Zwipe Making Convenience Secure EIC Conference Oslo, 5 June 2019 André Løvestam, CEO
This is how it works - everywhere Dubliner Pub, Oslo 10 October 2018 2
Zwipe is on a mission: Making Convenience Secure Launched world’s first battery-less, dual-interface biometric payment card pilot with world leading 1 industry giants VISA and Gemalto . No need for extra integration with existing infrastructure First-mover advantage with unique patented industry leading energy harvesting and power management 2 technology for biometric payment cards that will enable low production and manufacturing cost Strong market momentum for biometric payment cards with growing 3 commitments from leading industry stakeholders Experienced management team with leading industry experience 4 5 Strong IPR Portfolio with 31 active patent applications with 8 granted to date High potential – pursuing medium term annualised revenue of NOK 1bn 6 (Euro 105m) with an EBIT margin of 15% (long term potential of 20%) Note: (1) BPC is an abbreviation for biometric payment cards. Cooperating with European leaders
The challenge of making Convenience Secure Remove the unnecessary trade-off between security & convenience Challenge Zwipe innovation solves the challenge: Strong adoption of contactless cards, but cardholders still Zwipe solves challenges for several groups have security concerns with contactless… FOR FOR FOR FOR PAYMENT MERCHANTS CONSUMERS BANKS SCHEMES Enhances Reduces cash Eliminates the Drives handling, use of PIN. branding and contactless and saves Offers a top of wallet cashless effects. transaction consistent, fast transactions by time and and convenient Reduces fraud improving and offers increases user convenience and …and banks introduce transaction limits to limit fraud customer experience. cardholders security throughput Peace of mind peace of mind Source: Fingerprint Cards Research, 2018
Growth in contactless drives demand and create a new market for dual-interface biometric payment cards Demand from different key players in the payments ecosystem Addressable market for biometric payment cards growing fast expected to trigger exponential adoption of biometric sensors on payment cards: Millions Biometric payment cards in circulations Biometric payment card addressable rate 6 805 • Biometric authentication technology already validated and accepted by *Key determinants of the timing and speed of adoption of biometric payment card will be; i) timing and completion of certification processes and systems for enrolment, ii) the successful the mass market due to smart phones execution of pilot programs and consumer acceptance and adoption of the new technology, iii) inlay production capacity, iv) the competitive intensity at every step in the value chain (from technology • Card issuers looking for new ways to differentiate and meet evolving 38% solution providers to issuers), and vi) manufacturing cost development for biometric cards 4 298 consumer expectations • Governments and regulators promoting use of biometric solutions to 25% 2 566 minimise fraud and identity issues 16% • VISA & Mastercard industry mandate that all POS terminals must 1 504 accept contactless payments by 2020 in Europe 866 370 10% 148 61 3% 23 1% 6% 0% 0% 0% 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2018e Nathan Cushnie, Visa ´ s Head of Digital solutions for MENA: 98 PER CENT OF CONSUMERS SURVEYED IN THE UAE ARE KEEN TO USE BIOMETRICS SUCH AS FINGERPRINT RECOGNITION FOR PAYMENTS http://saudigazette.com.sa/article/532717/BUSINESS/Visas-first-biometric-payment-card-pilot-in-the-Middle-East Source: Edgar Dunn. The addressable market represents the total number of payment cards that could potentially be converted to b iometric payment cards according to Edgar Dunn’s analysis. 5
Zwipe´s solution is a highly innovative and breakthrough innovation ..is successfully embedded in payment Our proprietary core technology.. cards… Zwipe is a technology solution provider that enables battery-less, contactless, ultra-low power, self-contained biometric authentication solutions in constrained environments Zwipe’s issued and filed patents address factors that are essential in the mass deployment of this type of technology, focusing on manufacturing and production processes, biometric algorithms, energy harvesting, biometric enrolment applications and security ✓ 31 active patent applications (PCT regime), with 8 patents granted to date ✓ Energy harvesting technology ✓ Biometric engine ✓ Method of high volume manufacturing
Commercialisation strategy and business model Target markets: Target 1: Europe Target 2: Middle east Target 3: North America Key factors for choice of target markets: • European directives has set the way for biometric authentication • Value chain ready for licencing- partnerships with 7 of the world’s largest card manufacturers • Being able to migrate biometric authentication to multiple devices, due to the success of biometrics with smart phones • Advantage through EMV(Europay, Mastercard and Visa) certifications • All terminals in Europe to accept contactless payments by 2020, through mandates imposed by major payment schemes • Validation through pilots in all target continents • Low cultural barriers for Zwipe management- understanding European demands and culture Business model for Zwipe technology: 7
HORIZON 2020 is key for Zwipe’s strategic pillars The project applied for has the main targets: 1) Development of an ASIC that will reduce the manufacturing cost and increase production scalabilty 2) Certification for payment transaction through EMV and separately Visa and Mastercard 3) Commercialization for mass deployment The work plan will be divided into 4 work packages which directly supports Zwipe’s strategic pillars: 1 Biometric Payment Cards 4 Licensing of IP Leverage first mover advantage to secure #1 Zwipe is a pioneer in its field and, consequently, position, developing strategic partnerships and has a strong IP portfolio addressing factors technological advantage, offering multiple essential for mass deployment of its technology enrolment solutions 6 1 5 Economies of scale effects 2 A trusted digital authentication The Zwipe Generation NxT program entails Become a trusted digital authentication partner for performance improvements, supply chain financial services with on-card digital 5 readiness and cost reduction. The plan is to authentication solutions for e-commerce (Card Not 2 leverage economies of scale effects from the Present (CNP) transactions) in addition to POS. Payment card vertical into a range of other future Opportunities. 4 BSIC Development 3 6 Future and other opportunities 3 Transition from inlay to integrated circuits and systems Authentication of internet services. Developing the Transition from inlay to integrated circuits and inlay technology to be used in wearables in systems securing price competitiveness and security and IoT. Offer multiple form factors reduction of capital requirements (wearables) 8
Key medium term financial aspirations and risk factors • Revenue Annualised revenue of NOK 1 billion (Euro 105 million) • Targeting to sell 20-40 million embedded systems for dual-interface biometric cards annually in the medium term – Targeting 30% market share Volume and ASP – Expecting to reach cash flow break-even at these volumes • ASP in the range of Euro 2,5 – 3,5 derived from COGS with mark-up • Gross margin of 28% – 35% Gross margin – The transition from inlays to integrated circuit/system bundles is planned to trigger a margin expansion from approximately 20% in the inlay production phase • Targeting an EBIT margin of 15% in the medium term driven by; EBIT margin – Generation NxT cost reduction program and general economies of scale, transition from inlays to integrated circuits and optimisation of supply chain – Long term potential of ~20% EBIT margin • Competing technology: Higher than expected penetration rate of mobile payments may impact the smart card market. • Slow adoption rate: The US still only at 7% adoption rate for EMV cards. Total cost to end-user: ASP ~USD 10 for Zwipe’s payment card to end-customer may be considered too high for the mass market • Total cost to end-user : Cost reduction program is ambitious, although management believes this is realistic. Zwipe’s success is dependent on its ability to scale on existing frame work agreements and increase commercial orders, and there is no guarantee that Zwipe will sell in accordance with the forecast provided. Risk factors • Risks relating to the industry in which Zwipe operates: The business, earnings and financial condition of Zwipe can be affected by any deterioration in the economic conditions in the markets in which Zwipe operates. Unexpected changes to the legal landscape could adversely affect Zwipe’s business operations • Risks relating to financing and market risk: Zwipe’s ability to generate cash depends on many factors beyond Zwipe’s control, and Zwipe may not be able to generate cash required to service its debt failure by Zwipe’s counterparties to meet their contractual obligations may have a material adverse effect on Zwipe’s financial position. 9
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