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

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

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

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

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

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

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

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

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

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

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

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

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

Click here to register

Cartes North America: Day Two in Review from Las Vegas

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

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

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

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

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

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

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

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.

VDC Research’s RFID Takeaways from NRF Big Show 2012

At this year’s NRF show, RFID technology made the strongest showing VDC Research has seen yet.  From RFID vendors and their solution partners showcasing innovative end-to-end application offerings to big retailers and brands reaffirming their  RFID adoption plans, rollouts and program extensions it was clear that RFID is increasingly being positioned as a core technology that enables enterprises to “engage and evolve” (the theme of this year’s show).    

Here are a few highlights we picked up during the course of the event:

• RFID-tagged Apparel Items are the 1% – 200 billion apparel items. This was the estimated total number of apparel pieces globally that was communicated to VDC by several vendors and retailers attending NRF. So, assuming roughly 2 billion RFID tags, that translates to approximately 1% penetration.  The good news is that the percentage (penetration rate) will only increase in 2012 and beyond.
• RFID is Fashion Forward, but Going Backward (a good thing) – Retailers and brands using RFID consider themselves early innovators, positioning them as “fashion forward” versus their peers; however, RFID tagging is most meaningful when you tag at the source, or further “backward” in the supply chain.  Some exhibitors at NRF were predicting a surge in apparel source tagging by the end of 2012 and into early 2013. As a result, source tagging was major theme being identified by vendors this year.  This included strong messaging from Tyco Retail Solutions and Avery Dennison’s RBIS team on RFID source tagging solutions (including offerings that combine RFID with EAS/LP capabilities/functionality) and the announcement of a new solution called ViziT™ from SML Group Ltd.  SML works along with the Impinj STP™ source tagging platform and is able to offer high-speed RFID chip encoding and label printing through SML’s own global network of service bureaus.
• The Magic of Macy’s RFID Message – Macy’s leadership was very vocal once again about its RFID program and plans, offering highlights during a panel. Macy’s Chief Administrative Officer, Tom Cole, reportedly stated that it will only be a matter of time before RFID tags become as common as barcodes, especially for apparel.  He also indicated that while Macy’s, their competitors’ and their suppliers’/brands’ approaches may vary, it is important that we move RFID forward as an industry. We agree with Mr. Cole that RFID will be a competitive advantage and differentiator in the beginning for those that support it, but it will come down to which retailers and brands can put the technology to the best use – just like with barcodes today. 

While most NRF attendees come for what’s new in “traditional” retail solutions, many left this year’s conference with a greater appreciation for the “modernizing” retail solutions (including both RFID and NFC technologies). We expect the 2013 NRF event to carry this trend forward, showing us the next wave of innovative solutions and users of RFID and its related technologies. In fact, we think it would be interesting to see an “RFID Pavilion” or "RFID Showcase" of sorts at a future NRF conference - a dedicated area in which attendees can see how RFID, contactless and NFC technologies can be leveraged to enhance retail operations and the 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.

What Themes Dominated the CET Market in 2011

In 2011, there were 3 themes that dominated the customer engagement technology (CET) landscape - Mobility, Convergence and Application Development.

The need to take the store (or the checkout environment, in the least) to the customers at the point-of-decision, as opposed to drawing them to siloed touchpoints, is contributing to this growing demand for a seamless & consistent shopping experience across multiple customer-facing technology solutions.

A whole host of retail organizations have announced consumer handheld deployments within their installation environments in order to elevate customer service levels and drive loyalty over the past 12 months. VDC expects to see continued investment by retailers in these devices in 2012, especially given their relatively low upfront costs, intuitive user interface and high consumer appeal. While the verdict is not out yet on the success of these installations, it has become fairly commonplace to read about chain-wide deployments of Apple products.

Enterprise mobile device vendors have also been investing heavily in partnerships with the Independent Software Vendor (ISV) community to offer customized application sets that enable end-users to seamlessly integrate mobile solutions into their installation environments, ensuring consistency in service delivery and customer experience. As adoption of mobile devices scales, development of applications with varying degrees of configuration and control seems to be a very distinct possibility.

Finding Success in 2012

VDC expects the most successful suppliers in 2012 will be those who enable end-users to extend the value of their initial hardware investments and reduce TCO by supporting multiple applications with a single (mobile) device.

At the NRF later this month, we look forward to seeing CET vendors’ product roadmaps for 2012. We expect they will showcase their ability to effectively engage consumers and elevate service levels by way of immersive and interactive technology solutions – in alignment with today’s consumer handhelds featuring highly responsive, intuitive UIs and visually appealing image quality.

Multi-touch displays for kiosks and digital signage solutions anyone?

My Experience at the AIM and PACK Expos

I spent two days at the AIM and PACK Expos in Las Vegas this past week.  Although light on enterprise end user foot traffic on the show floor, the AIM Expo was chock full of great sessions and presentations and turned out to be a decent peer networking event.  Most exhibitors I spoke with were expecting more of a carryover from the mammoth PACK Expo; however, the general consensus was that the sessions on various AIDC and Mobility technologies and applications made up for the shortcoming.  Personally, the slower-than-expected traffic worked in my favor as I was able to spend more time talking to the highly knowledgeable individuals manning their booths.  Special thanks to Citizens, Seiko, Datamax-O’neil, Datalogic, Intermec, Seagull Scientific, MetalCraft, DAP Technologies, Feig, Infineon, Source Tech, Flexcon and Bluestar.

The Pack Expo was huge!  Word on the street was that there were more than 30,000 attendees walking a show floor that seemed to never end.  There were impressive displays of automation, robotics, packaging and labeling, but surprisingly, there was little about AIDC solutions.  Sure, barcodes were being printed and applied at many booths, but with the exception of a few vendors, I did not get to see every booth.  Vendors such as Intermec, ITW and Videojet, track/trace solutions were severely underrepresented.  Now I know that this is a packaging and automation show, but I really expected to see more AIDC solutions represented, especially since it is a critical part of the packaging solution for most vendors (and since nearly every box being prepared or packed had a barcode on it!)

The lack of AIDC solutions at the Pack Expo was most likely the reason for the limited traffic flow to the AIM conference.  Regardless, I enjoyed both shows and very much appreciated the time and attention the vendors afforded me.  Even though I’m immersed in the AIDC market on a daily basis, I gained an enormous amount of knowledge, particularly from the AIM sessions. 

A few highlights include:

• Bluestar’s ‘In a Box’ solutions.  What a novel concept - packaging a complete, application specific solution together … in a box.  Easy to set up via basic directions and a comprehensive configuration by Bluestar leveraging their diverse portfolio of products, software and services.   Talk about an out-of-box experience.  Check it out on their website http://us.bluestarinc.com/in_a_box
• Source Tech’s new thermal printers.  Very user friendly and offering additional functionality (i.e.: USB and open software platform) while still meeting customer preferences and remaining highly price competitive.  Check them out on their website http://www.sourcetech.com/

RFID Journal Live: Putting RFID to Work in Orlando

Last week Orlando became home for nearly 2,500 representatives from RFID suppliers, integrators and deploying enterprises.  What sets this show apart from other industry events is not only the diversity of technologies, served markets and applications showcased, but the collaborative emphasis placed on using RFID to solve business problems. 

RFID has evolved, and the main event reflects this evolution.  The tone and tenor of conversations taking place in conference rooms and on the exhibit floor continues to migrate from the core technologies and their inherent capabilities (these go to 11) to the real world problems deploying enterprises are solving with the technology, increasingly enabled by open standards and supported by a growing list of complementary technologies.

Support for these trends were found throughout the RFID value chain, from new chip designs that provide increased functionality and flexibility, to new devices designed to address widening data capture requirements, to new software and service offerings designed to harness, aggregate and analyze more data than ever before:

• Chip designers at Impinj and NXP have been hard at work addressing customer requirements that arise as their chip sets are deployed.  Each of these suppliers announced new offerings in Orlando, pushing the technical boundaries that limited the functionality of previous designs.  Impinj took the best in show award for its Monza 4 tag chip family, which delivers unique privacy, performance, and memory benefits to customers with challenging RFID applications, and NXP answered with their new UCODE G2iL chip series delivering extended read ranges, unique anti-tampering and privacy protection features.
• Motorola introduced a new hybrid presentation imager with an integrated RFID reader.  The DS9808-R is the first combination 1D/2D bar code scanner and RFID reader, but also the first combination handheld/hands-free UHF RFID reader. This device will enable retailers to manage existing store operations while exploring the benefits of real-time item-level inventory visibility.  
• Savi announced its partnership with Odin to provide a unified passive and active RFID software platform designed to exploit the full range of RFID and related AIDC technologies, enabling customers to more effectively track and manage items, assets and containers in the Aerospace & Defense, Government, Manufacturing, Healthcare, and IT Services industries. 

Nowhere in these companies’ presentations were there extended discussions about feeds, speeds, bits or bites.  Instead, an emphasis was placed on where to look for data to develop information, how to aggregate this information, and how to use the intelligence derived from this information to more effectively manage risk, reduce operating expenses, retain customers and grow revenues.  These conversations suggest that RFID is turning a corner, becoming a viable platform technology that will prove indispensable for the data, insight and perspective it can provide.