The Dangers Of Choosing The Wrong Wireless Approach

London-based Marks & Spencer is the RFID tag champ. Attaching 350 million a year to items of clothing, they even blow past Wal-Mart when it comes to tagging individual items. Unfortunately, each and every one of those tags might have used the wrong technology.

The exec "who has been running the program said to me a year ago, ‘I'd love Nokia to say we have a way for people to walk into this door, wave their phone over a suit and take it home,'" said IDTechEx Chairman Peter Harrop. "But he said, ‘I think I've chosen the wrong frequency.'"

Marks & Spencer and many other retailers that followed its respected lead, opted for ultra-high frequency (UHF) technology. Many merchants even had some good reasons, such as the greater carrying distance than that of high frequency (HF). Phone manufacturers have also standardized on HF, Harrop said. Plus, the chain used a proprietary 64-bit read-only variation on the RFID tags, making them inexpensive but incompatible with what everyone else in the world was doing.

That's by way of saying that choosing the right contactless payment technology can be harder than picking a winning horse, only the bet is much bigger. For example, according to a new IDTechEx study, near field communications- and RFID-enabled cell phones, contactless smart cards and contactless RFID tickets will all see continued rapid growth for at least 10 years. There's no way of telling today which ones will keep a given company's customers happy two years from tomorrow.

Deciding which way to turn is tough, because evidence suggests that the possible adoption of each technology is enormous. "About 50 million of the RFID-enabled phones have been put out there," Harrop said. The study estimated that 540 million RFID phones will sell in the year 2013 alone.

"We come to the surprising conclusion that there will continue to be rapid growth in sales of all three alternatives for at least ten years. This follows 800 million Chinese acquiring contactless national ID cards in four years and 47 million Japanese adopting RFID enabled, NFC compatible phones in three years," the report said. "These were two of the fastest rollouts of electronic products in human history."

Consumers seem to want to use the technologies as well, particularly when the method involves using their cell phones. "A significant number of us would like to use our phones to get onto the bus and buy things in the shop," Harrop says, noting that there seems to be no national bias in how consumers react.

Yet, for any promise, there can be a significant drawback. For example, phones may not become dominant, at least for the next few years, in western countries, as IDTechEx noted.

"With NFC phones, the telcos have nearly all the power and they have often failed to seek a mutuality of benefit with others in the value chain. That has meant that very few NFC enabled phones have been made available, banks are cautious about letting their cards be mimicked by the phones and transport operators are cautious about the ticketing option being loaded," the report said. "As in retail RFID, they can cite technical problems for delay because telcos prefer NFC to be loaded on the SIM and that standard is not quite ready. There are also issues such as the capacity of the SIM cards."

"The people who operate the mobile phone systems want to keep all the benefit to themselves, and then they seem surprised that" others don't want to be business partners, Harrop said. "Of course the others are going to drag their feet if they can't share in the benefit."