IoT technologies (including RFID, NFC and sensors). Much of the IoT activity in the US has been at the city level (e.g., smart cities) and we do not expect that to change. In looking ahead and predicting where will be the epicenter of IoT innovation, we are placing our bets on China. Simply look at what is on the list of IoT development subsidy projects from China's Ministry of Industry and Information Technology and Ministry of Finance (announced November 2012). UHF and microwave RFID chip design, product technology R&D, miniaturized intelligent sensor technology R&D, ad-hoc networking technology for wireless sensor networks, intelligent logistics and intelligent traffic are among the 14 categories of project, comprising 149 projects in total, which will receive support from the government.

I would like to extend a special thank you to Richa Gupta (VDC’s barcode analyst) and John Shuster (VDC’s MCET analyst) for their contributions to this blog.

Epson Mobilizes to Address Rapidly Growing mPOS Opportunity

Still questioning whether consumer-grade mobile POS (mPOS) devices are a short-lived trend or a here-to-stay expansion of the broader front-end technology solutions at many leading mainstream merchants? Here is another strong point in favor of the latter: Epson, the global market leader in POS receipt printers, recently announced its Mobilink P60 mobile receipt and label printer supports Bluetooth connectivity to facilitate wireless pairing with all Apple i-devices and a diversity of other Bluetooth-equipped consumer-grade devices. The Company simultaneously introduced a new software development kit (SDK) for iOS, Android and Windows operating systems that is intended to expedite the development of mPOS and label printing applications that leverage the Bluetooth-enabled Mobilink printer.

As mPOS solutions gain stronger adoption among retailers and hospitality operators—sometimes as an enterprise’s exclusive POS system—the demand for reliable, easy-to-use printing solutions that complement the mobility and empowerment mPOS provides workers is growing increasingly strong. In response, a number of POS receipt printer vendors—including Epson—have been swift to launch portable versions of their standard, stationary POS printers. These portable printers are certainly smaller than their stationary counterparts and are “mobile” in the sense that they can be easily transported. However, while smaller in relative terms, they are not ideally sized to be wearable for the average worker.

For this reason, we believe a Bluetooth-enabled printer such as Epson’s offering will­­­­ be well-received by many mPOS deploying merchants, especially those using mPOS “within the four walls,” as opposed to in field-sales or other remote applications. The deployment of Bluetooth-enabled stationary and portable printers enables mPOS-equipped associates to fulfill any printing requirements encountered during their shift while freeing them from the burden of carrying another device on their person. Furthermore, enabling on-the-go, mobile printing via shared Bluetooth-enabled (or other wirelessly accessible) devices allows enterprises to reduce printing hardware investment by eliminating the need to equip every associate with their own mobile printer. Accordingly, in the case of many mPOS deployments, we expect this approach to mobile printing will be favored both for its lower investment costs and freeing employees from carrying additional equipment.

VeriFone Furls its SAIL

Less than a year after launching its SAIL m.payment solution, payment terminal giant VeriFone has essentially pulled the plug on the product, which is its version of a Square-style card reader dongle. Citing a number of major challenges, including fierce competition in this nascent, but rapidly-growing market and the razor-thin margins on SAIL-based payments, the Company’s CEO officially disclosed SAIL would cease operations (save for continuing to service current users) in its recent Q4 earnings call.

While it is somewhat surprising that a well-established company like VeriFone is bailing out on a new product so quickly, the closure of SAIL clearly demonstrates the cutthroat competition in this market and could portend further consolidation or business failures of other similar ventures in the near-term. Certainly there is no shortage of Square-like solutions, with numerous hardware- and software-based competitors in the consumer-grade device mobile payment market (including Intuit, Paypal, Dwolla, iZettle and Groupon, just to name some high-profile players). Perhaps even more problematic for these m.payment service providers is that the business model on which they are founded is generally a race-to-the-bottom in regards to profit margins, with the major differentiator between each competitor often being the percentage fee charged for processing payments.

Looking ahead to the future, we believe the mobile payment competitors that will be viable for the long-term will be those that successfully layer value-added applications/services such as loyalty, coupons/offers and other mobile commerce functionality on top of their basic payment processing service. To the extent that these adjacent applications drive stronger customer loyalty, larger average ticket sizes and increased footfall for merchants, m.payment service providers can leverage them to generate additional revenue streams, differentiate their offering and attract new merchant partners. Conversely, we expect m.payment providers that remain reliant on processing fees for the majority of their revenues will see fiercer competition, shrinking margins and increasingly stronger chances of failure as payment processing service becomes more commoditized.

 

 

 

Gemalto, G&D and ARM Launch Trustonic JV to Ease NFC SE Pains, but Will it Really Help?

If you frequent this blog, you already know we are generally bearish on the NFC’s near-term prospects as a m.payment and m.commerce enabler. While the technology certainly has some great features and benefits, NFC faces too many challenges—several of which are highly complex and/or expensive to address—for it to reach mass adoption at a global level for the headline applications with which it is associated, at least for the next several years. Among the thorniest issues associated with NFC-enabled secure applications (i.e., use-cases that require transmission of sensitive and/or personal information, including payment, ticketing, loyalty, etc.) are those related to the secure element (SE), the part of a smartphone where this information is kept:

• Where does the SE reside on a smartphone? (SIM, MicroSD, embedded, elsewhere?)
• What entity owns/controls the SE? (MNO, device manufacturer, card issuer, multiple entities?)

These questions are of material importance to the above-mentioned stakeholders (and others), especially in the context of m.payment, ticketing and other contactless applications where funds are transferred between parties (e.g., customer-to-merchant, person-to-person). Just as credit/debit card companies generate billions in fees annually from processing “plastic” payments, so too could NFC SE owners generate handsome interchange revenues (as well as “rental” fees if a third party entity requires use of a SE for its own app) for NFC-enabled contactless payment. As a result of the high stakes and multiple, self-interested entities jockeying for position, no clear, broadly-accepted determination has been reached on either of these SE-related issues—nor do we expect one to emerge anytime soon.

In the meantime, NFC market players ARM (a smartphone chip vendor), Gemalto (a TSM provider) and Giesecke & Devrient (a payment security solution provider) have launched a joint venture called Trustonic to create a semi-secure alternative to NFC SEs called Trusted Execution Environments (TEE). Essentially, the TEE resides in the main processor of a smartphone, which positions it to execute transactions and other processes more expediently relative to a standalone SE. However, since a TEE is not entirely isolated from the rest of the device, this increased speed comes at the expense of security—meaning that it is unlikely credit/debit card providers and other credential issuers with high security requirements are unlikely to grant approval to TEEs like Trustonic.

While it is promising to see the emergence of new and innovative solutions to address some of the challenges hindering NFC adoption, we do not expect the emergence of Trustonic or other SE alternatives to have a material near-term impact on the NFC ecosystem. VDC views NFC’s great potential as an enabler of B2C applications as being a “package deal,” where payment, loyalty, couponing and other functions are united by one contactless application. Unfortunately, in maneuvering around the sticky SE issues, Trustonic also has diminished the SE’s value as a vault-like safeguard for the most sensitive credential types, meaning the TEE only can support semi-secure NFC apps. In our opinion—one we suspect is shared by many B2C merchants—this approach limits NFC’s value proposition and Trustonic’s potential to drive broader adoption of the technology.

France-based m.Wallet Consortium Leader Chooses Barcode, not NFC

Auchan, a leading French supermarket chain, announced plans to launch a cross-merchant m.wallet app called Flash ‘n’ Pay (FNP). The FNP app will be very similar to the one currently in development at the Merchant-Customer Exchange (MCX), which we discussed in a previous post. Like MCX, the FNP app can be used with all credit/debit card brands, supports loyalty cards and is MNO and issuing-bank agnostic. FNP also shares the same enabling technology as MCX—the app will be barcode-based, not NFC.

Whereas France is among the countries leading European NFC adoption, one might understandably assume that a retailer-led m.wallet app designed for that market would be NFC-based, not barcode. However, NFC faces many of the same fundamental challenges to mass adoption in France that it does in most other countries: 

• NFC-based apps cannot be used by many current smartphone users—barcode is accessible to virtually all
• NFC-based payment requires cooperation across multiple stakeholders—barcode does not
• Barcode-based apps are easier and less costly to support—and many B2C merchants already have the requisite 2D imagers installed at the POS

Certainly, NFC adoption in France is stronger relative to most other national markets, thanks in large part to the French government’s recent commitment to fund contactless transportation infrastructure in approximately 15 cities. However, NFC’s long-term potential as a B2C commerce enabler in France—and in most countries, save for a select few in Asia-Pacific—remains highly uncertain.

We view Auchan’s selection of barcode for its m.wallet as a particularly noteworthy development by virtue of its regional context. If an NFC m.wallet is not viable for a French retailer, in which countries is it?  From our perspective, the FNP announcement demonstrates how far NFC has yet to progress before it attains mainstream status, even in the countries/regions where adoption is relatively strong today.

Could RFID Lock Hack at US Hotel Chains Close the Door on NFC-enabled Security/Access Control Opportunity?

If you travel frequently, be warned: hackers have devised a way to bypass a particular type of electronic lock commonly found throughout leading hotel chains across the US (read original article here). With a little spare time and about $50 in common tools and materials, criminals across the US have been building these devices to break into hotel rooms (supposedly) secured with electronic keycard locks. The resulting e-lock pick is about the size of a marker and can be used to crack Onity HT and Advance locks found in an estimated 4 to 5 million hotel rooms nationwide, including those at certain Hyatt, Ramada, Doubletree Hilton and Country Inn & Suites locations. Obviously, this is terrible publicity for all the brands associated with this security failure—but we also see it as an unfortunate setback for RFID, NFC and other electronic security/access control solutions as well.

To be clear, the lock models targeted by this security hack are RFID-based. As far as we know, no other electronic security technologies (e.g., NFC, magnetic stripe, biometrics) have been compromised by this attack. Unfortunately for non-RFID electronic lock vendors, that fact might be of little consequence—especially in the context of end users’ perception.

The market for electronic hotel locks is somewhat unique in the sense that there are really two categories of end users: the hotels and their customers. Barring a PR disaster such as this, an e-lock vendor must only convince the former of the security and reliability of its locks to be successful—hotel guests will assume the lock on their door will do what it is supposed to—until a story like Onity’s goes viral.

Now, not only will hotel operators be avoiding Onity products due to this new security threat, so too will nervous hotel guests. While this presents an immense problem for Onity, we also see it as a challenge for all electronic security/access control vendors. While a hotel IT or security director may be savvy enough to distinguish between different lock vendors and enabling technologies—including RFID, NFC, magnetic stripe and biometrics—the average hotel guest most likely is not. Therein lays the problem for e-lock companies.

From a hotel operators’ perspective, guests’ perceptions carry significant weight—because if a guest is not confident in the hotel’s security, they are probably going to stay elsewhere. Thus, if the public becomes highly weary of electronic locks in general—to the point that their presence negatively impacts a hotel’s bookings—we bet operators would be swift to revert to old-fashioned lock-and-key or other more secure alternatives.

While fallout from this incident is not likely to be that severe, we expect it will cause many hotel operators to evaluate more carefully the reliability and security their future e-lock investments truly deliver. Moreover, this incident underscores the need for increased vigilance when it comes to securing electronically-enabled devices, particularly those that are customer-facing and likely to be targets of criminal attacks. Consumer trust is highly difficult to earn but can be lost instantly.