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

A Savvy Acquisition of Savi Technology?

In the late 2000s, Savi Technology, an active RFID solutions provider, was among the major beneficiaries of an approximately $430 million US Department of Defense (DoD) contract commonly referred to as “RFID III” (The Company also enjoyed strong growth through earlier announced large DoD RFID contracts). One of the principle objectives of this RFID funding was achieving “In-Transit Visibility” (ITV), which essentially meant establishing real-time insight into the progress and location of various DoD assets (e.g., cargo, personnel, vehicles, equipment, etc.) during their journey through the supply chain—from point of origin to final destination. The DoD selected Savi, along with several other well-known defense contractors (with Lockheed Martin, Savi’s parent company, being key among them), as the primary solution providers for the ITV initiative.

For its part in the contract, Savi Technology provided highly-rugged active RFID tags, which cost upwards of $100 per unit, along with other systems components. In the early days of the RFID III contract, the DoD struggled with best practices in regards to the recycling and reattachment of Savi’s tags to assets (e.g., cargo, intermodal containers) entering or re-entering the supply chain, despite their significant cost and the fact that the tags were reusable and designed for a 5-7 year lifecycle.

Several years into the RFID III contract, the Government Accountability Office (GAO) reviewed the practices of the DoD in the context of the ITV initiative. Among the findings of this investigation was the fact that significant funds were being squandered on new RFID tags, when the “old” tags could have (and should have) been reused many times over. Ultimately, this GAO revelation materially decreased demand for Savi’s tags and had a correspondingly negative impact on the company’s financial performance, especially on their renewable tag volume business. While Savi did enjoy some success outside the military space, deploying their solutions at a wide number of ports internationally, the company remained challenged by the slow pace of adoption for RFID-enabled cargo tracking and security applications, such as customs inspection.

It was no big secret in the RFID industry that Savi was struggling, and that its parent, Lockheed Martin, was looking to divest the business. Last week Savi announced that they had found a buyer.  The Company was acquired by LaSalle Capital, a private investor group based in Los Angeles. We expect LaSalle will likely seek to revitalize the Company and extend Savi’s presence outside its core historical market of Defense/Military within the US and its Allies to commercial markets. There is no shortage of potential avenues the company could explore to drive future growth with its current offerings, but we think RTLS and other forms of “RFID+” solutions (e.g., active RFID plus sensors) are among the most feasible options for Savi to pursue moving forward.

Consumer-Grade Devices in Retail—Now It’s Serious

How does one discern when an emerging technology trend (for example, using consumer devices for POS applications in retail) is materially impacting a well-established market from a broader, macro-level perspective? Answer: The moment one (or more) of the share leaders in that particular market implicitly acknowledges the trend in question, either via the launch of a new product, acquisition, partnership, or some other form of strategic maneuvering.

In cases of highly disruptive trends—where the dominance of the established leader(s) is potentially at stake—such acknowledgement of legitimacy usually follows extensive denial. During the denial period, the trend in question is generally dismissed on the basis of “having weak security”, “lacking durability”, “being poorly suited to application X or installation environment Y” or some combination thereof. Finally, only after realizing the opportunity it’s missing—and share it’s losing—by ignoring the trend in question, the established leader addresses what is now a proven market requirement. If the company truly learned its lesson, the story usually ends happily-ever-after. If not, slow-and-painful death is the typical outcome (see: RIM).

One such trend that has manifested itself in many parts of the broader enterprise technology market is the general embracement of consumer-grade devices—particularly smartphones, but also tablets—for a range of applications in a diversity of vertical markets. In the context of this blog we’re discussing specifically the increasingly common use of smartphones and tablets in retail, especially for POS applications.  Real-life examples of this phenomenon can be found at merchants of all sizes: Lowe’s sales associates carry the iPhone equipped with a mag-stripe reader sled, while Nordstrom, Urban Outfitters and Pacific Sunwear have all deployed iPads for various consumer-facing applications. The trend is not limited to Tier 1 retailers, either—independent merchants also use consumer devices to process transactions with the help of solution providers like Square and Intuit’s GoPayment.

A small number of highly dominant firms befitting the “800-pound gorilla” moniker lead the enterprise-grade POS solution market. VDC’s POS market research indicates that the top 5 POS vendors—IBM, NCR, Wincor Nixdorf, Toshiba TEC and MICROS, respectively—account for nearly 60% of the market, while the remaining share is fragmented across more than a dozen smaller players. Each of these companies’ POS business is built on application-specific, enterprise-grade, complete solutions.

While traditional POS systems (as opposed to consumer-grade devices) still comprise the majority of POS solution revenues, consumer devices now represent a serious enough threat that several of the aforementioned leaders now offer tablet/smartphone solutions alongside their traditional POS products. For example, MICROS offers an iPad-based ordering app that tethers with its traditional restaurant-focused POS solutions, while NCR introduced “Silver,” an iPad-based POS solution that includes a card reader, cash drawer and plug & play integration with other POS hardware—including standard NCR terminals and iPhones. Today NCR announced it will partner with Socket Mobile, a leading mobile computing and data capture solutions provider, to integrate a cordless barcode scanner with Silver.

In an effort to fend off online competition, VDC expects brick & mortar merchants will continue investing in improving the customer’s in-store experience. Consumer-grade mobile devices will play an important role in achieving this strategic goal via mobilizing store associates—thereby enabling them to serve shoppers on the retail floor at the point of decision—rather than forcing the customer to locate a fixed point-of-sale or service desk. This trend has been building for the past several years—and we think it will continue gaining momentum for the foreseeable future. If you are interested in learning more about the use of consumer-grade devices in the enterprise, contact us to learn more about our new Mobile Customer Engagement Technologies (MCET) research service, which will cover this trend and its implications in depth.

A Quick Scan of the 2012 AIM Summit Conference

Last week the VDC Auto ID team visited Chicago for the 2012 AIM Summit. AIM (Association for Automatic Identification and Mobility) is an industry standards and education organization dedicated to all AutoID and Mobility technologies—including barcode, RFID, RTLS and mobile devices. VDC was pleased to participate in this year’s event—both as attendees and presenters. AutoID VP Mike Liard delivered the opening keynote address during which he discussed current trends impacting the barcode and RFID markets. With a broad focus encompassing all AutoID technologies, there was a lot to take in during the event. Here are some of the key highlights:

• We believe the US FDA’s Unique Device Identifier (UDI) initiative could have a major impact on adoption and usage of Auto ID solutions in the healthcare vertical: Essentially, UDI is a federal mandate that will eventually require all medical devices to be individually marked with a code containing important information including manufacturer, model number and expiration date. Complex, high-risk (i.e., implantable) medical devices will be the first class of product to be effected by this new regulation (in 2014), but over the course of the following 5 years, the mandate will extend to other device classes as well. While the major objective driving the UDI legislation is improving patient safety and the effectiveness of medical device recalls, VDC believes the initiative could benefit healthcare enterprises by improving insight to their supply chains and supply inventory levels as well. Of course, realizing these adjacent UDI benefits may necessitate healthcare enterprises to augment current AutoID systems, but if the opportunity for strong ROI is there, we expect investment to follow.
• The barcode market is no longer just about linear and standard 2D barcodes: New 2D symbologies such as Han Xin code are emerging, and could have an impact on certain segments of the market. Han Xin code, introduced about a year ago, is a new two-dimensional matrix symbology. Han Xin codes are particularly effective at encoding large numbers of Chinese, numeric and ASCII characters, and can be printed in 84 different sizes. However, since this symbology is largely designed to encode Chinese characters, we expect its impact to be mostly limited to China and other parts of the Asia-Pacific region.
• Another relatively new symbology, called Ultracode, is also gaining traction: Ultracode was designed for printing on uneven surfaces/materials that are generally poorly suited to printing standard symbologies (e.g., stone, fiberboard, wood and other irregular surfaces). Also, thanks to its ability to be read even when damaged, Ultracode is also favored for applications where barcodes are highly susceptible to being damaged, such as supply chain and T&L.

In addition to being a great forum for engaging with the entire AutoID community, this year’s AIM Summit also provided a special opportunity to remember Bert Moore, a longtime industry advocate and AIM member, who passed away earlier in the year. Bert was given a heartfelt tribute during the post conference dinner and awards program—a fitting gesture considering his contributions to both the AIM organization and the broader AutoID industry for many years. VDC thanks AIM and its constituents for another great event and we look forward to next year’s show.

Part Deux—NFC World Congress Day 2—Exhibition Recap & Highlights

Bonjour once again from the NFC World Congress in Nice, France. While yesterday’s introductory session focused exclusively on keynote addresses and panel discussions, today the exhibition floor is full of activity with NFC vendors from across the globe showing off their latest and greatest. Here are a few highlights from our meetings:

• Nokia demonstrated its new Lumia 820 and Lumia 920 smartphones. Both devices run Microsoft’s Windows Phone OS, which, as we mentioned yesterday, looks well-designed and very user-friendly.  Both Lumia models feature NFC (of course) which can be used to pair with a range of NFC-enabled Bluetooth accessories, including wireless headphones, a hands-free headset and an mp3 stereo speaker. The two phones are very similar, but the 920 has several added features including wireless charging and a larger 4.5 inch screen. While it is no secret that Nokia has been challenged as of late in the smartphone market, we think these two new offerings have potential to reverse the company’s fortunes. Ultimately, it will be up to the consumers, however—only time will tell if they will give a non Android/iOS device a chance.
• Gemalto, one of the leading TSM providers for B2C companies deploying m.wallets and other secure NFC solutions, is working to educate enterprises (particularly banks, retailers and other merchants) about NFC’s capabilities, benefits and ROI potential. While Gemalto’s business is rooted in TSM for secure payment applications, the company has also broadened its application perspective to include ticketing, loyalty and couponing as well. The company claims it has a number of large-scale NFC projects currently in the works that are expected to go live during the next year, so we look forward to learning more about these deployments as details emerge.
• Device Fidelity, a US-based supplier of add-on NFC solutions for iOS and older Android devices, might actually be happy that the iPhone 5 is not NFC-enabled. The company, which integrates NFC into phones lacking embedded chips via slide-on protective cases or Micro SD cards, announced that it has an NFC case in development for the new iPhone, which (as we all know) represents the last major smartphone model still without embedded NFC. Device Fidelity has also diversified its offerings to include a Micro SD card-based Secure Element (SE)—a form factor that is especially appealing to banks and other financial institutions that want to make NFC available to their customers, but are unwilling to “rent” space on the SIM card SE from MNOs.

That’s all from day two at the NFC World Congress. The VDC team will return home tomorrow, but stay tuned to this blog for a full conference overview. Au revior til then…

Bonjour from the NFC World Congress—Day 1 Conference Recap

VDC is back at the NFC World Congress in beautiful Nice, France. With a larger roster of delegates and exhibitors participating in this year’s conference, the event was moved from Sophia Antipolis (one of the suburbs surrounding Nice) right into the heart of the city for 2012. The first day of the Congress was dedicated to panel discussions and presentations, but thanks to a robust, well-rounded lineup of speakers, there is no shortage of interesting NFC-related insight to share. We will be certain to report the highlights of tomorrow’s session on the exhibition floor, but for now here is a review of some of today's presentation highlights:

• Microsoft demonstrated its NFC-enabled Windows Phone 8 during an engaging presentation led by John Skovron, the product manager leading the Windows Phone initiative. Long story short: both the phone and the Windows OS look very promising. While Microsoft’s earlier forays into consumer electronics are probably best forgotten (see: Zune mp3 player), we think the Windows Phone 8 (especially the OS) is a solid product. If consumers are willing to give it a chance, we think this device/OS could win share in the smartphone market and drive consumer-level adoption of NFC. Furthermore, we think Microsoft has its collective thinking in the right place when it comes to NFC applications. During the presentation, discussion surrounding near-term application opportunities focused on non-secure (i.e., non-payment) use-cases. We look forward to seeing the Windows Phone 8 solution launch soon.
• Nokia, Microsoft, Device Fidelity and GSMA kicked off today’s proceedings with a discussion of the implications of Apple’s ongoing absence from the NFC ecosystem, a timely topic considering that it was approximately one week ago the company announced definitively that the iPhone 5 would not include NFC. While this announcement was certainly disappointing for many NFC ecosystem stakeholders, the tone of today’s conversations was decidedly upbeat and resolute. As we suggested in our post-iPhone 5 announcement blog, it seems that Congress participants are generally viewing this development as a call-to-action to educate end users (both consumer and enterprise) about NFC.
• Samsung discussed the impressive sales performance of its Galaxy line of NFC-enabled smartphones. The company expects North American shipments of smartphones (all brands, not just Samsung) during 2013 will have an NFC attach-rate of 23%, up from approximately 8% this year, while global NFC smartphone shipments will nearly double, reaching 183 million units. Of course, only time will tell if these forecasts prove true, but regardless, they demonstrate the major growth potential that remains in the market for NFC-enabled smartphones and complimentary NFC solutions.

We have another busy day tomorrow filled with meetings and seeing the best new NFC products and demonstrations the exhibition floor has to offer. Check back here tomorrow for another update from the Cote d’ Azur. Au revoir for now!

Wait ‘til Next Year (At least)…No NFC for the iPhone 5

Today Apple unveiled its much-anticipated iPhone 5—but NFC was not among the new features. While the new iPhone includes LTE, a 4 inch screen and a range of other incremental improvements, there will be no NFC in the iPhone for at least another year. We expect Apple’s latest NFC snub caught some by surprise, especially because several NFC-related patents granted to Apple during the past year suggested that the iPhone 5 would include the technology.

While the possibility remains some future iPhone iteration could integrate NFC, at this point, VDC does not foresee this happening unless material progress is made in the global NFC ecosystem—particularly in regards to the development of a robust contactless infrastructure in all regional markets, stronger enterprise investment in B2C apps and demonstrated consumer interest in using the technology. Time and again, Apple has deferred the integration of new technologies into its devices until they are fully proven, broadly accepted by the market and the company has developed a solution to support (if not monetize) them. At this point in time, NFC meets none of these criteria and, frankly, it is difficult to envision NFC progressing so significantly during the next 12 months that the iPhone 5s (or whatever the next generation device is called) would include NFC. It could happen, certainly, but we would not bet on it.

Furthermore, for at least the next year, Apple can legitimately be considered an NFC competitor. Via its new Passbook app, which is a key new iOS 6 feature, Apple is no longer on the contactless solution sidelines—it has adopted barcode in lieu of NFC. Passbook, which is essentially a mobile wallet of sorts, is capable of supporting certain contactless transactions, including ticketing (e.g., Delta Airlines) and payment at specific merchants (e.g., Starbucks). Just because Passbook is enabled by mobile barcode today does not mean future versions are precluded from NFC integration. However, in regions (such as the US) where the iPhone is especially dominant, NFC will remain challenged to become the preferred enabler of various mobile applications (e.g., payment, marketing, loyalty, etc.)

While the iPhone 5 announcement is certainly bad news for the prospects of the broader NFC market, there are still bright spots:

• Android is a larger and faster growing mobile OS: this is particularly true in EMEA and APAC where contactless infrastructure is more prevalent, and Android already supports NFC
• NFC has key differentiators that QR code, 2D barcode and the Cloud cannot match: These include speed/ease of use, stronger security, P2P capability and the ability to transmit information without a network connection
• New mobile OS options supporting NFC are in the pipeline: Windows Mobile, for example, will reach the market soon and could drive NFC adoption if it's well-received by consumers

From our perspective at VDC, the iPhone 5 introduction should send one very clear message to those suppliers and developers already engaged in the NFC ecosystem: stop pinning the hopes of your company and the broader market on the participation of Apple. Not only may it never integrate NFC into the iPhone or any of its other devices, Apple is now competing directly against NFC by virtue of the Passbook app. Now is the time to educate consumers and enterprises about what NFC is, what it can do, and why it’s better than competing solutions. Continue waiting 'til next year and by then it may very well be too late.

Groupe Casino Says “Ouí” to NFC, But “Non” to Payment

VDC has always maintained that NFC-enabled contactless payment is a long-term application opportunity, despite that hype and evangelism in the media often suggests otherwise. We believe NFC’s real near-term potential lies in B2C use-cases that are less complex, more easily-enabled and, most importantly, do not require the cooperation of multiple stakeholders or the use of a Secure Element (SE). Specific examples include mobile marketing, information access/content delivery and targeted coupons/offers.

Based on a recently announced NFC pilot, Groupe Casino, a major French retailing chain, evidently agrees with our view. In October, the company plans to pilot an NFC-enabled personal shopping solution at one of its upscale Paris stores. The app, called mCasino, will be provided by the France-based NFC developer Think&Go, and will support numerous functions, but payment is noticeably absent among them. Essentially, the mCasino app is an NFC-enabled, smartphone-based Personal Shopping solution that allows shoppers to scan items (via electronic shelf labels) as they shop and to access product information. The app also enables customers to set various warnings (e.g., if a shopper scans a product with ingredients to which they are allergic, or that a customer is approaching a predetermined spending limit) and pushes discounts to shoppers’ mobile devices based on their personal preferences.

Groupe Casino has been candid about its decision not to integrate contactless payment into its NFC shopping app, citing unwillingness to “rent” space on the SIM card (or other SE type) from MNOs as the foremost barrier to including payment as part of its upcoming trial. The company also expressed concerns about entering a three-way relationship that would position it as the intermediary between MNOs and financial institutions. Considering all of Groupe Casino’s approximately 400 supermarkets/hypermarkets are equipped with NFC-enabled contactless transaction terminals, VDC finds the company’s decision to exclude NFC payment from the trial particularly noteworthy. Among enterprises evaluating NFC, lack of contactless infrastructure—and unwillingness to invest in the same-- is a more commonly cited barrier to adopting NFC-enabled contactless payment.

While future versions of the mCasino app could include payment functionality, at this time, the company has given no hint as to what strategic path(s) it might pursue in this regard. Certainly, as we have previously discussed in our blogs and other research, there are several strong NFC alternatives for enabling contactless payment—including 2D Barcode, QR code and the Cloud. Considering Group Casino’s objections to working with MNOs to enable NFC-based payment, we think any future integration of contactless payment with mCasino is highly likely to leverage one of these NFC competitors.

Sensing a Ripe New RFID Opportunity

RFID soon could be used to reduce fruit spoilage during its journey through the supply chain, thanks to a new ethylene (a gaseous plant hormone that triggers fruit ripening) sensor developed by MIT chemistry professor, Timothy Swager. While ethylene sensors are already available, current solutions are too costly and unreliable for supply chain applications. In contrast, this new ethylene sensor will be low cost (as low as 25 cents) and capable of pairing with an RFID tag to enable remote, real-time ethylene monitoring. Furthermore, the sensor design provides high sensitivity—to levels as low as 0.5 PPM—which makes it well-suited to monitoring produce crates, shipping containers and warehouses.

While sensing/monitoring are hardly new RFID use-cases, we believe this particular example of monitoring ethylene levels is a first. More commonly, RFID is used to monitor conditions including temperature, pressure, humidity, and stress/strain. However, as RFID technology matures, solutions for highly-specific use-cases (for example, ethylene monitoring for produce) are becoming increasingly common. As more generic RFID applications continue to mature, we expect solution developers will seek growth via experimenting with new, niche-specific use-cases.

One of the RFID trends VDC is monitoring in its research is the concept of “RFID+”—i.e., using RFID in conjunction with other technology/solution types to achieve various objectives, including:

• Improved visibility and security of assets, cargo, workers, patients, etc.
• Real-time condition/status monitoring of the same
• Advanced decision making abilities (via leveraging the above-referenced data and other information sources)

For example, RTLS solutions combine RFID with other technologies including GPS, WiFi, Infrared and Ultrasound to enable precise tracking and location of vehicles, containers, workers and other assets.

While future RFID+ development could conceivably target niche application opportunities in any vertical or use environment, VDC believes transportation/logistics, food growing/processing/production and healthcare represent particularly fertile grounds for future development of niche-specific solutions. Each of these verticals presents a diversity of angles that could be explored for new RFID+ value propositions. We think food processing and production has particularly strong potential, especially within the US. Due in large part to the recently-passed US Food Safety Modernization Act and high-profile cases of food-borne illnesses, there is an increasingly strong need for visibility and documentation of the safety, freshness and chain-of-custody of food as it passes through the value chain. Sounds like another ripe RFID opportunity to us…

Walmart Could Bring Self-Scanning to the Mainstream

Self-scanning adoption remains very low among US merchants, but Walmart could singlehandedly change that in the near term. The retailing giant recently announced it is currently testing its own self-scanning app, called “Scan and Go,” exclusively among employees at one of its Arkansas stores.

Self-scanning solutions, which are comprised of a barcode-reading app deployed either on a dedicated store-owned Personal Shopping device (e.g., Motorola’s MC 17, Datalogic’s Joya) or a customer’s personal smartphone, enable shoppers to scan and bag items in-aisle rather than do so en-masse at the checkout lane. Self-scanning has benefits for both merchants and consumers.

Merchant benefits include:

• Insight into customer purchasing behavior
• Visibility into store utilization/traffic patterns
• Opportunity to influence shoppers at the point of decision via targeted offers
• Larger average basket sizes (resulting, in part, from the above point)

Consumers enjoy:

• Faster check-out
• Receiving personalized/targeted offers (based on purchase history)
• The ability to monitor spending in real-time as they shop

But, despite these benefits, self-scanning solutions generally have been challenged to gain adoption within the US. Other than a couple of notable exceptions—for example, Stop & Shop and Giant supermarkets (both subsidiaries of the Dutch retailing group Ahold), there are few merchants in the US that have invested heavily in self-scanning technology.

Walmart, with over 600 US store locations, could change that dynamic quickly and decisively if its pilot goes well. VDC believes it is unlikely that the retailer will move from its current, highly-restricted pilot test directly to a large-scale rollout, but if this early self-scanning experiment is well-received, it is reasonable to expect Walmart could take steps towards a moderate- to large-scale deployment in the next 12-18 months. Even if Walmart only deployed the app at select store locations, it would provide a material lift to the US self-scanning market—and could have a greater longer-term impact if other merchants follow suit.

Assuming Walmart fully embraces self-scanning, VDC believes the Company ultimately will integrate its “Scan and Go” self-scanning app with the recently announced Merchant Customer Exchange (MCX) mobile wallet initiative, created by a consortium of merchants, among which Walmart is a founding member. Whereas the MCX m.wallet will operate across multiple retailers, any integration of the “Scan and Go” app and m.wallet would need to maintain a certain degree of separation between the two.  But, to provide consumers with the most convenient shopping experience possible, we think some level of interoperability between self-scanning and the MCX m.wallet will be inevitable.

Have ISIS’ Summer Pilot Hopes Faded?

While summer does not officially end until September 22nd, the passing of Labor Day marks the unofficial transition to autumn and everything that comes with it—more temperate weather, back-to-school and shorter days. Along with the fading daylight hours, we think the hopes of the expected ISIS mobile wallet pilot tests in Austin, TX and Salt Lake City, UT are diminishing as well. ISIS (an m.wallet joint venture of three major US MNOs—AT&T, Verizon and T-Mobile) has long maintained that it would launch a planned two-city pilot of its m.wallet during summer 2012. However, considering summer is fading fast and the ongoing absence of any new pilot-related details from ISIS, it seems unlikely that these plans will come to fruition. VDC sees a number of challenges facing ISIS and m.wallet providers in general that could contribute to this delay:

• Limited card choices for consumers—Only three credit cards may be used with the ISIS m.wallet: AMEX, Chase Freedom, and Capital One. This highly limited selection set reduces the population of prospective consumer users who could conceivably try ISIS during a pilot. While a highly-motivated early m.payment adopter might—and that’s a big might—make the effort to sign up for a new card just for the purpose of paying with their phone, this scenario will be the rare exception, not the rule. Just ask Google Wallet—that m.wallet solution launched with only one card partner and failed to gain traction with consumers. Google Wallet v2.0, which launched recently, now affords consumers the flexibility to use any card.

• Infighting amongst key stakeholders—AT&T, Verizon and T-Mobile cooperating to develop, launch and operate a m.wallet app? To us, that sounds slightly more likely than The Coca-Cola Company and PepsiCo teaming up on a new beverage joint venture. In all seriousness, the ISIS consortium has made material progress so far, including recruiting a diverse range of over 100 merchant partners across its two test markets and developing an app that supports not just payment, but couponing and loyalty as well. However, there are numerous angles from which discord could emerge—revenue sharing, security-related issues, and even simple matters such as which smartphone models should or should not be made ISIS-capable could cause a rift in this partnership. If ISIS ultimately announces another official delay, disagreement(s) among the JV is a likely contributor.

• The competition is fierce—and growing stronger—Although NFC-based m.wallet competition in the US is limited to Google Wallet at this time, in reality, should it ever launch, ISIS would compete against all m.wallet apps, not just those that are NFC-based. This means ISIS will face competition not just from Google, but from well-established merchant-centric m.payment apps (e.g., Starbucks), mobile barcode-based up-and-comers (e.g., LevelUp) and consumer technology giants (e.g., Apple’s upcoming Passbook app). As a result, we think ISIS could be reevaluating its strategy. Perhaps the ISIS JV may be reconsidering whether it wants to pursue mobile payments exclusively via NFC—or questioning whether m.payment fits into the MNOs’ strategies at all.

Of course, the possibility remains that ISIS could eke out a pilot before summer 2012 officially draws to a close. From our point of view, however, the odds seem to be stacked strongly against such a scenario. Only time will tell for certain, but we think the challenges outlined above—in addition to other potential roadblocks—could prevent ISIS from launching, both in the near-term and altogether.