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Cutting Through the Hype: The Truth about BLE Beacons

The industry is abuzz at present with many people talking about the endless opportunities and possibilities around BLE Beacons, and amidst all the discussion remains a large amount of confusion around different beacon technologies be they iBeacon, PayPal Beacon or one of the many other types of beacon.

Several heated exchanges continue, especially with many observers questioning the future of NFC in light of the much-anticipated upcoming adoption of BLE Beacons.

To fully understand the pros and cons of BLE Beacons, it's first necessary to take a step back and consider the original aims of location-based services (LBS) and the notion of 'right-time' marketing that is so often discussed.

Location-based services (LBS) are nothing new. Ever since the mass adoption of smartphones several years ago there has been an endless stream of LBS solution vendors vying to dominate the market. The likes of Foursquare, TagTile, Shopkick as well as numerous others have in the past demonstrated novel and innovative ways of detecting or recognising when a consumer is at a given location, but one thing persisted across all of these solutions, a high level of friction, that deterred all but the most motived and proactive consumers from actively participating. The underlying pain of removing the phone from one's pocket, unlocking the device, locating the necessary app and then waiting for it to open was simply too great to ever achieve mass consumer adoption. It’s simply a question of convenience, or in this case, the lack of.

To understand why BLE Beacons are a game changer, we first need to look beyond the beacon related technology and understand why beacons are able to eliminate the traditional friction that has plagued LBS solutions. The root cause of this friction lies with the Apple iPhone and the restrictions that have been imposed on developers in the name of protecting the consumer. Don't get me wrong, the iPhone provides many valuable safeguards for the consumer, but it is these safeguards that have traditionally acted as effective roadblocks for LBS solution providers.

Apple's recent decision to provide native support for BLE Beacons, albeit their proprietary iBeacon signature, has created the first true opportunity for frictionless LBS solutions running on iPhone devices. Once the consumer has installed the app on their phone and granted the required permissions there is no need for them to keep manually opening the app at each location, instead the location is automatically detected from a nearby BLE Beacon and conveyed to the app without the phone ever leaving its owners pocket.

It is the 'frictionless' nature of iBeacon that has changed the game for LBS, rather than the underlying technology that surrounds BLE Beacons. The ability to communicate with a passive consumer is essential for the long-term success of any LBS solution. And for those consumers who do not like the idea of being tracked, they can avoid such schemes, it’s simply a matter of choice on the part of each consumer.

Getting a consumer to install an app on their phone is a relatively trivial task, but getting them to proactively open the app on a regular basis is an entirely different challenge and one that is doomed to failure in the long term, especially once the initial novelty has worn off.

The second benefit with iBeacon is that it's not constrained to iPhone devices. iBeacon is nothing more than the format of the data that is sent from a standard BLE Beacon to the smartphone and whilst the iPhone provides native support for iBeacon there is nothing stopping an Android app from detecting an iBeacon, albeit slightly more effort on the part of the developer and a somewhat increased level of battery usage.

In short, the game-changing aspect of BLE Beacons lies in the fact that they are supported by the majority of recent smartphone devices, which is not the case for alternative technologies and more importantly, that the consumer experience is frictionless, in that they don't even need to remove the device from their pocket.

But the real future of LBS and 'right-time' marketing does not lie solely with BLE Beacons, as any truly effective LBS solution needs to take into account the Omni connected nature of the world in which we live in. To truly succeed, LBS solutions must fully embrace, harness and leverage on a diverse range of 'location feeds', be they BLE Beacons, GPS from Smartphone Apps, Social Media Check-Ins or even the often overlooked 'grey-data' that already exists within the payments ecosystem in the form of payment-card and ATM transactions.

Incumbent players within the payments ecosystem, most particularly acquirers and issuers, are in a unique position to jumpstart their activities by leveraging on existing 'grey-data' whilst at the same time embracing other types of 'location feeds' to deliver value-added-services to merchants and consumers alike, that not only have the potential to re-invent the traditional brick-and-mortar retail experience but can also create new and highly profitable data-driven revenue streams, thus mitigating against the threat posed by the continued pressure against traditional transaction-fee based revenue models.

One thing is for sure. BLE Beacons are here to stay and will have a positive impact within the brick-and-mortar retail environment. The question that remains is whether the incumbent players will be able to leverage on their existing ‘grey data’ before new entrants corner the market.


Comments: (5)

Thad Peterson
Thad Peterson - Aite Group - MARIETTA 27 January, 2014, 14:35Be the first to give this comment the thumbs up 0 likes

Oscar, great post! You really nailed the importance of BLE. Thanks!

A Finextra member
A Finextra member 27 January, 2014, 15:48Be the first to give this comment the thumbs up 0 likes

Thanks Thad!

Geoffrey Barraclough
Geoffrey Barraclough - The Business of Payments - London 28 January, 2014, 15:51Be the first to give this comment the thumbs up 0 likes

The central problem for retail is not how to communicate with customers but what to say to them. iBeacons offer just one more option for the former but don’t make any contribution to solving the latter. Oh, and they're not secure enough for payments.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 29 January, 2014, 15:59Be the first to give this comment the thumbs up 0 likes

From personal experience with my own company's LBTR360 LBS app, my non-BLE experience is different: The app sends out an automatic push notification, with audio alarm, whenever the user reaches the location for which a task has been set up. Upon tapping the notification, the user is automatically taken to the app to take action. There's no need to take the phone from the pocket or to fire up the said app manually to check whether a task has come due. Of course, once the user hears the alarm that a task is due, they need to take out the phone from the pocket to act on it. But, that's part of the core functionality, not friction, and that's how it should be even with BLE. After all, what's the point in noticing a coupon for "25% off on Coke" when I've already left the supermarket after buying a pizza?

A Finextra member
A Finextra member 30 January, 2014, 11:271 like 1 like


iBeacon acts as an enabler, alerting the retailer to an 'opportunity' to communicate with a customer. As illustrated by the following examples, the real challenge is less about the ‘what’ and more about the ‘who’, ‘when’ and ‘how’:

  • Upon walking into the store, the clerk approaches to inform me that one of the out-of-stock items that I wish-listed on their website a few weeks ago has just come into stock in the store
  • Whilst casually browsing the store, the clerk approaches and informs me that if I spend another $84 before the end of the month, I'll be enrolled into their VIP program, entitling me to additional in-store benefits
  • As I'm walking past the store, my phone vibrates and alerts me that I still have a 10% discount coupon that will expire at the end of the week

It's true that there are other potential ways of identifying the customer (NFC, QR-Code Check-In, Geo-Fencing, etc.), but they are generally less pervasive, requiring an increased and sustained effort on the part of the customer, something that is difficult to maintain in the long-term without dangling a large enough carrot in front of the customer.

Regarding security, or the apparent lack of, that discussion is likely to open a much larger 'can of worms' within the payments community. Naturally, you couldn't just drop in an iBeacon as a direct replacement for a payment card, but that's more of an issue with the legacy payment card ecosystem and its over-reliance on maintaining the secrecy of the means of identification (i.e. PAN).

PayPal Beacon and PayCode are excellent examples of why the means of identification doesn't need to be secure so long as other parts of the payment ecosystem have appropriate authentication and security layers.

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