Zwipe Making Convenience Secure EIC Conference Oslo, 5 June 2019 - - PowerPoint PPT Presentation

Zwipe

Making Convenience Secure

EIC Conference

Oslo, 5 June 2019 André Løvestam, CEO

This is how it works - everywhere

2

Dubliner Pub, Oslo 10 October 2018

Zwipe is on a mission: Making Convenience Secure

Note: (1) BPC is an abbreviation for biometric payment cards.

First-mover advantage with unique patented industry leading energy harvesting and power management technology for biometric payment cards that will enable low production and manufacturing cost

2

Strong market momentum for biometric payment cards with growing commitments from leading industry stakeholders

3

Experienced management team with leading industry experience

4

Strong IPR Portfolio with 31 active patent applications with 8 granted to date

5 6

Launched world’s first battery-less, dual-interface biometric payment card pilot with world leading industry giants VISA and Gemalto. No need for extra integration with existing infrastructure

1

Cooperating with European leaders

High potential – pursuing medium term annualised revenue of NOK 1bn (Euro 105m) with an EBIT margin of 15% (long term potential of 20%)

The challenge of making Convenience Secure Remove the unnecessary trade-off between security & convenience

Challenge Zwipe innovation solves the challenge:

FOR PAYMENT SCHEMES Drives contactless and cashless transactions by improving convenience and security FOR BANKS Enhances branding and top of wallet effects. Reduces fraud and offers cardholders peace of mind FOR CONSUMERS Eliminates the use of PIN. Offers a consistent, fast and convenient user experience. Peace of mind FOR MERCHANTS Reduces cash handling, saves transaction time and increases customer throughput

Strong adoption of contactless cards, but cardholders still have security concerns with contactless… …and banks introduce transaction limits to limit fraud Zwipe solves challenges for several groups Source: Fingerprint Cards Research, 2018

Addressable market for biometric payment cards growing fast

23 61 148 370 866 1 504 2 566 4 298 6 805 10% 16% 25% 38% 2020e 0% 0% 2018e 0% 2019e 2027e 1% 2021e 3% 2022e 6% 2023e 2024e 2025e 2026e

5

Biometric payment card addressable rate Biometric payment cards in circulations

*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 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 solution providers to issuers), and vi) manufacturing cost development for biometric cards

Source: Edgar Dunn. The addressable market represents the total number of payment cards that could potentially be converted to biometric payment cards according to Edgar Dunn’s analysis.

Millions

Demand from different key players in the payments ecosystem expected to trigger exponential adoption of biometric sensors on payment cards:

• Biometric authentication technology already validated and accepted by

the mass market due to smart phones

• Card issuers looking for new ways to differentiate and meet evolving

consumer expectations

• Governments and regulators promoting use of biometric solutions to

minimise fraud and identity issues

• VISA & Mastercard industry mandate that all POS terminals must

accept contactless payments by 2020 in Europe

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

Growth in contactless drives demand and create a new market for dual-interface biometric payment cards

Our proprietary core technology..

Zwipe is a technology solution provider that enables battery-less, contactless, ultra-low power, self-contained biometric authentication solutions in constrained environments

..is successfully embedded in payment cards… Zwipe´s solution is a highly innovative and breakthrough innovation

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

Business model for Zwipe technology:

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

Target markets: Target 1: Europe Target 2: Middle east Target 3: North America

7

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:

8

HORIZON 2020 is key for Zwipe’s strategic pillars

Leverage first mover advantage to secure #1 position, developing strategic partnerships and technological advantage, offering multiple enrolment solutions Biometric Payment Cards Become a trusted digital authentication partner for financial services with on-card digital authentication solutions for e-commerce (Card Not Present (CNP) transactions) in addition to POS. A trusted digital authentication The Zwipe Generation NxT program entails performance improvements, supply chain readiness and cost reduction. The plan is to leverage economies of scale effects from the Payment card vertical into a range of other future Opportunities. Economies of scale effects 1 2 5 1 2 3 4 5 6 Transition from inlay to integrated circuits and systems securing price competitiveness and reduction of capital requirements BSIC Development Transition from inlay to integrated circuits and systems Zwipe is a pioneer in its field and, consequently, has a strong IP portfolio addressing factors essential for mass deployment of its technology Licensing of IP Authentication of internet services. Developing the inlay technology to be used in wearables in security and IoT. Offer multiple form factors (wearables) Future and other opportunities 3 4 6

Key medium term financial aspirations and risk factors

Revenue

• Annualised revenue of NOK 1 billion (Euro 105 million)

Gross margin

• Gross margin of 28% – 35%

– The transition from inlays to integrated circuit/system bundles is planned to trigger a margin expansion from approximately 20% in the inlay production phase

Volume and ASP

• Targeting to sell 20-40 million embedded systems for dual-interface biometric cards annually in the medium term

– Targeting 30% market share – 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

EBIT margin

• Targeting an EBIT margin of 15% in the medium term driven by;

– 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.

• 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

• perations
• 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

• n Zwipe’s financial position.

Risk factors

9

Summary: Worry-less payment with biometric smartness

Industry awards

1

Ease of use: A simple and consistent user experience that interact with all existing payment infrastructure - Chip and contactless terminal. No need for changes to be made to the existing legacy infrastructure. Decentralized storage of data inside the card and NOWHERE else. EC regulations -GDPR and PSD2- is an advantage for Zwipe since we are not storing personal biometric data inside a big

• database. No reachable tunnel software as for example as in mobile phones.

Basis of costs: Unique patented contactless payment method without the need of a battery. Developing the BSIC for large scalable low production cost hot lamination manufacturing method to create a scalable supply chain. Biometric (fingerprint) technology is at highest standard and qualified as a highly safe method by industry giants as Visa and Gemalto. Zwipe specific system combines best-in-class biometrics with firmware designed for payment ecosystem. First mover market leadership position in a conservative industry. Ensured IP differentiation/barriers to entry. Technical and business partnerships with all relevant stakeholders in the value chain.

2 3 4 5

10