[00:00:06.490] – Peter
Let me show you four words: security, usability, scalability, and utility. Hello everyone. My name is Peter Kostur. I’m from Scantrust and welcome to our online webinar for a discussion, or maybe assessment of, secure QR codes.
[00:00:35.090] – Peter
I work for Scantrust. Scantrust is a connected goods platform. We help companies enable anti-counterfeiting and product traceability through secure QR codes to help to maintain the brand’s and product’s integrity. We not only protect the brand but also their intellectual property and their most valuable assets; that’s the customers of every single brand. Our solutions deliver valuable consumer insights and supply chain insights, and we also help to create new opportunities for direct consumer engagement.
[00:01:13.110] – Peter
Today I would like to walk you through three steps or three sections. One, I would like to introduce you a little bit more in-depth what is actually the issue? Why the growing counterfeiting actually across many categories and geographies is becoming an increasing problem. In the second section, I would like to discuss and assess several solutions in the anti-counterfeiting space, especially comparing overt versus covert and physical versus digital options for anti-counterfeiting. And I would like to also elaborate more on secure QR codes for the anti-counterfeiting.
[00:01:57.690] – Peter
In the last section, I would like to walk you through several case studies of projects and clients that we have worked together over the past years. So a little bit about the issue, what we are actually facing. And based on the latest OECD and EUIPO data, more than 5.8% of all goods entering the European market are actually counterfeits. So it’s not really counterfeiting is not really an issue anymore, only of some exposed countries, but it really is also an issue of European and North American markets. Over the past year, EUIPO has estimated a loss of taxes and revenues over 83 billion a year.
[00:02:53.850] – Peter
And just in certain ranges of 2013 to 2017, there was more than 15 billion euro loss in taxes that actually resulted in loss of jobs for more than 671,000 people across the whole European Union. That is actually a massive issue. And this counterfeiting issue is growing and penetrating more and more markets. And besides the usual suspect like the clothes, accessories, and luxury goods, counterfeiting is actually a big issue also for electronics, for food and beverage, perfumes, and cosmetics, but also very much in pesticides and toys, which are very directly impacting what we eat, what we consume, or what our kids are actually playing with.
[00:03:52.230] – Peter
As you can see, in many countries, many industries are suffering. And actually based on all the reports, the biggest losses are actually for companies that are based in the United States or in the European Union. That’s the intellectual property that is suffering the most. And not only that the external entities are producing the counterfeit products of the western brands. But also that they are importing these counterfeit products into our countries.
[00:04:30.950] – Peter
Into European Union and there have been several seizures across the past years where the Europol has been very active and have been seizing millions and millions of dollars worth of products across really various industries. Across various products through pesticides. Tobacco. Clothes. Luxury.
[00:04:56.700] – Peter
But also pharmaceuticals.
[00:05:00.970] – Peter
Additionally, to the challenges posed by the illicit trade, there are several specific cities over recent years that are also creating more challenging environment for the companies to protect their IP. And these additional issues of the current days are actually the easier access to higher quality production technologies than 20-30 years ago. Today it’s very easy to go online and order some holographic labels or order some products that look very authentic. These possibilities were not there several decades ago that goes into that. Really anyone can buy and sell anything online, and this is not only for the consumer but this is also for businesses.
[00:05:56.030] – Peter
So there are many platforms where you can actually order OEM production that can be printed basically or that can be marked and branded by any brand someone may want. What is not really helpful is also the fast pace and convenience and a low price that is on the increasing demand with the final consumers. The consumers, all of us are actually very much present in the online environment, and we are always looking for a better deal while our attention spent is really decreasing. And there are many search engines that are actually only searching for the lowest price, and there is a decreasing trend of loyalty with certain retailers. So all of these other aspects are also not really helpful for the global trade of counterfeits and also not really helpful for the brand owners protecting their intellectual property.
[00:07:09.410] – Peter
Before diving into the second part of the anti-counterfeiting assessment, let me discuss or let me define what means anticounterfeiting. Anticounterfeiting means it’s intending to prevent or reduce the existence of counterfeit goods, which actually means counterfeit goods means goods made to look like originals for dishonest or legal purposes. That means someone tries to sell and reproduce an original product. Someone tries to imitate the look like the branding, the naming, the look, and very often also much less often the performance of the product. Of course, counterfeiting offers then some motivation in a trade that illicit traders, the criminals, they don’t need to pay for the development of the original product, they don’t need to pay for the marketing, they don’t need to pay for the distribution.
[00:08:31.250] – Peter
Usually, their profits is much higher than the producer of the original product. Of course, they also don’t need to take any warranty or any claims into consideration. And that is also one of the reasons why even if the counterfeits are cheaper than the original products, they also are much more profitable than the original products if you look at the anti-counterfeiting tools. Let me make a very high-level assessment.
[00:09:05.570] – Peter
First, I would like to discuss between two main categories overt and covert anti-counterfeiting tools. The overt means that the tool is discernible for the average person with no tools, devices, or training, and difficult to reproduce replicate such as temper seal. This is coming from EUIPO Anticounterfeiting the guide and what it really means in human words. Basically, our tools are those that we all know from the money, from the currencies, from many products that are actually carrying holographic labels, color-shifting inks, or some micro texts.
[00:09:55.790] – Peter
The other tools rely on the authentication and on the assessment of the consumer without any special training or special devices used for the authentication. On the other hand, the covert solutions, they are not immediately discernible to the average person, and they are only visible with additional tools or training. Basically, what that means is that the covert tools are somehow hidden and cannot serve as obvious authentication. Between these it can be special inks, it can be UV ink that only shines under the UV light, it can be magnetic inks, it can be DNA markers, but we can also consider sparse patterns, which is a pattern of dots that are distributed randomly across the graphical file of the product but also copy detection pattern. Something that cannot be really assessed by the naked eye and cannot be really assessed without special training or other tools or devices.
[00:11:13.490] – Peter
The second distribution or differentiation that I would like to make is to compare two approaches for physical and digital anti-counterfeiting tools. The physical tools, the visual that can actually be also haptic help with inspection of the product. So as an example, you can look at your euro bank note or dollar or whatever is your currency and there is usually several types of these physical features that are overt, and you can compare the hologram, you can compare the embossed text, you can compare the watermarks, you can compare other special physical features of the currency of the banknote and assess the authenticity. On the other hand, the digital anti-counterfeiting tools, they require a dedicated digital or electronic device that is used to confirm the authenticity of the product. So for example, it can be the RFID readers, it can be special inks.
[00:12:29.780] – Peter
As I was saying, that is the UV light. So you can have a special UV torch that you can shine on the product and some special text printed with the UV ink will actually pop up. This can also be magnetic, it can be DNA markers, and for these assessments, it can be anything from the reader, which is for example in the ATM and the cash machine that actually authenticates the credit card or through special dedicated devices, for example, the UV torch or to special mobile application that the consumers, for example, can download and can authenticate.
[00:13:13.250] – Peter
Of course, every single of this category or differentiation bears certain positive aspects and certain negative aspects. So if we would look a little closer at the pros and cons of the physical authentication tools, definitely these are tools that we all know that we are very familiar. Each of us holds such a tool if we just compare the banknote several times a week, if not every day. So we are pretty familiar with it, and there is a good reason why these tools are still available. But there is also a good reason why these tools are not the only tools for the authentication of bank notes.
[00:14:07.130] – Peter
Undeniably. The pros of the physical authentication tool is its price. It’s not requiring any special tool and quite positive it’s also its easy usage. Meaning if we would know how the Hologram looks like, it would be relatively easy to actually assess the authenticity.
[00:14:40.770] – Peter
However, there are some significant negative aspects of these solutions, and that is the not reliability in providing the binary result. You will not be able to say okay, this is real or fake. There will be always certain knowledge gap that is actually need to be crossed to successfully authenticate. The second core of the physical tools is that the duplicates don’t need to be really perfect. If we would be honest to ourselves, how many of us would know precisely how the Hologram on the Euro banknote looks like, how the authentic Hologram looks like, very little people from the general public would be actually able to tell okay, this is the original Hologram, it should shine in a certain way, it should be shifting the colors and light in certain way.
[00:15:48.890] – Peter
Usually, this gap is the biggest obstacle for the whole tool to be really functional. And that way if we don’t know how the original Hologram should look like, that means also the duplicates don’t need to be perfect. It’s usually enough to trigger consumer if the color is shifting in a certain way. Another negative aspect of the physical tools is that there is no possibility to add additional functionality to these tools. Nobody really knows how many consumers are looking at the Hologram every day.
[00:16:28.610] – Peter
So this is really passive tool that it’s not bringing any business intelligence to the brand owner or to the government.
[00:16:39.870] – Peter
And the last negative that I have listed here is actually kind of repeating the high degree of education that is needed because for experts who is trained to authenticate the Holograms, it is relatively easy. See on the first side, okay, this is suspected counterfeit, or this is authentic product. For the general public, even with several versions of a Hologram, for certain banknotes, it is close to impossible to actually know all the details, how all the Holograms should look like. If we would look at digital tools. For digital tool, there is a dedicated digital electronic device used to confirm the authenticity of the anti-counterfeiting tool. As an example, we can imagine the ATM authenticating our credit card.
[00:17:42.550] – Peter
There is an authentication that actually happens during the moment when we insert the credit card into the ATM.
[00:17:53.930] – Peter
The important positive aspects of the digital tool is really high security and reliability of the solution that actually really provides binary result. Okay, this is fake product or real product. So these solutions really can reliably provide secure answer to the user in many cases. In the case of ATM, this answer is basically underlying basis for the whole transaction to be happening with the credit card. Of course digital tools not only for the credit cards can be used also with the smartphones, apps can be used with dedicated devices, and these digital solutions always provide higher security and reliability than the physical tools. Additional functionality or additional positive aspect of digital tool especially in the cases of a smartphone that is publicly available for the consumers is that this can enable traceability of the product and traceability of the supply chain and can provide additional functionality for the brand owners and additional edit value for the brand.
[00:19:22.170] – Peter
On the negative side of the tools definitely, the tool itself is also the con. So you need to purchase or at least download a necessary application, and you need to perform certain necessary steps to authenticate a product, and this is usually perceived also as a negative aspect of it.
[00:19:52.230] – Peter
The second negative is you may have some solutions that are very hard to use, so there needs to be certain level of knowledge, and especially in the cases like UV lights or other DNA markers that require special devices, there might be also the barrier for the education. And usually, these solutions are also a little bit more costly and scalability might be an issue. So if we would basically look at the two segmentation between overt and covert and the physical and digital authentication. When you are using or deciding about the technology, it is important to consider several factors, but to kind of highlight the main three is definitely security and robustness is important to serve the function against the counterfeiting. Usability for users and consumers is another group that is very important because if you have something secure but cannot be used by anyone what would be the point of it? And the last objective to achieve that I would like to point out is the business data.
[00:21:27.510] – Peter
So the solution that you would be looking at and would be considering should be valuable for your business, not only for the protection but also should allow you the whole knowledge and should allow you to understand better what is actually happening in the market. If we would play several technologies that are widely available or known to the public and would place them in certain locations. Basically, to give you an example of something very secure and not really usable, it’s a DNA, it’s a technology that is decades old, and it’s very secure, basically close to impossible to replicate but also it has no usage for the consumer in the field. Consumer cannot really assess the authenticity because they don’t have dedicated devices that are actually only produced for defining and specifying and finding the DNA in the material or on the packaging. Another example or another extreme or something that is very usable for the consumer but security and robustness is rather questionable would be holograms.
[00:22:51.700] – Peter
So holograms are coming from a technology that is more than 30 years old and basically had been used in the still used on the currency today. But for many years he’s been the only possible way for anti-counterfeiting and basically how to mark and how to demonstrate that the product is secure and secured. Holograms were used for this purpose. Today if you go on certain online platforms you are able to order authentication holograms with any logo, any design that you want. You can have it delivered in several days.
[00:23:40.950] – Peter
Also because it’s not connected usually to anything, just the pure hologram, for example, the one on the banking code, it provides very little business data and business intelligence. And the third extreme of a solution that provides only business intelligence but it’s not really secure or robust when you have a counterfeit product in your hand or your consumers cannot use it in the field when they are making the buying decision. For example online brand protection. These anticounterfeiting means or solutions are actually searching through the online environment and trying to find a fake listing. This is very important practice and very important exercise but also cannot restrict all the channels for the counterfeit products in the field because obviously for obvious reasons, it doesn’t capture something like the shops in the streets because they don’t have any online presence.
[00:24:44.910] – Peter
If we would look at solutions that are more combined and are combining multiple objectives, we definitely could look at RFID that is very secure and robust and provides business data. For example, the credit card authentications because the RFID in the credit cards is just effectively NFC but doesn’t work with the smartphone authentication. It provides less of the consumer usability or consumer benefits. The NFC is definitely a solution or subgroup of RFID solutions that provide the security, provide the business data, and provide also the usability for consumers. If we would look at the UV inc, provide certain usability for the consumers, they also are relatively secure and robust, but because for example they only work with the UV torch, they don’t really provide too much of business data.
[00:25:56.370] – Peter
On the other hand, if you look at standard QR codes, especially those that are serialized, they do provide a good usability for consumers, and they also provide business data, but they are not very robust against the counterfeiting, and they are relatively low-security level. The combination is NFC. We also see here the secure QR codes. Secure QR codes are kind of QR code with a superpower. And a secure QR code really provide high-security level and robustness against counterfeiting. It provides or combines the great usability of QR code to any consumer with a smartphone can use them and also provide a lot of business data because through QR codes, especially if they are serialized.
[00:26:52.960] – Peter
You can provide a lot of product information, additional values but also get back a lot of data points from the consumers and from the market.
[00:27:07.330] – Peter
What is a secure QR code? To go more in-depth into understanding what secure QR code really means and why it’s better than a normal QR code is the concept of copy detection pattern. In Scantrust, we have a secure graphic which is a section with a copy detection pattern that is inserted into QR code. This QR code can be unique for every product or can be unique for SKU level and works as a normal QR code. The combination of these two is a carrier of identity.
[00:27:52.550] – Peter
The QR code plus secure graphic equals secured QR code. This QR code really combines the best of the two worlds. It provides the ease of use of a normal QR code, but thanks to the secure graphic, it also can work and can serve for authentication.
[00:28:16.070] – Peter
So the brand owners are often using this to engage with the consumers in their localized conditions. So they can have language adjustments, they can have various adjustments for various products across different regions, but they can also provide incentivization for authentication. So the consumer can not only reach the product information and authenticity, but they can also exchange some other information with the brand owners. So to go through the four benefits that are listed at the beginning security, usability, scalability, and utility. If we would look at the security aspects of secure QR codes, definitely the solution can provide instant binary authentication results so you, your consumer, didn’t know whether they hold authentic product or suspected counterfeit product.
[00:29:20.510] – Peter
And because the copy detection pattern is very stable technology, it also provides a high security that can be achieved through the existing production procedures. On the usability side, the secure QR codes are definitely easy to use for consumers. You can see especially after the pandemic of the COVID19, QR codes are today everywhere. It’s definitely a growing trend of the QR code usage. Before it was domain of China, QR codes were everywhere.
[00:29:59.940] – Peter
Today it’s the domain of the whole world. Companies started to use the QR code in much more meaningful way before 2019. And today also the majority of the smartphones they natively recognize and scan QR codes. So usually you don’t need to even download any additional application like it was five, seven years ago. On the scalability side, because secure QR codes is actually printed technology, it is a solution that is relatively easy to deploy at scale.
[00:30:37.790] – Peter
It’s compatible with the majority of the conventional printing technologies, which makes it cost-effective compared to other technologies, for example to NFC and you also don’t need to run the serialization. So for several product trenches, it makes sense to have a non-serialized QR codes that are secured and can run the authentication. So, unless you really need a granularity of a unit-level serialization secure QR codes provide not only serialization but they can also provide a non-serialized authentication of products. In the fourth value, the utility is that the QR codes can seamlessly connect the existing marketing and supply chain tools. You can connect the QR codes to your existing e-commerce platform, you can connect to your ERP system, you can connect them to any existing solution that we have currently within your company.
[00:31:50.430] – Peter
Secure QR codes can also provide additional incentives, long lines of product information or added digital value for final users, which also increases the perceived value of your products. And last but not least, because you enable your final customers to actually interact with the product, you are effectively crowdsourcing the anti-counterfeiting and supply chain traceability data. And you are also significantly growing the connection and engagement with your final consumer. Within Scantrust platform we have several dashboards, and basically because every single scan of a QR code is a data point, or actually carries several data points, we are trying to make from these data points business intelligence. So we closely work with our customers to actually identify the suspicious activities on the QR codes on the QR code alerts. But we are also able to provide the user demographics and user engagement, what actually happens after the authentication, and who are the consumers who actually interact with the products of yours.
[00:33:13.900] – Peter
Of course, this is all GDPR compliant and complies with all the global regulation depending on where the project is actually running. If we would look on several use cases at the end, how our customers are actually utilizing the solution.
[00:33:37.630] – Peter
One I would like to talk about is Motul. Motul is a French or basically global lubricant producer. They produce oil that is aimed for racing purposes, so very high-performance products and basically lubricant industry for years and now, even more, is actually targeted heavily by the counterfeiters. In their eyes, obviously, they can put any oil into any bottle, print the labels, and deliver them to the market. Companies like Motul or others are actually investing a lot into the R&D and into the performance of the product under harshest conditions. We have worked with Motul to secure a product but also enable and digitize their product and enable consumer engagement or customer engagement across the world.
[00:34:36.960] – Peter
So they use a similar style of label that is applied on top of the cap, that works for the initial authentication but also in certain regions it works for loyalty, engagement. And different regions have different partners for the engagement. But basically, the whole infrastructure of the secure QR codes can be applied globally but also can act very locally and very localized. Another example of a product is Dupont water filters. We work with Dupont for several years already where we also applied a secure QR code on their label. It’s actually in combination with other overt features.
[00:35:29.310] – Peter
So there are other holograms, there are other special prints, there are other layers of security, but basically, for the user there is authentication interface, and there is a dedicated Dupont application that can be downloaded, can be used for registration, for loyalty purposes, but also for authentication of the Dupont labels.
[00:35:58.310] – Peter
And last example, we have worked with Deusburg Plus where they have applied a secure label that goes on every product of their gloves. The natural gloves. And the consumer can scan, authenticate a QR code, and actually can see the certification details and how to use the product. The concept is very much always the same. It is a unique QR code that enables the traceability and the engagement with the consumer combined with the secure graphic that works for the authentication purposes as a fingerprint for the identity. After every single scan, there is a product information and digital value for the consumer to actually get back as an incentive for scanning the product and making the effort. I would like to thank you for your attention.
[00:37:01.250] – Peter
If you would have any questions or inquiries, you are mostly welcome to reach out to us on Scantrust.com. You can reach me also on my email, Peter.firstname.lastname@example.org and you can also scan this QR code for an example experience that is actually linked to the DuPont water filters that will maybe be inspiration for your project. Thank you very much for the attention again, and I will be looking forward to hearing from you someday. Thank you. Have a great rest of your day.
[00:37:43.590] – Peter