Retail and Payments Industry

1. Retail and Payments Industry 03/15/14 Radio Frequency Identification Near Field Communication

2. RFID Technology • NFC Technology • Business case in Retail Industry • ROI in Retail • Introduction to Contactless Payments • Latest trends in Contactless Payments • Q&A Agenda

3. What is RFID? • RFID employs radio signals for short-range communication between a reader and a target. • RFID systems consist of three components • A Transceiver (transmitter / receiver) • A Transponder (transmitter / responder) • Antennas

4. How RFID Works

5. Transponders • Active Tags • Require a power source and connect to the infrastructure directlyor use stored energy. • Lifespan of active tags are limited by the stored energy and stress on the device • Passive Tags • Don’t require batteries or maintenance • Least expensive • Indefinite operational lifespan • Small enough to fit into an adhesive label

6. Benefits and Limitations to RFID Benefits • Tags can be read simultaneously • Unlike a barcode scanner there is no line-of-site requirements with tags • Tags are less sensitive to wear and tear (dust, physical damage, etc.) • Tags can store information locally; thus, it has increased fault tolerance • Reduces warranty claim processing costs • Reduces inventory control and provisioning costs Limitations • Standardization • More freedom in the industry • Communication Protocols, transmission frequency and information stored on the tag • Cost • Varies greatly depending on needs • Between 25 cents and $25 per tag • Collision • Simultaneous signal reading results in collisions and data loss • Anti-collision algorithms available but at an extra cost

7. RFID Frequency Bands

8. Near-Field Communication • Near-Field Communications (NFC) is a specialized subset within the RFID family • Operates in a High-Frequency band in the 13.56 MHz range • Shares similar advantages and disadvantages of RFIDs • Major difference is NFC is a 2 way communication • Operates in 1 of 3 unique modes

9. NFC Operating Modes • Reader/Writer Mode • Can read and alter stored data on NFC compliant transponders • This kind of tag can be found on Smart Posters • Depending on the data NFC could independently take action without user interaction • Card Emulation • The external reader as a result cannot distinguish between a smart card and a NFC device • Most useful for contactless payments and ticketing applications • Peer-to-Peer • Can establish bidirectional communication • Used by smart phones to change data between devices • Bluetooth

10. Business CaseRFID IN RETAIL

11. RFID In Retail Industry Ready…Set…Go! The RACE is on in RETAIL. Retailers are determined to be the first to deliver the perfect shopping experience to their customers. With hundreds of retailers adopting RFID, there is clearly an advantage to be gained from this technology.

12. RFID Implementation

13. RFID Benefits While the RFID solution greatly enables the efficiency and visibility of the supply chain, it generates other benefits for the retailers which allow to company to make smarter decisions. • RFID Improves Supply Chain • RFID Prevents Loss and Thefts • RFID Improves Staff Utilization Source: ABI research RFID Enables Omni channel Retailing • RFID Improves On-Shelf Availability

14. Recent RFID Implementations American Apparel has fully deployed RFID at its 254 stores around the world. Stacey Shulman, CTO of American Apparel, says that the fully RFID automated inventory visibility solution has significantly improved inventory accuracy and on-shelf availability. Stacy Shulman, CTO, May 2013 Macy’s chief Omni channel officer Robert Harrison said that RFID and Omni channel represent “a huge sales driver” for Macy’s. Sales in the third quarter of 2013 totaled $6.276 billion, up 3.3 percent from total sales of $6.075 billion in the third quarter of 2012, many of which carry item level RFID tags that contributed strongly to the third quarter sales gains. Robert Harrison, COO, June 2013 Borsheimsturned to RFID to monitor the high-priced JEWELRY items throughout the 62,500 square foot store and as a safeguard against employee theft. RFID helps company staff to track and trace jewelry as it moves around the store, be it to the back room to be cleaned or if it is inadvertently relocated within the store. Limas, CFO, May 2013

15. RFID Challenges 1 Exponential Increase in the Data Volume 2 Integration with Existing Systems 3 Filterting Out Unwanted Data 4 Finding the Business Value with the Data • Avoiding the Missteps • Not all RFID programs succeed and the top three reasons are: • - Lack of well-defined use cases • - Lack of executive support • - Superseded by other business priorities. • There are categories where ROI for RFID hasn’t appeared to be strong enough to drive adoption and the top two reasons are “Too expensive” and “Insufficient ROI”.

16. Path to ROI - Example Assume a retailer with 200 stores Sell roughly 12.5 million items per year at an average of $25 Yearly turnover is $312.5 million

17. Path to ROI - Example TOTAL INVESTMENT COST $4,890,000 TOTAL ONGOING COST $1,660,000 TOTAL COST YEAR 1 $6,550,000

18. Path to ROI - Example Case 1: Assuming consumer would buy increased accuracy of stock and based on certain criteria’s Retailer will make together over $34 million with estimated 10.8 % increase in the sales. Case2: Let assume that the actual sales only go up by 3% which is quarter of estimated 10.8%, then also it means $8.5 million growth and a cost saving of $712,800

19. Future of RFID - Potentials

20. Contactless PaymentsRFID/NFC

21. Payments Industry is witnessing a dramatic change leveraging the technological advancements in the wireless technologies over the last decade. • With Target security breach there is a tenacious desire among the the credit card companies and merchants to secure the credit card transactions • Provide seamless customer experience and reduce payment processing time at checkout. Payments Industry ContactlessPayments

22. Contactless Smart Chip Card Contactless Payments Mobile Wallets

23. Use RFID technology to make secure payments • Embedded chip and antenna enable customers to wave their card/devices over a reader at the point of sale • Payment account and security information is then sent wirelessly (via radio frequency) from the contactless payment card to the terminal • Based on ISO/IEC 14443, the international standard for contactless smart chip Contactless Smart Chip Card

24. Mobile wallet is a container for cards, services, offers/coupons, or any digitized content . • Mobile wallet implementations vary based on how companies want to define them. Mobile Wallet Tap and Go Spend Tracking NFC Loyalty Coupons

25. NFC itself is a proximity technology relying on the smartcard standard ISO/IEC 14443 • Card Emulation: In this mode an external reader cannot distinguish between a smart card and an NFC device. NFC enable handset is capable of storing different contactless smartcard applications in one device. Mobile Wallets - NFC

26. EMV is the technical standard that ensures chip-based payment cards and terminals are compatible around the world • The smart chip securely stores information about the payments application and performs cryptographic processing • Contactless card can have its own unique built-in secret "key" that uses standard 128-bit encryption technology to generate a unique card verification value or a cryptogram that exclusively identifies each transaction EMV – Standards and Security

27. Contactless Benefits

28. In Jan’2014, Apple got a patent (US 20140019367) “Method to send payment data through various air interfaces without compromising user data” which integrates NFC technology with other wireless technologies like Wi-Fi and Bluetooth Contactless Payments - Apple Patent

29. Google Glass?

30. Questions