Biometrics stocks this week: biometric ticketing, the cards race, FPC Q2, big IWSY deals

Biometrics stocks this week: biometric ticketing, the cards race, FPC Q2, big IWSY deals

Let the battle of the biometric ticket providers begin.

Texas-based startup Blink Identity recently announced a successful USD $1.5 million round of seed funding. The venture capital comes from Sinai Ventures, but also massive entertainment company Live Nation. Techstars, a Colorado-based incubator, and some other live entertainment-related funds put money in as well.

Blink is an interesting company. It was founded by Mary Haskett and Dr. Alex Kilpatrick. The two developed biometric tech for the Department of Defense before moving on to the commercial sector. The company was developed through the Techstars Music Accelerator in Los Angeles this past spring.

The plan is to bring face recognition technology to live event venues. Blink’s technology can identify people walking at full speed, which is key to making automated event face identification work. By no longer requiring people to slow down and stop to offer a ticket for scanning by an attendant, relying on pre-bought, pre-registered and scanned face photos, people who bought ‘tickets’ to an event just walk into the venue without worrying about anything. Line-ups and bottle necks are reduced at entry. Everything is a lot smoother, easier, and that’s going to be the hook that will get people to register their face photo and pay a bit extra. Live Nation also owns Ticketmaster, so this is an obvious step.

But Blink has a competitor. The other name making noise in this sector right now is another privately held firm, CLEAR.

The company is still in funding mode, but it’s been doing biometric ID at airports for years. The company goes way back to 2005 when it was one of the earlier organizations to try to make biometrics work commercially.

CLEAR was launched by publisher Steve Brill as a response to 9/11. Backed by GE, Lockheed and Lehman Brothers, the company began to work with the newly-created TSA to bring biometrics to airports. Travelers with smart cards were given access to fast lanes in some airports at that time. But the company ended up drenched in debt, highly leveraged. When the economic downturn hit, founders started leaving. Corporate spending on travel crumpled. The company went bankrupt in 2009.

But the story of the corporation wasn’t over. In 2010 a hedge fund manager, Caryn Seidman Becker, bought the company at a bankruptcy auction for pennies on the dollar. Lockheed Martin, the back end for the old company, still had the biometric data locked up behind military-grade security. CLEAR returned to the market.

Nowadays the company utilizes a subscription-based model—$179.00 a year—that allows users to skip identity lines at airports and pro sports stadiums. There is a partnership with Delta Air Lines. The company’s system is tied into the TSA. The plan is to eventually automate everything from baggage check to boarding, creating a frictionless so-called “curb-to-gate” trip.

In 2015 the company successfully raised a $20 million equity financing round from a group of investors including fund group T. Rowe Price and Jeff Boyd, chairman of the board and former CEO of The Priceline Group Inc. Also putting up cash was Robert Mylod, the former CFO of Priceline and Bill Miller, the famous portfolio manager of the Legg Mason Opportunity Trust Fund. And now, the company is moving into the baseball ticket market.

CLEAR recently jumped into the ticketing industry with the announcement of a deal with Major League Baseball and Tickets.com. The deal will see biometric ticketing technology at participating MLB ballparks next year. CLEAR members who link their existing profile with their MLB.com account can gain entry to ballparks using fingerprint data, and eventually facial recognition. “We are thrilled to partner with MLB to make game days more enjoyable and secure for fans with biometric ticketing. We look forward to continuing to innovate alongside the League and the sports community to transform the fan experience from ticketing to concessions and more,” said Caryn Seidman Becker.

Let the battle for biometric ticketing supremacy begin. The ticket space is huge. If biometric face identification systems can add a new level of ease to events, these companies have an epic opportunity before them. Who will be the first to pull off a hugely lucrative IPO?

The smart card market continues to evolve at a rather rapid pace. A report out this week suggests that the payment security software market will grow by 16 percent through 2022. The Technavio analyst responsible for the report was quoted this week as saying that, “The increasing number of fraudulent activities in the e-commerce industry due to the high volume of trade has led to several vendors adopting various methods to prevent online fraud. Presently, many e-commerce companies provide their customers with a personal account, which contains personal information and financial data… protecting [these] customers from fraud [is] driving the overall growth of the global payment security software market.”

This is good news for the companies racing to bring biometric-based smartcards to market.

One of these is IDEX ASA, which this week announced that its sensors for dual interface biometric cards have passed engineering integration and validation at Feitian, a provider of user authentication and transaction security.

IDEX first launched its polymer sensor for dual interface biometric cards in June 2017. It has a power management system that doesn’t need a battery and works with standard NFC terminals. “We are very pleased that Feitian is using our sensors in their dual-interface biometric cards, and that their feedback on the products is very positive. The application is for banking on a major Chinese payment network”, said Stan Swearingen, CEO, IDEX. “IDEX is on track for commercialisation of the sensor, which will be important in this rapidly growing market.”

The company delivered the good news at a recent conference hosted by the Asia Pacific Smart Card Association, which IDEX recently joined. Said Swearingen, “Having a sensor suitable for dual-interface cards is very important to meet customer demand, especially in the banking segment… the convenience of a contact-less ‘tap and pay’ experience is unrivalled. With a biometric sensor, issuers can add security to the experience.”

According to the company the total addressable market represents a fast-growing multi-billion unit opportunity. It seems investors like the recent news. Shares in IDEX have been climbing over the past month, increasing from just USD $0.32 a few weeks ago to $0.50 this week.

Another company getting in on the smartcard action is SmartMetric, which revealed that it is now manufacturing a new biometric card designed to protect online transactions by building on the company’s advanced, “inside-the-card” miniature fingerprint scanner.

The card can be credit or debit. It’s designed to be used with bank-issued chip cards. Inside the SmartMetric biometric card is a fully functional fingerprint scanner that uses the cardholder’s pre-stored fingerprint inside the card to match and then activate the card.

In June SmartMetric announced that sales trends have “stabilized somewhat, as sequential revenue growth of 35 percent in the second quarter resulted in positive cash flow from operating activities.”

Shares in SmartMetric are trading at about USD $0.06 this week.

The second quarter earnings season is getting underway. One of the first companies to report in the biometric sector is Fingerprint Cards (FPC).

For the second quarter of 2018 the company reports revenues were USD $43.6 million. That wasn’t enough to post a profit. The company posted a loss of $0.17 per share. The company attributed the decline in sales to a lower average selling prices for capacitive fingerprint sensors for smartphones.

As that market matures manufacturers are shifting demand to smaller and cheaper sensors. According to Christian Fredrikson, CEO, FPC, “Currently, around 80 percent of the sensors we deliver are low-cost products. This is a significant change compared with last year, when the market could accommodate a variety of different sensor types in different price ranges.”

As well, the domestic smartphone market in China, while recovering somewhat, is still down in terms of volume than what it was last year at this time. Fredrikson was admirably blunt when he said, “We expect the value of the market for capacitive fingerprint sensors for smartphones to continue to decline. This is a consequence of continued price pressure, but also of the introduction of alternative biometric technologies, not least in-display sensors. For Fingerprints, this means we have to lower our costs in parallel with focusing on diversification to increase growth, lower risk and stabilize revenue streams.”

In an effort to deal with these shifts in business the company announced last month it would reduce operating expenses by two-thirds through restructuring measures, including the combination of business lines (Smartcards and Automotive are now a single unit) and a reduction in management from 10 to six people.

Even so, the Swedish biometrics company did have some good news this past month. Its sensors are included in six new smartphones. Another sensor will find its way into a new biometric payment card.

The new card, Ukey, is a biometrics-based cryptocurrency card that MeReal Biometrics and Unikeys are launching that can be used to store cryptocurrencies or make normal payments, without PIN or password. Considering the continued expansion of the crypto currency market this is good news.

Perhaps most exciting is another announcement from FPC concerning a new POS terminal for the biometric market in India.

Hong Kong-based Grand Tech International Development announced recently that it will use FPC’s STQC-certified ActiveIRIS iris recognition system in a terminal that will do real-time authentication for India’s Aadhaar program. The world’s largest biometric program announced recently that just about everyone in India has been registered. That FPC technology is headed for that market is really good news.

The iris recognition system used in that product was developed by a company called Delta ID, which FPC acquired last year. Said the company about that deal, “This acquisition is consistent with Fingerprints’ strategy of expanding from our positioning as the leader in fingerprint sensors for smartphones, with the objective of being a leading global biometrics company.”

Investors seem to be in favour of the strategy shift on the part of FPC. Although the company posted a loss, shares in the company were actually up at the end of day Thursday 3.5% at SEK 6.28.

ImageWare this past week announced a series of new deals. It also had a new distribution and integration partnership to announce as well as the opening of a Tokyo office to support the increase in sales occurring in Asia.

According to a press release, the company says that its largest partner reached an agreement with a “Canadian financial institution” to provide multi-modal biometrics for its employees.

As the deadline for this column approached an interesting rumor floated by: According to industry sources the deal is with the Bank of Canada.

The press release also twigged to a deal with a financial services company based in New York. Our source suggests the deal is not just any New York financial company, but the biggest New York financial services company, Black Rock, the sprawling fund management outfit that is now the world’s largest measured by assets-under-management (USD $6.3 trillion).

According to the source these are, “… two home run, mission-critical, enterprise deals.” The sales will contribute revenue to ImageWare on a per user, per month basis, according to the announcement. Which is the kind of recurring revenue you want coming into a company.

ImageWare also announced a deal through Four Points Technology LLC, which has received a multi-year contract worth $3.6 million from the Veteran’s Administration. According to the Jim Miller, chairman and CEO, ImageWare, “Our vendor-neutral, open-architected and patented ImageWare Biometric Engine platform provides government agencies and commercial enterprises with extremely flexible capabilities to meet any new business requirements… The two sales to existing customers is a validation of the value proposition of our biometric products. These three new customers, brought to us through partners, are just the tip of the iceberg of business that we see entering the final stages of the sales cycle.”

The partnership that was also announced this week is with an organization called TwoFive, which provides end-to-end solutions for Japanese service providers as well as messaging security solutions. That deal also includes an initial order described by ImageWare as “modest.” The new office in Japan will be in Tokyo’s Marunouchi district, which is where the country’s big banks are located.

Shares in ImageWare enjoyed a good 7% bump Thursday to end the trading day at USD $1.28.

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