This week in biometrics industry stocks

July 7, 2017 - 

As the biometric industry continues to grow Biometric Update is bringing a new focus to the stories around the stocks in the sector. Check in with this space each Friday for a rundown of the financial news and interesting ideas from the week that was.

The data chain between Nasdaq and several media outlets was accidentally fed incorrect data on July 4th. For a while the data feed to several major websites suggested shares of tech stocks such as Amazon and Alphabet had plunged 87% in aftermarket trading. Luckily it was a holiday so relatively few noticed.

-Within the biometric sector, shares of NXT-ID have been popular lately. Just last week the company’s stock surged 75% after it was announced that wholly-owned subsidiary Fit Pay will provide payment capabilities for Token, a biometric identity ring. The company was also recently qualified as a Visa TR-TSP partner through the Visa Ready Program. It’s clear the company’s plan to grow through acquisitions in the IofT space is paying off. An article in the financial press this past week notes that, “The company’s financials are on a favorable trajectory.” The company’s first quarter numbers for 2017 are proof. The company reported revenue in the first quarter of 2017 of $6,681,297, which compares very favourably to revenue of just $42,302 in the first quarter of 2016. Gross profit was also up, hitting $3,509,290 in the first quarter of 2017. In the same period last year the company reported a loss of $32,853.

-Nuance Communications announced it was hit in last Tuesday’s cyberattack. The hacker hit, now known as Petya, affected companies and governments in the Europe and the U.S. In the case of Nuance it seemed the attacks stemmed in part from a, “… Ukrainian tax software product [on] portions of its network.” According to a press release from the organization, “As soon as the company became aware of the situation, it took measures to contain the incident and assess the extent of the impact on its network.” The company also announced it had engaged, “… leading security experts to assist in responding to the incident.” The stock sold off a bit in the wake of the news. But shares in Nuance are still up over 20% since the start of 2017.

-Diebold Nixdorf suffered a big 20% decline in its stock price Wednesday when it announced it would have to lower previously issued estimates for 2017 revenue and earnings. The company previously provided guidance to analysts suggesting the company expected to lose 65 to 95 cents per share on revenue of $5 billion this year. This past week management updated those estimates, suggesting that the company is going to suffer an even larger financial loss in 2017. The new guidance on full year 2017 earnings and revenue is a loss of $1.45 to $1.65 a share and just $4.7 billion to $4.8 billion in revenue. Investors did not take kindly to the news. The company’s shares were down more than $5.50 to almost $12.40 for a lost of over 20% on the day. To be fair to the company it is undergoing a bit of a transition this year. The company is working through a major merger (and a divestment related to the acquisition) and that’s changing the business focus. According to a press release the company’s work in the financial services is, “… increasingly made up of large, complex projects with higher software content, resulting in a longer customer decision-making process and order-to-revenue conversion cycle.” The timing and volume of orders has changed leading to delays in the roll-out of some systems according to the release. The company warned investors that the shifts will take some time to work through yet. According to the release, the changes, “combined with investments in hiring and training in the service organization as part of the company’s transformation, will pressure near-term margins.”

– A report that looks at the biometrics market for point-of-sale (POS) terminals claims one driver of growth in this sector is a rise in fraud at merchant POS terminals. According to the report, “The chances of fraud at merchant POS terminals are increasing… Credit and debit card users face issues such as identity theft and financial fraud.” The press release announcing the report didn’t provide a number for the rate of increase in fraud. It is thought in the payments industry that chip-enabled cards had helped stem rising fraud rates for a while. But according to the 2016 LexisNexis True Cost of Fraud Study, the “average number of monthly fraud attempts has spiked by 33% in the past year, with just under half (46%) getting past merchants’ fraud mitigation efforts.”

-Could the biometric industry be on the verge of a boom in the financial services sector? That’s an idea that appeared in a recent trade publication that covers the payments industry. Mastercard’s president of global enterprise risk and security, Ajay Bhalla, was interviewed. He discussed the reasons the financial service has to adopt biometric technology. Bhalla’s company recently released a study carried out in conjunction with Oxford University. That survey shows that, “… 93 percent of consumers would prefer to use biometrics instead of passwords — and 92 percent of banks would to.” According to Bhalla passwords are “unrealistic.” According to the survey data 51 percent of consumers repeat passwords across multiple sites and another 21 percent of consumers forget their password after two weeks. Remarkably, “[A] full 33 percent of [consumers have] abandoned carts at checkout because consumers have forgotten their passwords.” Even when used correctly by consumers, “… passwords are still a security risk for digital banking,” Bhalla was quoted as saying. As well, eighty percent of complicated passwords can be “auto-cracked with software within a few days,” and four out of five web-based password managers are vulnerable to attacks according to the article. “…[Our] work with Oxford University made it clear that the time has come for an industry-level push to accelerate the use of biometrics in financial services,” said Bhalla. So far, only 36 percent of decision makers in mobile biometric implementation say they have adequate knowledge to make those decisions. According to Bhalla, “…these 36 percent need to be the flag bearers so that we can accelerate these technologies into financial services.” But according to the Mastercard executive, “I think in the next five years we will see a massive change. We are pretty much at the crossroads of all devices being rolled out with a biometric now. I think devices have embraced it, there is a consumer hunger and the compromises and the breaches are extremely high.” Bhalla was also quoted as saying he recommends biometric tech be multi-modular (with fingerprint, iris and facial recognition). He also said it’s important that data be, “… read and authenticated entirely within the device,” with only encrypted tokenized data being sent over networks. All hail the coming boom in biometric tech in the financial services sector.

-The major Isreali paper Haaretz published a series of stories this past week about the flawed roll-out flawed roll-out of biometric ID machines at Ben-Gurion Airport. According to one of the reports passengers on arriving flights have been facing, “… delays of more than an hour,” as the number of counters manned by clerks, “… has been reduced and replaced by automated devices.” The report went on to say that at Ben-Gurion on Tuesday, “… confused travellers were asking, ‘If I have a regular passport and it’s still in effect, it doesn’t count?’ and ‘Do I need a biometric passport to get through?’” One traveller was quoted as saying, “People were confused and needed help, but there was no agent.” A Biometric Database Law was approved by the Israeli parliament, the Knesset, last February. It went into effect July 3rd follow a major marketing campaign involving television and billboard ads that “…touted the state-of-the-art technology and the advantages it would bring.” More than 107,000 biometric passports have been issued so far.

-A digital rights group in Israel is fighting the biometric database law in court. The group, The Movement for Digital Rights, formally asked the High Court of Justice to block advertisements about the new biometric measures at the airport. The group’s lawyer argued that, “…portraying the new database as ‘Bio: Smart Upgrading For Everyone’,” was ‘misleading’ as it failed to spell out the “dangers inherent to the public,” according to a report. The attorney was quote as saying his client, “… wants to block [the government’s] ability to mislead the public. What the state is doing with this campaign is to encourage people to join a controversial database … ”

-This week the government of the Philippines announced it will go ahead with a national biometric ID program to, “… ease the delivery of social services,” according to a media report. A national biometric-based ID will replace, “… all government-issued IDs, with the exception of a citizen’s drivers’ license and passport,” according to the story. The new ID will be issued to all 105 million Filipinos “within two years of the enactment of the proposal.” The cards will be free. Anyone over the age of 18 will be obligated to obtain one. According to the report, “[The biometric card] will be issued at birth and will be renewable once a citizen turns 18.”

-A story in the tech trade press notes that The Department of Homeland Security is developing, “… face recognition tech that would work through car windows.” The system is being developed by the Department of Energy’s Oakridge National Laboratory at the request of U.S. Customs and Border Protection (CBP). According to the CBP’s website the government agency is carrying out a major program to develop technology to biometrically check all travellers leaving and entering the United States. Delta Airlines was involved in a test of biometric tech at Hartsfield-Jackson Atlanta International Airport last year. Last month the program expanded to Washington Dulles International Airport on a daily flight from the United States to Dubai. According to the CBP, “Using the flight manifest, CBP builds a flight specific photo gallery using photographs from the travel document the traveler provided to the airline. CBP then compares the live photo against the document photo in the gallery to ensure the traveler is the true bearer of the document.” CBP is also testing biometric devices at pedestrian crossings. The new camera being developed will be used at vehicle crossings. According to the media report the camera works, “Even work when the occupants are shielded from view by glare or tinted glass,” a technically challenging initiative. Generating a picture of a face that can be biometrically identified through glass is tough. The reflective surfaces add glare, making it difficult to gauge depth and focus. According to the article so-called “plenoptic or light field” cameras are being used along with complex algorithms.

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Disclaimer: Stock recommendations and comments presented on BiometricUpdate.com are solely those of the analysts and experts quoted. They do not represent the opinions of BiometricUpdate.com on whether to buy, sell or hold shares of a particular stock. Investors should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal or corporate ownership, may influence or factor into an expert’s stock analysis or opinion. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

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About Jeff Sanford

Jeff Sanford has worked as a business journalist for more than fifteen years. He has held staff jobs at major commercial publications such as Canadian Business and National Post Business magazine. He has contributed to various Canadian, U.S. and UK-based publications. He has written about markets, economy, finance, energy, infrastructure, government policy and technology. He currently lives and works in the west-end Toronto neighbourhood of Parkdale.