44 million mobile credentials to be downloaded by 2021

The reason for the strong growth is two-fold. Market sentiment reveals that the use of mobile credentials in access control is not only a strong value proposition on its own, but it also holds the potential to unlock a more integrated and better value system for the end user while also creating new services that can support new revenue streams for providers of mobile access going forward.

Also, mobile credentials are currently not competing against physical cards, but instead are being marketed as a complement to traditional offerings; therefore, the potential market is much larger.

The end users most likely to transition to a full mobile credential-only system are those who have to deal with large numbers of temporary visitors or who experience exceptionally high card turnover rates. Examples include building sites at which contractors require access to varying locations, as well as universities and hotels where large numbers of cards have to be replaced each year.

The adoption rate of mobile-capable readers currently far surpasses that of mobile credential downloads. This is primarily for two reasons. First, a significant proportion of the access control smart card reader installed base is mobile capable by default. And second, many end users are opting to install mobile-capable readers despite having no intention of rolling out mobile access in the near future. They are doing so simply to future-proof their systems.

The installed base is still in the process of being seeded with mobile-capable readers
In 2016, just seven percent of non-residential access control readers shipped were mobile capable. However, global shipments are forecast to grow to around 20% by 2021.

Mobile-capable readers are access control readers with either Near-Field Communication (NFC) or Bluetooth Low Energy (BLE) data-transfer capability. To be included within the IHS Markit definition for the term, a mobile-capable reader must be able to interact with a smartphone in such a way that the smartphone directly replaces a key or other physical credential.

The Americas region is the most mature market in terms of adoption of mobile-capable readers. In 2016, over 17% of access control readers shipped in the region were mobile capable.

Shipments of mobile-capable readers are rising due to the following:

• A growing number of smart card readers are becoming mobile capable by default as manufacturers add NFC mobile communication functionality - often at no additional cost to the end user
• Access control manufacturers are adding readers to their offerings with Bluetooth modules that can be used for mobile communication, or they are selling Bluetooth module add-ons separately

Smart card readers are by far the most common type of mobile-capable reader, accounting for 98.5% of mobile-capable reader unit shipments in 2016.

iOS 11 could result in a resurgence of NFC-based, mobile-capable readers
The vast majority of mobile credential suppliers now accept that Bluetooth Low Energy is the preferred format of choice. Although the industry originally opted for NFC as its number-one data interface, the lack of support from Apple led suppliers to switch to the more ubiquitous Bluetooth format. The launch of Bluetooth Low Energy v4.0 of the Bluetooth Special Interest Group in 2013 also played a key role in solidifying Bluetooth’s position as the leading communication technology.

However, with the release of iOS 11 in September, Apple opened up access to the NFC chip in the iPhone 7 and 7 Plus, as well as future iPhone generations. This has huge potential to reinvigorate interest from mobile access providers in NFC-based smartphone communication.

Historically, using the payment market as an example, the use of mobile-based contactless payments started to gain market share rapidly only after Apple launched Apple Pay. A similar scenario could occur in the access control space for these reasons:

• End users, after experiencing the payment and transportation ticketing migrations, are now very familiar with the NFC process and could be easily educated about the use of NFC in the access control space
• Many mobile access providers in the market today are access control equipment manufacturers that have vast amounts of experience working with similar technology through their production of MIFARE smart card readers

Increasing adoption is only half the battle for providers
Despite selling mobile credentials for the better part of three years, providers have yet to converge on the use of a particular business model. Some providers are opting to charge the end user directly for the credentials (in a similar fashion to physical credentials), others are trialing subscription fee-based pricing models, while others are simply giving away the mobile credentials for free.

Providers that are not charging for mobile credentials are hoping to use this as a unique selling point to win key projects or increase their share of the reader equipment market.

IHS Markit expects that as the number of suppliers that are providing mobile credentials for free grows, the average selling price of the credentials will decrease as other companies lower their prices to stay competitive.