NFC & Contactless Payments:

Transcription

1 y NFC & Contactless Payments: The Long Awaited Promise Copyright ClearViewIP Ltd. All Rights Reserved. St George s Chambers St George s Street Winchester Hampshire SO23 8AJ T: +44 (0) E: info@clearviewip.com

2 2 What is NFC? NFC (Near Field Communications) is a somewhat divisive topic in technology circles: some see it as a key technology for unlocking the potential of smartphones, with countless applications and advantages; whereas others view it as a mere gimmick. Although now somewhat diminished, the level of attention NFC received around the time of the launch of the iphone 4S, may have given the impression that NFC was then a Figure 1: NFC Media Coverage at MWC 2011 (NFC Forum (Sony)) new, cutting edge technology, but in reality, this was not the case. NFC is based on radio frequency identification (RFID), a technology that has been around since the early 70s, and is used in products such as: automated inventory management systems, microchips for tracking animals, antitheft devices, library books and payment cards. RFID allows data to be read wirelessly from a passive tag (passive meaning that the tag doesn t have its own power source) by modulating an electromagnetic field produced by the reader. This field also powers the tag by inductive coupling, like in a transformer. NFC is a standardisation of this RFID technology, focussing predominantly on incorporation into mobile phones and other personal electronic devices. These standards are aligned with the ISO standards for contactless smart cards, to allow interoperability. It extends the scope of RFID by adding the capability of communication of small amounts of data between two inclusive elements, such as two mobile phones or a payment card and a Point Of Sales (POS) terminal. The frequency of communication for NFC is set at 13.56MHz, which intentionally limits the range over which data can be transferred by NFC to around 10cm, for security purposes.

3 3 Although the standardising body, The NFC Forum, was established by Nokia, Philips and Sony in 2004, NFC has, so far, not been greatly successful. The growth of the smartphone market, however, has opened up a host of new applications and, consequently, NFC seems to be finally finding its way into a significant number of devices. It is estimated that in 2015, 53% of new smartphones (863 million units) will be equipped with NFC modules. 1 There are numerous applications for NFC, including: peer-to-peer communication, simple set up of Bluetooth or Wi-Fi connections, access and identification, and smart advertising; but the application that has attracted the most interest is contactless payment. NB. Given the inter-related nature of contactless payments using a mobile phone, and those using a contactless smart card, we shall consider both, under the term contactless payments. Contactless, or tap-and-go payment systems, have already proved very successful, particularly in many public transport systems, but we are still some way from disposing of cash/bank cards entirely. Certainly, the prediction that the UK would be a cashless society by 2012, by Visa Europe s CEO in 2007, was somewhat 2 optimistic. In the UK, contactless payment has been suffering from a chicken and egg scenario: currently, there are not enough people using contactless payments (or knowing how to) for companies to be willing to invest in updating POS systems, however, without the systems being installed in the first instance, there is no incentive, nor enough education, for customers to change their habits. Although adoption is steadily increasing, the cost of updating POS equipment is one of the key issues hindering the deployment of contactless payments. Though companies such as izettle and Square have had some success in producing low cost POS solutions, they do not currently encompass contactless technology. Other factors hindering adoption are security concerns, which have caused transaction value limitations; and the fragmented nature of the market, with many different players attempting to implement their own payment platforms. With all of this in mind, ClearViewIP took the opportunity to investigate how the patent filing trends in contactless payment have reflected industry trends; in particular, their correlation with the adoption of contactless payment methods.

4 4 THE PATENT LANDSCAPE NFC: THE PATENT LANDSCAPE NFC PATENT FILING TIMELINE Figure 2: Filing timeline for NFC related patents NFC is not a new technology: as far back as 1979, Philips had patented a Portable element for receiving, storing, displaying and outputting digital data, and a reservation device for use in a reservation system, which was powered by inductive coupling and transferred data contactlessly. However, NFC patent filing rates have grown rapidly since the early 1990s, both in absolute and relative terms, i.e. the increase in NFC patent applications is not simply a result of the overall increase in patent filing. The sharp increase in filings from 2004 onwards correlates with the formation of the NFC Forum, though there is no evidence of this relationship being causal.

5 5 NFC PATENT OWNERSHIP Consumer electronics manufacturer Smart card manufacturer Electronics manufacturer Chip maker Payment Company Digital Security Bubble area corresponds to number of active patent filings. Figure 2: Top 20 assignees of NFC patents by count of valid filings worldwide In Figure 3, we can see that Sony dominates in both number of patent filings and number of individual families. Naturally, these two measures of a portfolio go hand-in-hand, to some extent, but the number of patent families provides a better indication of the number of distinct inventions a company has, while the number of filings, relative to the number of families, goes someway to suggest how widely (geographically) an invention has been protected. For example, NXP and Mitsubishi have a similar number of patent families, but NXP has a much larger bubble. NB. For the purposes of this study we have assumed that NXP - a spin out from Phillips - have access to all of Phillips NFC related patents. This is because Mitsubishi has a Japan-centric portfolio, with many inventions protected in Japan only, whereas NXP have filed foreign equivalents for the majority of their inventions. It is notable that 8 of the Top 10 companies, by number of families, are Japanese.

6 6 However, it is clear to see, in Figure 4, that there is a strong tendency for these companies, as with the example of Mitsubishi, to file a large proportion of their patents only in Japan. Figure 3: Breakdown of filing jurisdictions for top 20 assignees (ordered by number of NFC related filings) In Figure 3, we showed citations per patent family on the y-axis, with Ask SA, a French smart card manufacturer, the leader by some margin. The number of times a patent is cited can be an indication of the importance of the patent, implying that Ask has a strong portfolio. US A1 - System and method for incenting payment using radio frequency identification in contact and contactless transactions US A1 - Mobile device equipped with a contactless smart card reader/writer US B1 - Contactless chip card with touch element to activate transmission of data from data processing circuit on card VERIFONE US A - Hybrid chip card capable of both contact and contact-free operation and having antenna contacts situated in a cavity for an electronic module Figure 4: Top 100 patents by citations per annum with bubble size proportional to absolute no. of citations of patent

7 1 7 Looking at the individual patents/applications with the most citations (Figure 5), again, early dominance is shown by Japanese firms. The earliest patents in the Top 100, by citations per year, were all filed by Japanese companies, but later applications are predominantly filed by US firms. The strongest patents, in terms of citations per year, were filed in the early 2000s, which correlates with the sharp increase in applications a few years later, seen in Figure 1. The two filings with the most citations have not been granted, suggesting that the breadth of their claims has caused them to encounter some challenges in prosecution. NFC GEOGRAPHICAL LANDSCAPE Of the patents in this landscape, Japan has seen the most filings (31%), followed by the US (22%). However, in Figure 6, we can see that the distribution of filings has changed quite dramatically over time, with Japan losing most of its share to the US, China and Korea. Figure 5: How the geographical distribution of NFC patent filings has changed since 1990 In 2011, 41% of NFC applications were filed in the US, 19% in China and 8% in Japan. This is not just a result of gradually decreasing applications filed annually in Japan, as can be seen in Figure 7, but evidence of a clear drop in the proportion of Japanese applications relating to NFC (a similar effect is seen in Europe), in contrast to a sharp rise in Figure 6: NFC applications as % of jurisdiction s total annual patent applications the percentage of US NFC patents

8 8 NFC APPLICATION INDICATORS To understand the subject matter of the patents, we looked at keywords, as shown in Figure 8. Figure 7: Keyword analysis NB. Asterisks are wildcards that can represent any character or no. of characters. In Figure 9, we reviewed how the number of patents containing smart card related keywords and mobile phone Title contains mobile phone or mobile device or mobile terminal Title contains IC card or smart card or chip card related keywords have changed over time. Although this is an approximate method, it is clear that smart card patenting started much earlier than mobile and then Figure 8: Change in patenting focus over time plateaued, while patenting related to NFC in mobile phones took off considerably later; a rate that has been increasing rapidly since the early 2000s and now dominates the landscape.

9 9 CONCLUSION HOW DOES THE LANDSCAPE CORRELATE TO CONTACTLESS PAYMENTS? The trend, demonstrated in Figure, 9 clearly correlates with the relative success of contactless smart cards and contactless payments via mobile phones. Contactless smart cards have been around for some time and the technology has reached a level of maturity. The implementation of contactless technology by mobile devices has opened up many opportunities for innovation and the rate of patenting continues to rise. Another trend identified was the early dominance of Japan, followed by a recent decline. To date, contactless payments have been much more successful in Japan than in the rest of the world: in December 2011, 9.8 million people in Japan used their phone to make a contactless payment in just one month ; and 90% of all NFC payments in 2011 (by value) were made in the Asia/Pacific 3 region, particularly Japan and Korea. Implementation in Japan benefitted from strong leadership 4 from NTT DoCoMo which drove standardisation in a way that encouraged participation from relevant parties. In the USA and Europe, however, there are too many companies competing to control the ecosystem, meaning that no platform has been widely adopted. Implementation requires cooperation between chipmakers, handset makers, service providers, financial institutions and retailers; all of whom are naturally unwilling to cover the cost of implementation but who have to make a profit, whether directly or indirectly. Japan benefits from a tech savvy population and a high number of commuters, used to using contactless smart cards for public transport; it is perhaps surprising then that, despite the relatively fast uptake of contactless payments, Japan still lags behind the US and Europe in terms of the number of non-cash transactions per person. It is 5 i

10 10 possible, therefore, that the improvement in convenience that contactless payment offers has encouraged its adoption in Japan. Another key factor in the adoption of the technology is the number of available handsets. Although smart phone manufacturers are advertising NFC as a new feature, the first NFC handset, the Nokia 6131 (pictured), actually shipped in It is only now, however, that the majority of Android and Windows smartphones are coming equipped with NFC as standard (Apple does not support NFC). Figure 10: Nokia (Picture: GSM Arena) 47 million Japanese people adopted tap and go phones in the 3 years preceding 2011, whereas only 30 million had been adopted in the rest of the world. In Japan there was an incentive to 6, 7 adopt NFC enabled smartphones, as the infrastructure for using them was in place. Perhaps the adoption of the technology by Apple, a significant brand leader in mobile devices, would be the push contactless payments needs to enter the main stream in Europe and the US although this seems somewhat unlikely to happen. Patents may yet have a further part to play in the progress of contactless payments and NFC. In December 2013, France Brevets, the company appointed by Inside Secure to license their NFC portfolio, filed lawsuits in the US and Germany against HTC and LG for infringing two NFC related patents. The strong US/European portfolios of Nokia (soon to be a non-practising entity, in terms of handsets) and RIM, may also provide cause for concern: the likely imminent litigation cases can only complicate matters in the battle for our mobile wallets. ****************

11 11 Links 1 Frost & Sullivan NFC Prediction, Despite Apple, NFC is catching on..., Matt Hamblem (Computerworld, 19/12/12, 06:00AM) 2 Future of Contactless Payments (E&T Magazine 30/12/2013) 3 Global mobile statistics 2012 Section F: Mobile payment, NFC, m-commerce, m-ticketing and m-coupons (Mobithinking, 27/04/2013) 4 NFC Country Profile: Japan (Contactless Intelleigencehttp://contactlesscities.wordpress.com/2012/03/13/nfc-countryprofile-japan/ 30/12/2013) 5 World Payments Report 2013 (Capgemini, MillionNFC-Equipped Phones Shipped in 2011 (Engadget, 27/03/2012) 7 What is Near-Field Communication (NFC)? (MobiThinking, 16/06/2011) **************** About the Author Tim Butler is a Technology Analyst at ClearViewIP. He is involved in patent analytics across a range of high-tech industry sectors. He is responsible for carrying out both technical and commercial assessments of patent portfolios and enjoys conducting competitive analysis to indicate which patents are of relevance to a specific industry and which may have applications across other sectors. Tim has a Master's Degree in Materials Science from Oxford University, where he wrote his thesis on nanocomposite ceramics. He also specialised in biomaterials, metals and alloys, and microstructural characterisation. Before joining ClearViewIP Tim spent time teaching English in Russia and materials science in China.

12 12 ABOUT CLEARVIEWIP ClearViewIP is an Intellectual Property Consultancy providing a comprehensive range of services to high-tech markets. Using our proven international commercial experience, we help our clients develop their IP strategy, establish effective processes and realise value from their intellectual property. Founded in 2007, the experience of our directors, consultants and analysts provides a unique blend of commercial and IP experience that carries with it a highly competitive track record of delivering value to businesses. ClearViewIP have experience of working with FTSE and Fortune 500 companies, as well as smaller enterprises, across a range of industry sectors including, but not exclusive to: telecoms, computing, silicon, medical devices, satellite, consumer electronics, automotive and manufacturing. Our services are bespoke dependent on client s requirements but can include: investment due diligence, IP strategy, competitive intelligence, IP discovery and capture, patent landscaping, patent searching, IP acquisition, commercialisation and coaching. HOW CAN CLEARVIEWIP HELP? ClearViewIP are uniquely placed to review the patent landscape of your business and help manage and align your portfolio accordingly. We have significant experience in patent landscaping and patent-to-product mapping, and frequently work with companies to acquire or divest patents. We can also help you to optimise your IP Strategy to place you ahead of the competition. Please contact us to find out more using the details overleaf.

13 13 For a free, confidential discussion on how ClearViewIP can help your company, Disclaimer: This document is for marketing purposes only. The information contained in this document should not be or for a more detailed look into the current NFC or payment technology market, considered as legal or tax advice. ClearViewIP is an IP Management Consultancy and not a law firm or tax advisory consultancy. please contact: Tim Butler Technology Analyst : +44 (0) i : tim_butler@clearviewip.com DISCLAIMER This document is for marketing purposes only. The information contained in this document should not be considered as legal advice. ClearViewIP is an IP Management Consultancy and not a law firm.