Zwipe Making Convenience Secure

EIC ConferenceOslo, 5 June 2019André Løvestam, CEO

This is how it works - everywhere

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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 cost2

Strong market momentum for biometric payment cards with growing

commitments from leading industry stakeholders3

Experienced management team with leading industry experience4

Strong IPR Portfolio with 31 active patent applications with 8 granted to date5

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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 infrastructure1

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 consumers Zwipe eradicates the need to use

cash, or enter a PIN

Superior convenience and increased security

For merchants Zwipe reduces cash handling and

increases customer throughput

For the card networks Zwipe strengthens the growth of contactless by improving convenience & security

For the banks Zwipe ensures brand visibility by enhancing

top of wallet effects and reduced fraud

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 Zwipe eradicates the need to use

cash, or enter a PIN

Superior convenience and increased security

For merchants Zwipe reduces cash handling and

increases customer throughput

For the card networks Zwipe strengthens the growth of contactless by improving convenience & security

For the banks Zwipe ensures brand visibility by enhancing

top of wallet effects and reduced fraud

FOR

CONSUMERS

Eliminates the

use of PIN.

Offers a

consistent, fast

and convenient

user

experience.

Peace of mind

For consumers Zwipe eradicates the need to use

cash, or enter a PIN

Superior convenience and increased security

For merchants Zwipe reduces cash handling and

increases customer throughput

For the card networks Zwipe strengthens the growth of contactless by improving convenience & security

For the banks Zwipe ensures brand visibility by enhancing

top of wallet effects and reduced fraud

FOR

MERCHANTS

Reduces cash

handling,

saves

transaction

time and

increases

customer

throughput

For consumers Zwipe eradicates the need to use

cash, or enter a PIN

Superior convenience and increased security

For merchants Zwipe reduces cash handling and

increases customer throughput

For the card networks Zwipe strengthens the growth of contactless by improving convenience & security

For the banks Zwipe ensures brand visibility by enhancing

top of wallet effects and reduced fraud

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

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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

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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:

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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

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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 opportunities3

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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

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.

Risk factors

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Summary: Worry-less payment with biometric smartness

Industry awards

1Ease 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.

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