...unless, that is, one had a key to the safe. Combination locks had not yet been invented; all locks were operated by key, and the most reliable way to break a safe was to come prepared with a previously obtained key. This truth lies behind the nineteenth-century criminal's preoccupation with keys. Victorian crime literature, official and popular, often seems obsessed with keys, as if nothing else mattered. But in those days, as the master safe-cracker Neddy Sykes said in his trial in 1848, 'The key is everything...the problem, and the solution....'-- Michael Crichton The Great Train Robbery
A Key On The Tip Of Your Finger
With the purchase of biometric company AuthenTec (AUTH), Apple (AAPL) is opening the floodgates on biometrics. No more remembering alphanumeric password on a digital touchscreen. In the future, fingerprint, palmprint and voice-ID will allow you to log into your iTunes, Facebook (FB), or GMail account with the press of a finger.
Here comes the iWallet.
NFC
NFC (Near-Field Communication) is a set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity, usually no more than 10cm apart. The origins of NFC date back to the introduction of RFID (Radio Frequency Identification) in 1983; however, it wasn't until the NFC Forum in 2004, led by Nokia (NOK), Philips (PHG) and Sony (SNE), that the technology began to be taken seriously by engineers and developers. Now its everywhere you look.
NFC is used in PayPass transactions at terminals in Austria, Germany, and Latvia. China is deploying NFC nation-wide for mass transit. NFC is being used to pay for fast food in France, social networks in Japan, and farmers in Switzerland. Google (GOOG) has integrated NFC into its Nexus 7 platform, including a new remote wipe feature that allows users to reset the Wallet app and purge all related financial data right from the service's online management site.
For all of that, NFC is still in its Trial and Discovery phase. According to Mastercard, customer adoption is still years away. The merchant infrastructure isn't widespread enough yet. And it also has security problems.
Enter AuthenTec.
Smart Sensors
AuthenTec originally went public in early 2007 as a Harris Corp (HRS) spinoff. The Melbourne, Florida-based company produces chips for fingerprint recognition and NFC (near-field communication), chips for mobile phones and security software. It is the #1 provider of fingerprint authentication sensors, with products licensed to companies such as Samsung Electronics (SSNF.PK), Lenovo Group (LNVGY.PK), Fujitsu (FJTSF.PK) and Dell (DELL). Over 100 million AuthenTec sensors have been embedded in devices worldwide.
The Company's broad portfolio of swipe sensors use a patented sub-surface technology to read the live layer of skin beneath the skin's surface where the fingerprint is first formed. This allows AuthenTec sensors to read through worn, damaged, calloused or oily skin. This ensures that the sensor provides highly accurate fingerprint imaging every time.
According to its corporate website, AuthenTec's patents "go beyond the security offered by fingerprint authentication to include other touch-based features including personalization, or the ability to associate different functions with different fingers. For example, a phone or PC user can quickly and securely launch eBay (including user log-in and password) by swiping their index finger, launch Yahoo (YHOO) with their thumb, or speed dial their spouse with a swipe of their ring finger."
AES2750
Among the fingerprint sensor company's products is the AES2750, a device specifically designed to protect access to NFC mobile wallets. The AES2750 sensor is small enough to be mounted on the edge of a smartphone or tablet and, for touchscreen phones, can also be built into the screen using a "through-hole" glass mounting. The modular design also reduces bill of material (BOM) costs required for sensor integration by handset and tablet OEMs, making the AES2750 attractive for large scale production.
iPhone/iTunes Integration
With the cottage industry that has grown surrounding every hint and rumor surrounding the next generation of Apple products, it's refreshing to know something concrete about what Cupertino has in mind going forward.
Our source, in this case, is the U.S. Patent Office. Placement for the AES2750 sensor is clearly defined:
AuthenTec sensors offer users the ability to interact directly with payment applications stored within an NFC secure element and to provide direct NFC radio control, based on positive authentication of the user; ensuring that only the registered user of a device can gain access to the mobile wallet. In keeping with its philosophy of vertical integration, Apple is not only incorporating this sensor directly into its iPhone design -it's making it an integral part of iTunes.
Layered parental controls are built in. The key to Apple's model involves a primary account for parents and secondary ones for their children. This way, parents are given the option to control their child's mobile transactions by setting up some limits based on the amount, time, and location of the transactions.
Enterprise Services: Channeling the BYOD Movement
Apart from the Cool factor, Cupertino's plans to leverage biometric technology is based in part on the BYOD (Bring-your-own-device) movement. Apple products permeate the workplace. As of this writing, the average worker spend $1,253 a year on tech gear used over the course of their jobs. The average C-level executive spends over three times that in a twelve month period. 90% of employees currently use their own technology at work - and of those devices, Apple products have the highest penetration.
(courtesy of bitzer mobile)
The problem is that Apple products aren't considered to be very secure by Network Administrators. As part of the AuthenTec buyout, Apple is paying $20 million for non-exclusive licenses, patents and hardware & software tech from AuthenTec, with the option to pony up an additional $95 million to make the non-exclusive licenses perpetual. One of those patents is the QuickSec VPN Client, a template based configuration which allows a Network Admin to distribute a standard template with pre-configured parameters for the corporate gateway. Taken together with AuthenTec's other security products, future Apple products will be well placed for Enterprise level integration, a market that has -until now- been the preserve of companies like Research In Motion (RIMM) and Microsoft (MSFT).
Conclusion
According to Global Biometric Systems Market Forecast &Opportunities, 2017, global biometrics market revenues are anticipated to reach USD 10.02 Billion by 2014. By including biometric sensors in the future -potentially 2013- iPhone, Apple is throwing open the floodgates to widespread adoption of biometric technology. However, no one biometric technology is sufficient to provide security for every situation, which means that the rate of adoption of parallel technologies is likely to increase. Investors may want to take a look at leading providers of voice-authentication and iris-recognition technologies, such as Nuance Communications (NUAN), a leading provider of voice authentication technology and Titan Corporation (TWI).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
