Biometrics and Wearables: Enabling The Next Billion Dollar Disruptions

security

We are not far from a future where homeowners and business operators will be able to manage their premises from anywhere, and some combination of advanced sensor technology, user identification, image recognition, motion capture, data sciences, and simple to install hardware will make access more efficient and secure.

The promise of wearable computing lies in its ability to create novel and useful ways we interact with the digital and physical worlds. While much of the wearable computing fanboy attention gets focused on consumer applications, it is also beginning to penetrate and potentially cause major disruptions in other markets. The security industry is no exception.

In our coverage of Wearables, we’ve seen a number of companies mapping sophisticated identity management and access control technology to hardware. Although it is a fringe case today, very soon, we all may be unlocking our devices, our homes, our cars, our offices, our safety deposit boxes, with secure wearable devices. We also may be entering NFL games, seeing custom highlight packages on TV, crossing ports of entry, and may be hosting and accessing our medical records using the same technology.

Securing our property alone is big business. According to IBISWorld, security alarm service firms alone will amass $16.8 billion in revenue in 2013 and revenues will increase by 2.8% annually in the next five years. This growth will be powered by two major drivers: (1) New and innovative technology driving new system sales which will drive up effectiveness while driving down high labor costs; and (2) new home construction.

Several wearable devices have interesting applications related to this market. Bionym’s Nymi bracelet, which we covered in our latest Week in Wearables post, offers a fresh solution to identification and access control. Based on the principle that everyone’s electrocardiogram (ECG) is as unique as a fingerprint or retina, Nymi identifies users and grants them access to compatible electronic devices, doors, and even bank accounts. Nymi offers a more secure solution than other biometric identification systems that depend on physical attributes because unlike a fingerprint, a copy of your ECG cannot be easily lifted. Eventually, devices that identify people by other sophisticated biometrics, such as gait analysis, iris scanning, or others will join ECG devices as a part of ID and access systems. Another interesting solution is the NFC Ring, a battery-free ring you wear on your hand that can interact with any NFC device, selling for only $30 USD. Last month, this product generated buzz for its successful Kickstarter campaign. While less technologically advanced than biometric ID gadgets like the Nymi, the NFC ring represents a low-cost solution that may appeal to more consumers’ pockets and may be more easily integrated into current security technology infrastructure. Many current popular ID systems already use NFC technology, like card-ID sensors on secure doors. Infrastructure for biometric ID gadgets is not as common, but is spreading and could replace all other forms of ID security technology within a few years, though admittedly, we’ve been talking about NFC and this potential for a very long time. The point is, both new startups and massive incumbents are gearing up for a world where wearable computing influences how we and others interact with and access our most valuable property

To do this, many leading industry players are spending an increasing amount of time in the world’s innovation centers looking for technology partners to power the next generation of products and services, while at the same time staffing up their own innovation efforts to at least keep pace with the table stakes in the industry, e.g. iPhone apps! For instance, ADT Pulse allows homeowners to arm and disarm their home security system, light control, and climate via iPhone; it also sends notifications to smartphones if alarms are triggered. ADT is a clear market leader -with 2012 sales of $3.21 billion it easily beat out the competition, such as Protection One, which had only $56.9 million in sales. Other competitors include Bosch and G4S, but ADT still stands out as the #1 home security-system supplier. In enterprise environments, the most common technology used to secure doors are pin-entry pads and card swipe readers, but biometric ID systems like fingerprint, facial structure and retina scanners are also in use. Major suppliers to this segment include Tyco (which spun off ADT in 2012) and Raytheon. Large companies such as GE, Honeywell International, and United Technologies offer integrated monitoring and alarm solutions, but these firms are further behind on biometric tech. Every large player in this industry realizes its need for relationships with high-tech startups to differentiate their products – today market value driving perception relies heavily on technological advancement. Brand familiarity in this market will only sustain market share until a big competitor teams up with high-tech startups to bring their products to the top or innovates on its own.

“Brand familiarity in this market will only sustain market share until a big competitor teams up with high-tech startups to bring their products to the top or innovates on its own”

In the meantime, new entrants are disrupting the space and starting to compete with big players. For instance, Time Warner’s IntelligentHome shows how cable companies might compete and newer companies like Control4, which held its initial public offering last month, are also gaining ground in the personalized home automation market, which is only a short hop to security services. Smart locks, which use smartphones to unlock doors, also have potential. One of the most elegant products we have seen is the August smart lock – it notifies users whenever certain people enter your home and has a sleek design. Facial recognition, iris scanning, and retinal scanning technologies are also gaining ground. This biometric identification has been implemented in the Samsung Galaxy S III and new iPhones and we are certain to see similar technologies in future form factors across iOS and Android ecosystems, not to mention adoption at the network software layer of solutions from Animetrics, Solidpass, and Visidon.

How will these new players carve out their place in a tough industry? While there will always be a role to grow a company with proprietary technology through licensing innovation and services to incumbents, we are more excited about companies that can potentially drive a more efficient value chain AND own more components of it. There is lots of potential to automate the services component of the security business, especially in the fragmented home security segment where security standards are lower.

It is inevitable that new identification and access technologies and services will cause disruption in the home and business security market. We are not far from a future where homeowners and business operators will be able to manage their premises from anywhere, and some combination of advanced sensor technology, user identification, image recognition, motion capture, data sciences, and simple to install hardware will make access more efficient and secure.

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