Objects-as-a-Service (OaaS) and why things need identities

Ann Cairns, Executive Vice Chair at MasterCard, said back in 2018 that it could be the year when (thanks to the incredible speed with which new technologies are adopted) physical wallets could soon be a thing of the past as the world wakes up to wearables. Ann said, correctly, that wearable devices are getting a “new lease of life by becoming payment enabled” and noted forecasts predicting that two-thirds of wearables would have payment functionality by 2020. This didn’t quite happen, for reasons I will return to shortly, but as a baseline note her point that five years ago the global sales of smart wearables were already at $416 billion.

In 2019, Mastercard highlighted that wearables are about fashion as well as function. They pointed out that as the technology that powers wearables gets smarter, fashion brands rather than technologists (or payments geeks) are driving the evolution of the market. Even then, one in five adults in the USA were already wearing a smart watch or fitness strap and they expected the wearable tech market to reach something like $30 billion in 2020.

Wearables Market 2020

Global wearables markets 2020 (Source: IDG, 12/20).

In 2020, as these figures from IDG show, the wearables market (dominated by Apple) continued to grow and is expected to maintain a double-digit rate of growth through 2024. In the US, the wearable device most frequently used for payments is the smartwatch (more than mobile phones or contactless cards). Interestingly, recent research shows that college graduates are more frequent users of smart watches for payments than non-college graduates and that they use their wearables to pay more than 200 times a year, almost double the usage of mobile phones and 50% more than cards.

The market for wearables that can do interesting things (eg, payments) is going to grow more than that though, because the growth of cheap passive wearables (ie, wearables that don’t need batteries, just as contactless cards don’t need batteries) will grow faster because of the new, smaller and more cost-effective chips arriving from suppliers such as Infineon. I wasn’t surprised, therefore, to see an excellent presentation from Discover at the Women in Payments 2021 summit saying that…

Discover Wearables

So what has prevented this market from developing even faster? Well, the process of taking an “empty” microchip and loading secure credentials into it so that it can be used for payments, identity, provenance and other high value applications (the process of what card people call “personalisation”) is complex and costly. Imagine that you are running a pop festival and you want to provide rings or wristbands or badges or whatever than can be used to gain entry, to pay for drinks, to identify someone in an emergency. Taking 20,000 wristbands and loading credentials into them and then making sure each wristband gets to the right person is a logistical challenge hence the technology tends to be applied at the high end of the market. There are companies that make some beautiful wearables that can be used in this way. I love the stuff that Tovi Sorga has and I think this illustrates that Mastercard point about the role of fashion. Amex, to give another example, have just released a Prada leather bracelet with a contactless chip in it for their Centurion cardholders.

Getting the right bracelet with the right payment card into the hand of the right cardholder is complicated though. The logistics are a challenge because the devices must be “personalised” when they are ordered and then correct distributed. As a way of reducing the logistics costs, though, suppose there was a decentralised way to do the personalisation needed to turn nice wearables into secure, smart objects? Imagine that the pop festival organiser sends you a wristband and then you use your own mobile phone to load one of your payment cards into the wristband? Or you use the (eg) Discover app on your phone to create a prepaid card valid for a week and load $100 onto so that you can leave your phone in your pocket while you enjoy the show? Well, this is what Digiseq, a UK start up has done. And this is only one of the reasons why I was flattered to be asked to become their Non-Executive Chair as they go into their next fund-raising round. Amongst their achievements already is the launch of KBC wearables in Belgium, including the Rosan Diamond key fobs that proved popular last year, creating a Lucozade bottle that you could use to pay for travel in London and putting chips into the Golden Globe awards so that their authenticity and provenance could be validated.

Provenance is Forever

Provenance is important. I wrote about it more than a decade ago using the example of luxury goods such as watches and asking how you would tell a fake Rolex from a real one. It’s a much more complicated problem than it seems at first. Suppose an RFID chip is used to implement an ID in luxury goods, authentic parts, original art and so on. If I see a Gucci handbag on sale in a shop, I will be able to wave my phone over it and obtain the ID.  My mobile phone can decode the number and then tell me that the handbag is Gucci product 999, serial number 888. This information is, by itself, of little use to me. I could go onto the Gucci-lovers website and find out that product 999 is a particular kind of handbag, but nothing more: I may know that the tag is ‘valid’, but that doesn’t tell me much about the bag. For all I know, a bunch of tags might have been taken off real products and attached to fake products.

To know if something is real or not, I need more data. If I wanted to know if the handbag were real or fake, then I would need to obtain its provenance as well as its product details. The provenance might be distributed quite widely. The retailer’s database would know from which distributor the bag came; the distributor’s database would know from which factory the bag came and Gucci’s database should know all of this. I would need access to these data to get the data I would need to decide whether the bag is real or fake.

The key to the business model is not the product itself but the provenance, so delivering a service means linking the personalisation and the provenance under the control of the brands. This is where Digiseq is going. In January, one of the world’s leading chip manufacturers Infineon Technologies AG announced that they will be working Digiseq on their  SECORA™ Blockchain NFC technology to deliver secured identity data. This is an advanced solution that connects the digital data recorded on blockchain to physical items, allowing for just this comprehensive verification of the identity of items, thereby eliminating the challenge of product substitution and heightening supply chain transparency.

cheap chips can turn almost anything into a smart object and with the right provenance service in place turn those smart objects into objects-as-a-service (OaaS). Click To Tweet

The ability for brands to choose whether to give customers high end wearables for select markets or to push into the mass market with wearables that customers can personalise themselves, using the mobile phones to add/remove payment cards, access codes or identities at any time, is a game changer. But it is only the beginning. The secure microchips that are inside the Prada bracelet or the Golden Globes can be inside everything from smart watches to luxury handbags, from aircraft parts to bottles of whiskey. These inexpensive RFID chips turn almost anything into a smart object, and with the appropriate back-end provenance system in place, they can turn those smart objects into objects-as-a-service (OaaS).

Objects-as-a-Service are going to be… well, huge. If you want to learn a little more about this incredible new market and the opportunities that it presents, come and join me at the Digiseq webinar on 22nd April 2021 at 9am UK time. Sign up here.

Some off-the-cuff comments on in-the-cuff payments

It’s amazing what sort of things trendy youngsters in the payments space are getting up to these days. Only today, I read that the UK-based DressCode has released “the ultimate in geek chic“, which turns out to be a shirt with a pocket in the cuff to hold a contactless chip for payments.

The ultimate in geek chic? Sorry dudes. I had a Thomas Pink “Commuter” shirt back in 2006! The Commuter shirt had two features that I really liked at the time. It had a channel running up the inside to carry earphone cables tucked away out of sight. These connected through a hole in a side pocket so that you could keep your iPod snug and out of the way while strolling through London’s fashionable West End listening to the mighty Hawkwind. The shirt also had that second pocket in the cuff to hold a contactless card.

It was designed really for Oyster cards, but we put Visa cards in the pocket to make purchases using standard POS terminals with contactless interfaces. As I recall, we bought a few of them as presents for some of our favourite customers as well! Anyway, I went upstairs and got it out of the wardrobe to model it for you:

Untitled

The point I used to make was that contactless was about more than the interface, it was about form factors and that it would lead to innovation and I used the shirt to show an example of innovation beyond the card itself. Although the shirt was fun and helped to make an interesting demo about contactless payments in conference presentations, I thought it had two design flaws.

First of all, the pocket was behind the cuff on the top of the wrist. This meant you had to lay the back of your forearm across the contactless POS terminal or Oyster card reader. The pocket really should have been on the underneath of the forearm near the wrist to make paying a more natural action.

The second problem was that if you were wearing a suit and coat, it was hard to get the card close enough for the reader. I remember thinking at the time that I wished that the pocket was in my suit rather than in my shirt.

Naturally, being a consultant rather than an entrepreneurial business go-getter my thoughts went no further. I was surprised to see that only eight years later some entrepreneurial Aussies went and did just as I’d thought about, and put the payment card pocket in the suit! I found out that the dynamic and chic (I assume) menswear specialists M.J. Bale and Visa had teamed up to create a suit with a contactless payment chip and antenna woven into the sleeve! Apparently the “power suit will let men pay ‘invisibly’ wherever Visa payWave is accepted”. I expect they were planning something for the ladies too but it’s not mentioned in the article.

 

Anyway, how fun. These days of course I wouldn’t use either the cable run (because I have AirPods – in fact I have AirPods2 which are absolutely awesome) or the card (because I have a smartphone and that’s what I use to pay). Nevertheless, I wish DressCode all the best with their chic project.