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HCE vs. BLE: Which has the bigger in-store potential?By
The battle is on to transform the in-store shopping experience leveraging mobile technology, with host card emulation-enabled near field communications and Bluetooth Low Energy beacons at the forefront.
A surge of new services using NFC to enable in-store payments and engagements are expected later this year following Android’s introduction last year of the cloud-based HCE protocol, which does not require access a secure chip in phones. At the same time, BLE beacons are already picking up steam quickly and in some cases the two technologies could be complementary.
“Essentially, the differences between NFC and beacons as it relates to the shopping experience can be boiled down to push versus pull marketing,” said Jordan McKee, analyst at Yankee Group, Boston. “Both have advantages in specific situations.
“For instance, it’s easy to imagine a scenario where a consumer walks into a store and is prompted to download a merchant’s app by tapping an NFC-enabled poster,” he said. “Upon download, the merchant can begin sending targeted, location-based offers to a user’s device via beacon technology.
“Certainly, NFC and beacons can work in conjunction and I expect to see more instances of this in the near-term.”
Not too long ago, NFC was close to stalling out, with services such as Google Wallet unable to gain scale because the wireless carriers are limiting access to the secure chips in phones that store credit card information. With HCE, this information is stored in the cloud.
As a result, there is newfound interested in NFC.
For example, PayPal’s president David Marcus recently posted on the company’s official blog that he has moved from being a big skeptic of NFC to being cautiously optimistic about NFC for specific shopping use cases.
HCE bypasses the secure element on a phone
The examples where Mr. Marcus sees NFC having potential include where shoppers need to be at a specific place in the store to pay, such as a multilane grocery store.
Visa and Mastercard have also come out in support of HCE.
However, Mr. Marcus also stated he believes BLE beacons will be more transformative to the in-store experience, for example, by enabling hands-free payments and engagements via smartphones and wearable devices.
The beacon transformation is already happening while various interested parties are working hard at bringing new NFC solutions to market that take advantage of HCE.
So far this year, there have been numerous beacon installations in malls, sports stadium and a variety of retailers, with more expected.
“In the short term BLE beacons can have a huge impact in terms of driving initial adoption and creating customer awareness,” said Patrick Connolly, a London-based senior analyst at ABI Research. “At ABI, we really feel that beacons will become a huge part of the connected home and IoT, meaning having them in-store will be no different to using your smartphone in-store today.
“With sub-$10 beacons already available, any developer or retailer worldwide can become an indoor location application provider,” he said. “The technology has already been democratized and now it can be adopted in a variety of ways.
“NFC, like a lot of other emerging technologies such as LEDs and digital labels will all have a part to play.”
One of the key benefits of beacons is that consumers do not need to take an action — after turning on BLE on their device — and can receive push notification offers when they walk into a store or alert a cashier in a café that they have arrived to pick up their order.
“Beacons trump HCE NFC when it comes to the in-store shopping experience because of their precision marketing capabilities,” Yankee Group’s Mr. McKee said. “Beacons have the ability to deliver hyperlocal, contextual engagement by marrying location data with known information about a consumer.
“The beacon experience is also more seamless in that a consumer can receive a notification or offer on their device without having to make an action, as you would with NFC,” he said.
However, when it comes to enabling a payment via a mobile device, many feel that HCE-enabled NFC has the upper hand.
“NFC is standardized, it is supported by the networks, it has the highest rate of deployment in both handsets and the user experience is something that is familiar,” said Ted Fifelski, co-founder of SimplyTapp, Austin, TX, which provides mobile commerce services around HCE.
“Early on, Bluetooth is still around notification and messaging,” he said. “The consummation will most likely to be an NFC transaction via a tap.
“Maybe some time down the road we will see a beacon-only solution based around tokenization but there is some technical limitations that are outlined right now outside of the infrastructure issues.”
NFC also has a lot of potential around gathering information and customer engagement in-store, enabling a shopper to tap a label to pull up information on pricing in other stores, recipes, allergy listings and shopping applications.
While both NFC and BLE are likely to bring some important innovations to the in-store experience, they also have their limitations.
This means there could still be some other mobile technology that comes along to capture the attention of marketers.
“BLE beacons are not the silver bullet this industry wants and different verticals will want different solutions,” Mr. Connolly said.
“Democratization also brings significant competition and commoditization,” he said. “The companies that are successful in this space will continue to combine and hybridize technologies to meet specific needs.”
Chantal Tode is associate editor on Mobile Commerce Daily, New York
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