nfc & contactless payments · 2015-11-25 · nfc is a standardisation of this rfid technology,...
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NFC & Contactless Payments:
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The Long Awaited Promise
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What is NFC?
Figure 1: NFC Media Coverage at MWC 2011 (NFC Forum (Sony))
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
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
14443 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.
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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 modules1.
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 20072, was somewhat
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.
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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.
THE PATENT LANDSCAPE
NFC PATENT FILING TIMELINE
NFC: THE PATENT LANDSCAPE
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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.
NFC PATENT OWNERSHIP
Figure 2: Top 20 assignees of NFC patents by count of valid filings worldwide
Consumer electronics manufacturer Smart card manufacturer Electronics manufacturer Chip maker Payment Company Digital Security
Bubble area corresponds to number of active patent filings.
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Figure 3: Breakdown of filing jurisdictions for top 20 assignees (ordered by number of NFC related filings)
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.
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.
Figure 4: Top 100 patents by citations per annum with bubble size proportional to absolute no. of citations of patent
VERIFONE
US2004127256A1 - Mobile device equipped with a contactless smart card reader/writer
US2003167207A1 - System and method for incenting payment using radio frequency identification in contact and contactless transactions
US6424029B1 - Contactless chip card with touch element to activate transmission of data from data processing circuit on card
US5598032A - Hybrid chip card capable of both contact and contact-free operation and having antenna contacts situated in a cavity for an electronic module
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Figure 6: NFC applications as % of jurisdiction’s total annual patent applications
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.
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.
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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 2009-11 (a similar effect is
seen in Europe), in contrast to a sharp rise in
the percentage of US NFC patents 2010-11.
NFC GEOGRAPHICAL LANDSCAPE
Figure 5: How the geographical distribution of NFC patent filings has changed since 1990
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Figure 7: Keyword analysis NB. Asterisks are wildcards that can represent any character or no. of characters.
Figure 8: Change in patenting focus over time
To understand the subject matter of the patents, we looked at keywords, as shown in Figure 8.
In Figure 9, we reviewed how
the number of patents
containing smart card related
keywords and mobile phone
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
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.
NFC APPLICATION INDICATORS
Title contains ‘mobile phone’ or ‘mobile device’ or ‘mobile terminal’
Title contains ‘IC card’ or ‘smart card’ or ‘chip card’
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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 month3; and 90% of all NFC payments in 2011 (by value) were made in the Asia/Pacific
region, particularly Japan and Korea4. Implementation in Japan benefitted from strong leadership
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 person5. iIt is
CONCLUSION
HOW DOES THE LANDSCAPE CORRELATE TO CONTACTLESS PAYMENTS?
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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 2007. 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).
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 6, 7. In Japan there was an incentive to
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.
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Figure 10: Nokia 6131. (Picture: GSM Arena)
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Links
1 Frost & Sullivan NFC Prediction, ‘Despite Apple, NFC is catching on...’, Matt Hamblem (Computerworld, http://www.computerworld.com/s/article/9234736/Despite_Apple_NFC_is_catching_on_just_not_for_payments_quite_yet, 19/12/12, 06:00AM)
2 “Future of Contactless Payments” (E&T Magazine http://eandt.theiet.org/magazine/2013/07/new-ways-to-pay.cfm 30/12/2013)
3 “Global mobile statistics 2012 Section F: Mobile payment, NFC, m-commerce, m-ticketing and m-coupons” (Mobithinking, http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/f#mpaycountries, 27/04/2013)
4 NFC Country Profile: Japan (Contactless Intelleigencehttp://contactlesscities.wordpress.com/2012/03/13/nfc-country-profile-japan/ 30/12/2013)
5 ‘World Payments Report 2013’ (Capgemini,http://www.capgemini.com/resource-file-access/resource/pdf/wpr_2013.pdf)
6 30 MillionNFC-Equipped Phones Shipped in 2011…’ (Engadget, http://www.engadget.com/2012/03/27/30-million-nfc-equipped-phones-shipped-in-2011/, 27/03/2012)
7 ‘What is Near-Field Communication (NFC)? ’ (MobiThinking, http://mobithinking.com/blog/near-field-communications, 16/06/2011)
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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.
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HOW CAN CLEARVIEWIP HELP?
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Disclaimer: This document is for marketing purposes only. The information contained in this document should not be considered as legal or tax advice. ClearViewIP is an IP Management Consultancy and not a law firm or tax advisory consultancy.
i http://www.capgemini.com/resource-file-access/resource/pdf/wpr_2013.pdf
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.
For a free, confidential discussion on how ClearViewIP can help your company, or for a more detailed look into the current NFC or payment technology market, please contact: Tim Butler – Technology Analyst
: +44 (0) 845 690 1953
: tim_butler@clearviewip.com
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