Mobile phones have become a ubiquitous part of daily life and, in some cases, an extension of the human anatomy, but marketers and retailers have only scratched the surface of potential applications. One, which has generated considerable interest at industry gatherings, including February’s Mobile World Congress in Barcelona, is using mobile phones to scan products on the shelves and then download the information at the checkout and pay for groceries via the phone – in effect creating an electronic wallet and a new level of connectivity for consumers that could conceivably make credit, debit and even storeloyalty cards obsolete. At the centre of this application is Near Field Communication technology (NFC), a highfrequency radio communication standard, which enables devices to share information over short distances. This includes holding a phone near an RFID chip on the grocery shelf product and downloading data to an NFC reader at the checkout. The benefits of this technology to consumers and retailers have yet to be fully explored and but already pilot schemes are testing the technology which may not be available for mass-market consumption any time soon. Nonetheless, according to industry sources, industry giants including Nokia and Sony Ericsson are among those working on NFC enabled phones for scanning and payment systems. In fact, Nokia has stated that in two years, 50 per cent of its phones will include NFC technology.  

Readability issue “Intelligent tools like this will no doubt be available in the next few years. However, the major challenge is to get readability for barcodes,” said Christian Steinborn, chief operating officer, Neomedia Technologies, Aachen, the Germany-based provider of wireless transaction and payment systems. “The technology is available in the lab. But the worst thing that could happen is if we release it now and consumers can only scan every second or third barcode. A bad experience can keep them from adopting it in the future,” he said. “There’s a lot of hype right now. In my opinion we’re far away from seeing any practical use of mobile phones as scanning devices for shopping,” added Joachim Pinhammer, director of retail marketing for Wincor Nixdorf. The technology is available on the payment side. But there are only two commercially available phones that have NFC technology integrated,” he said, alluding to Nokia and Sony Ericsson. However, the next step in mobile applications, or m-commerce, is being spearheaded by Albert Heijn in the Netherlands, a chain which has always been on the cutting edge of new technology.

Albert Heijn in the Netherlands has already run a pilot scheme in which customers were given a Nokia NFCenabled phone which they used to scan shelf tags, download information to an NFC reader at the checkout, and then pay for the products. 

Early adopters “We’re a very innovative company and we’ve always been the first with new technologies. We want to keep that position in the market and that’s why we have special innovation teams that only think about the future, new technologies and how we can use them to provide better service to customers,” said Els van Dijk, a spokesperson for the chain. One successful example has been handheld scanners, which have been available in larger Albert Heijn stores and some of Ahold’s Stop & Shop supermarkets in the US for several years. “About 40 per cent of customers use this equipment in the stores that have them,” she said. “But it’s very important not to develop big projects and then take them to customers. We prefer to go to customers first to find out what they think.” The latest project took place at an Albert Heijn supermarket located inside a hospital in Amsterdam. About 100 people were given a Nokia NFC-enabled phone that they used to scan shelf tags for price information, download information to an NFC reader at the checkout, and then pay for the products. “We’ve finished that test and we’re developing a new one. Customers were very positive about it. They found it very easy to scan and pay for products using the phone,” she said. Meanwhile, Albert Heijn is one of over 40 companies – including restaurants, cinemas and apparel stores – testing a pay-by-phone system in Rotterdam, the Netherlands, in conjunction with Payter, a payment technology company. The pilot project, said to be the largest of its kind in Europe, is being conducted at shops located in the city centre among nearly 1,000 participants. “The test has been going on for about six months but we have yet to evaluate it,” said Van Dijk. “We know the telephone will be an increasingly important communication tool, but there have to be standards and you have to make sure all customers have the phones. There are other technologies and ways to pay and we have not yet decided which would be best in the future.” Other tests are also being conducted. About 100 customers at a Schuitema C1000 store in Molenaarsgraaf near Rotterdam are testing a pay-by-phone system in an initiative led by LogicaCMG. Here, again, the phones are equipped with NFC technology for contactless payments over a short distance. In Germany, Metro is introducing self-scanning via mobile devices at some cash and carry stores. According to a recent report in Lebensmittel Zeitung, the system will be rolled out in other stores after new POS software is installed from Wincor Nixdorf.

Quicker rollouts Pinhammer is confident that consumers will continue to use their mobile phones for new applications, particularly since technology changes rapidly and the normal life cycle of a mobile phone is now shorter than a PC. “Not much is really being done right now. But at some point in time, new scanning technology will be introduced to the mobile phone market very quickly. It is already technically feasible to scan products with the phone’s camera. “But it’s very tricky because you need out-offocus functionality and sophisticated software behind it,” he noted. In essence, the idea of scanning by phone goes back to 1993 but was not put into practice until 2002 when cameras were first installed in phones. “Companies are still trying to determine what is and what isn’t possible. The majority of telephones do not allow technology that is sufficient for supermarket operations, said Steinborn, noting that industrial cameras can scan laser engraved 2D barcodes on BMWs, Rolls Royces and Mercedes Benz to determine which individual parts have failed or might fail. The first iteration of this was in 1994 when a Japanese company called Denso-Wave developed the QR Code (quick response code) to track automotive parts in the manufacturing process. It was subsequently used for inventory management in a number of industries. “But cameras for industrial uses cannot yet be adapted to mobile phones. There are different operating systems that prevent us from having access to the data,” Steinborn said. He agreed with Pinhammer that focus is also an issue. “Cameras were made to take pictures of friends during a party so the focal point is 1-1.5 metres. You have to get very close to scan a barcode but it gets too blurry because algorithms can’t see the code. But in the next few years an autofocus will be part of new camera phones and this will enable scanning of 1D barcodes,” he said.

Digital content Meanwhile, NeoMedia is taking mobile phone functionality to yet another level with the recent introduction of its NeoReader, a barcode reading technology that enables devices to scan product packages, retail displays and even ads in publications. The reader scans 1D or 2D barcodes and immediately connects to digital content and services without consumers having to enter long URLs or deal with complex menus. This allows for highly targeted marketing campaigns by brand manufacturers. For Steinborn, the key to consumer acceptance may be providing information in a telephonefriendly way. “Right now, it takes a long time to download a web page to your phone. The industry needs to provide more mobile-specific content.” But it is Near Field Communication that is the basis for the test at Albert Heijn, and one which, at the moment, seems to be the most promising technology, according to Pinhammer. “There is some discussion about scanning barcodes and some companies are looking at this opportunity. “But in my opinion, we’re far away from seeing any practical use of mobile phones as a scanning device for shopping. “Most retailers wouldn’t accept it because they want to have control over the device and the information. You would also need a lot of security mechanisms so everything is scanned in the right way and the right prices are detected,” he said. However, scanning a barcode to retrieve additional information on the product via the Internet or from a supplier is a more practical application, Pinhammer noted. A more immediate application is using NFC for mobile phone payment systems at vending machines, parking facilities and public transportation, applications which are already being used in Europe Although the technology is available and massmarket applications are imminent, the question is whether consumers are ready for it. “It’s a smart application that can be much more secure than other payment systems because consumers do it with their own devices. This makes it highly unlikely that someone else will be able to use it for payment. It will only work if the payment is authorised,” he said. From the retailer’s perspective, all that is needed is a device that can read the data from the mobile phone and put the data into the register for payment. For this, you need a payment application that can be integrated into the register by defined protocols and interfaces, Pinhammer added. “But retailers are very cost conscious and will only accept technology that fits on a large scale,” he said. “It may all take longer than we think. The question is whether there is a benefit for retailers and whether consumers think they need it.” •

 Launched alongside The Museum of Modern Art “Design and The Elastic Mind” exhibition, Nokia’s Morph concept device is a bridge between highly advanced technologies and their potential benefits to end-users. This device concept showcases some revolutionary leaps being explored by Nokia Research Center (NRC) in collaboration with the Cambridge Nanoscience Centre (United Kingdom) – nanoscale technologies that will potentially create a world of radically different devices that open up an entirely new spectrum of possibilities.