PROXIMITY PAYMENT TRANSACTIONS

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1 PROXIMITY PAYMENT TRANSACTIONS Why Audio Jack Over Bluetooth Low Energy A Complimentary White Paper from OTI Produced by GrowthPraxiS

2 TABLE OF CONTENTS Introduction Audio Jack Overview Project HiJack Key Differences in Technologies Issues with Pairing Need for Power Source Expense and Complexity Battery Drain Issue Conclusion Appendix PROXIMITYPAYMENTTRANSACTIONS 2

3 Introduction With mobile phones becoming ubiquitous, the development of applications and new technologies to aid in the auxiliary use of mobiles to connect with external peripherals has become mainstream. There are many ways to interface external peripherals with a mobile device, such as Bluetooth, BLE (Bluetooth Low Energy), QR codes, GPS and Wi-Fi. Hardware such as USB ports, audio jacks, and micro SD card slots are designed specifically for connecting with peripherals. With high expectations for mobile payments, couponing and loyalty program delivery, and with major investments in mobile platforms, key questions concerning these technologies have been raised. Scalability, efficiency, security and adoption generate high inquiry rates, to name a few. BLE, which is considered to be the current pinnacle of wireless connectivity methods, does have some shortcomings. This white paper compares BLE (which is supposed to improve on Bluetooth, QR Codes, GPS and Wi- Fi) with audio jack-based communication, which is ubiquitous among all technologies currently available in the market. The white paper defines Hijack, a system developed by the University of Michigan that simplifies connections for a variety of external devices to smartphones for selfpowered data communications. The paper also identifies the advantages of using audio port-enabled communication over BLE. This white paper is intended to inform the reader, clarify misconceptions and illustrate the advantages of using audio port as compared with BLE, thereby encouraging solutions that bring about the best possible consumer value propositions. PROXIMITYPAYMENTTRANSACTIONS 3

4 Audio Jack: Overview By adapting the standard 3.5mm audio jack found on smartphones, companies can create a universal interface for external sensors, switches, peripherals and other devices. Such solutions make communication with external devices as easy as plugging in headphones. Audio Jack Support All mobile devices have an audio port and will support audio jack technology. What Makes the Audio Jack Unique The audio port is better for cross platform communication with secure elements. There is also no question regarding high or low energy implementations. Status of Audio Jack Technology PROXIMITYPAYMENTTRANSACTIONS 4 In 2010, students and staff at the University of Michigan tested audio jack technology. The project has been named HiJack In 2014, NXP announced Quick-Jack, a versatile new smartphone solution that simplifies connecting a variety of external devices to smartphones for selfpowered data communications. Benefits of the Audio Jack All#mobile#devices#have#an#audio#port# No#battery#required#for#charging# Virtual#instant#connection# Inexpensive#and#less#complex#to#implement# Battery#life#will#never#be#an#issue# Audio#jack#usually#connects#faster#compared#to#other#devices#

Project HiJack (AUDIO JACK BASED OPEN-SOURCE COMMUNICATION SYSTEM) Project HiJack is being developed by researchers from the Electrical Engineering and Computer Science Division at the University of

5 Project HiJack (AUDIO JACK BASED OPEN-SOURCE COMMUNICATION SYSTEM) Project HiJack is being developed by researchers from the Electrical Engineering and Computer Science Division at the University of Michigan, a DIL (Development Impact Lab) collaborator. HiJack is a hardware/software platform for creating cubic-inch sensor peripherals for mobile phones. HiJack devices harvest power and bandwidth from the mobile phone s headset interface. Several energy harvesting power supply designs are possible with tradeoffs in efficiency, cost and complexity but the HiJack platform fundamentally strives to enable a new class of small and cheap phone-centric sensor peripherals that support plug-and-play operations. HiJack has been tested with the iphone 3G/3GS/4G, ipod Touch and ipad devices. Work is underway to support Android and Windows Phone 7 devices as well. The HiJack platform has served as the basis for a number of low-power sensor and signal conditioning applications, including EKG monitoring for health interventions, gas concentration (CO, NOx, O3, and SO2) monitoring for environmental health assessments and soil moisture analysis for agricultural interventions. Source: Development Impact Lab; University of Berkeley PROXIMITYPAYMENTTRANSACTIONS 5

6 The white paper by Smart Card Alliance on Bluetooth Low Energy identifies BLE as one of the most promising wireless technologies that can enable payments and commerce. While the standard is common on modern smartphones, they require an external power source for the peripherals. In addition, there are also concerns around security. To read more about BLE and its shortcoming, please refer to the appendix section of this report. Most mobile phones are embedded with three ports, which can be used for two-way communication. They are the microsd card, audio port and USB port. The microsd card interface is typically too small and is often not easy to access. Thus, linking peripherals to the microsd card will be difficult. Furthermore, devices like the iphone (which has a 50% market share in the U.S.) do not offer a microsd card slot. Hence, the potential of the micro SD card as an interface is limited. While USB host capabilities seem like the ideal interface, only a few phones provide OTG capability. USB OTG host can supply power very efficiently; however, they require an external USB slave. With USB gaining more prevalent acceptance on mobile phones, it may become the preferred method for connecting to peripherals for communication. The most promising solution currently being implemented in the industry is by using the phone s audio jack as a communication interface. NXP Semiconductor s Quick- Jack Solution is a perfect example. Adapting the standard 3.5mm audio jack found on the smartphone, the solution creates a universal interface for connecting devices that can communicate with external sensors. The device is inspired by the University of Michigan's Project Hijack, which gives mobile, consumer and industrial product designers a plug-and-go connectivity for adding features to a variety of applications from commerce, payments, medical and fitness devices, smart grids to diagnostics and maintenance tools. PROXIMITYPAYMENTTRANSACTIONS 6

The Difference Between the Audio Jack and BLE for Payments The audio port is superior to BLE for cross-platform communications with the secure element.

7 The Difference Between the Audio Jack and BLE for Payments The audio port is superior to BLE for cross-platform communications with the secure element. The primary reason for the audio port being better is its ubiquity. Audio ports are available in both smart and feature phones, including other mobile devices such as laptops and tablets. By 2019, only about 50% of the installed phones will have BLE, while essentially all mobile devices possess audio ports. PROXIMITYPAYMENTTRANSACTIONS 7

8 Mobile Phones Installed Base (Billion Units) % 100.0% % 48.8% 50.7% 38.5% 42.6% 27.0% 13.2% % 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Installed Base of Mobile Phones Phones With BLE Phones With Audio Jack Let s consider a payment transaction. A transaction initiated via an audio jack is more secure than that through BLE mainly because of the direct contact/shorter distance (which makes data theft more difficult). With BLE, it will be easier to spy on and interfere with the secure data that is being sent. Furthermore, audio jack can easily enable a card-present transaction with lower interchange fees unlike BLE. Besides, for a card-present transaction to happen, BLE would need a similar setup for hardware and software just like NFC or other similar technologies. To be able to process secure card-based transactions (card-present), a merchant will be required to get certified and become complaint, which is comparatively more effort. ISSUES WITH PAIRING The issue of pairing Bluetooth is a very well known challenge. Bluetooth transmits data in the 2.4GHz frequency band a communication band also used by other wireless technologies - which can be monitored by an attacker. Hence, it is harder to provide security and privacy to network interference. Bluetooth uses Adaptive Frequency Hopping (AFH) to detect channels with interference and removes them from its hopping sequence. PROXIMITYPAYMENTTRANSACTIONS 8

9 This technique works well against interference from sources such as Wi-Fi, but it does not make Bluetooth resistant to interference from other Bluetooth devices that cause interference on different channels. Thus, interference can be a problem in crowded places, such as shopping malls and transit stations, and can affect the quality of service. In the case of the audio jack, a customer and merchant are linked to each other with a single tap. However, in the case of BLE, the retailer has to select the correct device and the correct customer. In other words, with the audio jack the customer identifies himself with the location to a merchant and a transaction is made with a tap to the POS. With BLE, the customer is identified because of his position and this position is then linked to a merchant. An additional selection step is however needed to match the customer with the right transaction. NEED FOR POWER SOURCE Another advantage of using audio jacks instead of BLE for communication is that, unlike BLE accessories which require charging for operation, audio jacks require no power source to charge them. Furthermore, the cost of including BLE in a mobile phone is 15% more than that of including a Hijack system. The bill of materials for an audio jack with communication capabilities is $ , while for BLE, it is $ ARS Technica, 4 Digi-Key, PROXIMITYPAYMENTTRANSACTIONS 9

10 BLE IS EXPENSIVE AND COMPLEX TO IMPLEMENT AND USE BLE as a method to enable payments and commerce is quite complex. Customers first need to turn their Bluetooth on, have an app that is built to communicate with beacons and then agree to receive notifications based on their location. Beacons cannot simply engage with any random device, as they need user authentication in the first place. In addition, beacons are a relatively new concept. Beacons can range in price from $20 to $40 depending on the specifications. A BLE implementation requires customization and configuration of beacons along with the infrastructure and access to control and monitor systems. Additionally, proper implementation also means that the beacon installed by the retailer is recognized by either a proprietary app or a partner s app. BLE technology is still in a nascent stage with some features like payments and loyalty being still developed and tested. Full-scale implementation is currently far from reality, which suggests that the cost of implementation of BLE and beacon technology is high. Additionally, the per-unit cost to enable BLE is actually higher because the beacons cost much more. In its current state, the retail industry has little support for BLE. Consequently upgrading retail infrastructure to support BLE is not trouble-free. The retail infrastructure would need an overhaul as current systems don t support BLE implementation. Apart from this, beacons will have to be installed across the retail store or optimal customer experience. After all this, an app still needs to be in place to support BLE, consumer devices will need to be BLE-enabled and the consumer should be ready to accept messages. Hence, consumer behavior and device configuration would still be barriers for full-scale implementation of BLE even if the necessary systems are in place at the retail stores. PROXIMITYPAYMENTTRANSACTIONS 10 Beacons aren t tracking you; you track beacons, said Colin O Donnell, COO of Technology and Design Consultancy Control Group. They are not active pieces of technology; the apps you ve downloaded decide which beacons are worth using or not.

11 USE OF BLE LEADS TO BATTERY DRAIN Impact of the number of beacons on battery drain: Baseline 0 beacons 7 beacons 10 beacons Nexus % -2.14% -2.63% N/A Nexus % -1.43% -2.23% -5.18% Moto G -0.76% -1.20% -1.44% -1.79% Source: aislelabs.com " Baseline refers to battery drain without any BLE scans. " Zero beacons refer to the case where BLE scanning functionality is on, but no beacons are in the vicinity. " The other two cases (7 and 10 beacons) refer to the incremental drain on the battery when the above-mentioned numbers of beacons are in the vicinity. The number of beacons in the neighborhood influences the battery radically. However, research also points out that newer handsets are slightly better in performance and the battery impact on using BLE is slightly reduced. Regardless, we believe that battery life will continue to be an issue. This is a significant problem, because even with a small number of beacons, at some point the battery will die and leave the customer stranded. PROXIMITYPAYMENTTRANSACTIONS 11

12 CONCLUSION Bluetooth Low Energy is a viable option for payments and content marketing. It seems to be one of the best among the wireless technologies currently available in the market. However, the technology has its own pitfalls. Lack of BLE on all devices, security concerns, cost of implementation, effect of BLE on battery life and pairing problems make it a difficult proposition to implement BLE on a large scale. On the contrary, enabling two-way communications through the ubiquitous 3.5mm audio makes it an ideal technology for large-scale adoption. Since there is direct contact in the case of the audio port, the problem of security and pairing does not surface easily. Besides this, battery life is not affected much when using audio ports. All these benefits make the audio port a better option for payments and commerce than BLE in the current scenario. PROXIMITYPAYMENTTRANSACTIONS 12

APPENDIX BLUETOOTH LOW ENERGY: OVERVIEW Bluetooth Low Energy (BLE), sometimes referred to as "Bluetooth Smart," is a lightweight subset of the classic Bluetooth standard and was introduced as part of

13 APPENDIX BLUETOOTH LOW ENERGY: OVERVIEW Bluetooth Low Energy (BLE), sometimes referred to as "Bluetooth Smart," is a lightweight subset of the classic Bluetooth standard and was introduced as part of Bluetooth 4.0. Support for Bluetooth 4.0 and Bluetooth Low Energy (which is a subset of BT 4.0) is available on most major platforms as of the versions listed below: - ios 5+ (ios 7+ preferred) - Android 4.3+ (numerous bug fixes in 4.4+) - Apple OS X Windows 8 (XP, Vista and 7 only support Bluetooth 2.1) - GNU/Linux Vanilla BlueZ What Makes Bluetooth Low Energy Unique? BLE substantially reduces classic Bluetooth s peak, average and idle mode power consumption with energy efficiencies. It can be 20 times higher than classic Bluetooth. Its very simple link layer designed for quick connections enables BLE s incredibly low power consumption. BLE chips spend most of their time asleep, only waking up to send data - a process that takes only few milliseconds as compared to classic Bluetooth which takes 100 milliseconds. PROXIMITYPAYMENTTRANSACTIONS 13

14 Benefits and Challenges of Bluetooth Low Energy 9 Not all mobile devices have BLE. 9 BLE requires a power source. 9 Expensive & complex to implement. 9 Battery life will continue to be an issue. 9 BLE is problematic and slow to connect. BLE has a number of features that set it apart from other available wireless technologies. 9 Interoperability and robustness 9 Bit rates 9 Range 9 Pairing is not obvious/automatic. PROXIMITYPAYMENTTRANSACTIONS 14

15 Comparative Technologies Underlying technology Range Network Requirement Connection Speed (Sec) Key Highlights BLE Bluetooth to GHz Classic Bluetooth Bluetooth 4.0/ to GHz GPS QR Code NFC Wi-Fi Global Position / Geodesy via satellites ISO/IEC 18004:2006 2D matrix code or bar code ISO/IEC ISO/IEC MHz Near Field 2.4 GHz/ 5GHz Microwave 50 to 150 m m Outdoor satellite range 10cm <10 cm 65om NA NA No Needed for No No dynamic data NA NA Very kbps long ~25 Higher mbps power in Location Requires a lot Data Cost transfer Data Limited Data Can work at range; consumption of battery effective; the Range; longer BLE requires a than BLE power. technology The NFC tag distances new Is often turned has does not with larger infrastructure off by the limitations in require any data to target users owner. scope, power as it transfer with phones Typically not range, is derived rates; who subscribe accurate security, and from the includes with BLE indoors consistency phone quality and security Source: Bluetooth Low Energy (BLE) 101: A Technology Primer with Example Use Cases by Smart card Alliance, June 2014 PROXIMITYPAYMENTTRANSACTIONS 15

16 About OTI On Track Innovations LTD. On Track Innovations LTD. (OTI) is a leader in contactless and NFC applications based on its extensive patent and IP portfolio. OTI s fieldproven innovations have been deployed around the world to address NFC payment solutions, petroleum payment and management, cashless parking fee collection systems and mass transit ticketing. OTI markets and supports its solutions through a global network of regional offices and alliances. For more information, visit PROXIMITYPAYMENTTRANSACTIONS 16

WHITE PAPER. Bluetooth 4 LE: the only viable solution for next generation payments

WHITE PAPER. Bluetooth 4 LE: the only viable solution for next generation payments WHITE PAPER Bluetooth 4 LE: the only viable solution for next generation payments 2 Introduction As the IoT and connected devices become more prevalent, our smartphones are becoming increasingly connected