Picture: THINKSTOCK
Picture: THINKSTOCK

DESPITE the rapid pace of technology that has overhauled many consumer goods, the front-door lock and key is little changed since the 1800s. That is about to change — to virtual keys in data clouds, if the world’s biggest lock maker gets its way.

Assa Abloy, which makes one in 10 locks worldwide, is the muscle behind brands such as Yale.

But the lock technology it is now developing means consumers will be able to open doors with a tap of their mobile phones, visitors will be able to download a key online and business owners will be able to lock and unlock their premises remotely.

"I think most people will go digital. People will rely more on a secure identity than a physical key, provided over the net into your mobile phone," says Assa Abloy CE Johan Molin. Electromechanical locks such as key cards in hotels now account for almost half of Assa Abloy’s sales compared with 13% a decade ago, and the company believes this is just the start of growing demand from consumers for more flexible, hi-tech locking mechanisms. At its Stockholm headquarters, some of Assa Abloy’s staff are trialling different versions of virtual keys downloaded to mobile phones that open a lock with a swipe of the phone.

The company is also working up versions where phones with bluetooth or wireless links could automatically open doors when within a certain distance. Other keys can be set to switch on at a certain date and expire on another date, meaning someone renting a flat, for example, need no longer hand over physical keys at the end of their stay.

The digital keys can be embedded in SIM cards or inside phones, thanks to Near Field Communication (NFC) technology, or short-range wireless that within a few years may be standard in most mobile devices. US research firm ABI Research has estimated the number of NFC enabled devices will exceed 500-million in 2014.

The new technology could unlock higher recurring revenues. While traditional locks last on average four decades, electromechanical locks have lifespans of 10-15 years and software coupled with more fickle consumer electronics means these locks will need to be routinely replaced or updated.

It is a model Assa is confident consumers used to frequently upgrading their phones and tablets will accept.

"People will have the same kind of relationship to their lock that they have to their computer. They will want to have the latest features, designs," Mr Molin said.

Last week Apple launched its new iPhone 5S, with a fingerprint scanner, replacing the need for passwords and PIN numbers with biometric security.

But selling locks is a delicate business and the market is traditionally conservative. Some consumers, especially in Europe, are reluctant to move from the security of physical keys to a more opaque system, particularly amid worries about cybersecurity.

The cost involved — a digital Yale lock is about 30% more expensive than a traditional one — limits the technology to high-end households.

So Assa Abloy’s strategy is to make the technology a good fit with businesses and institutions such as hotels, hospitals and schools, which account for three-quarters of its sales, in order to "normalise" the new product, lower costs and ultimately drive broader consumer acceptance. With this in mind the company has lifted research and development (R&D) spending 129% since 2005 and last year spent about $210m, or 2.9% of sales on R&D.

That 2.9% is about the industry average for R&D spending, analysts say, as Assa’s US rivals in particular, Ingersoll-Rand and Stanley Black and Decker chase the same new markets.

"The challenge for Assa Abloy is to move fast enough," said Carlo Pompili, CEO of Swedish startup firm Telcred which is working on new locking technology. "It’s a huge market with many nuances. They cannot think of everything. That opens up space for other companies." Alongside its own technological research Assa Abloy says it will continue to do deals that advance its products.

"We of course try and focus on our own innovation," says Daniel Berg, vice-president of Assa Abloy mobile keys. "But complementary acquisitions could happen if there is a start-up with a great idea." The company has a long history of buying up competitors.

More than 10 years ago it bought US firm HID, an early secure ID card producer, giving it a big advantage in a market providing secure computer access that subsequently boomed.

It then bought up US-based ActivID in 2010, adding a layer of more sophisticated digital identity recognition to that product line. With an eye on its direction, Assa Abloy reached a deal last year with Oberthur, a leading manufacturer of SIM cards, allowing it to embed its digital keys in Oberthur’s cards. A consumer buying Oberthur’s product need only then buy an app to get access to Assa Abloy’s key code.

Newer and smaller competitors pushing forward in this area, such as US-based Lockitron, which makes devices to lock and unlock deadbolts via remote control, or Spain’s Salto, making lock software tailored to businesses. But in a still-developing market few can compete with Assa Abloy’s reach.

"Hi-tech locks, using phones … are the future, but the question is how fast it will grow?" Danske Bank analyst Oscar Stjerngren said.

"Assa Abloy are so dominant globally they can drive this transition in the hi-tech lock market."

Global reach means catering to a rich mix of national nuances that in turn require a combination of products — so Assa Abloy is not turning its back on traditional security just yet.

North American consumers still spend twice as much on "emergency-exit devices" such as fire escape doors than Europeans.

Northern Europeans spend three to four times as much on high security household locks than North Americans. "In America it’s all about getting out.

"In Europe it is all about avoiding people getting in," Mr Molin said.

The company’s most recent buy was more traditional hardware — in September it acquired the firedoors business of Polish-based Mercor to give it access to growing markets in Poland, the Czech Republic and Slovakia.

It is also planning acquisitions of hardware manufacturers and traditional locksmiths in China, South America and India, although demand for digital locks is growing fast in the first two of those markets.

Demand for hi-tech security is particularly strong in Brazil, where violent crime is common.

Not only is fingerprinting identification for cash withdrawal machines becoming popular, banks and consumers are requesting an extra layer of security that allows the machines to analyse blood vessels in the finger to recognise whether the person to whom it belongs is alive or dead.

Reuters