Privasys

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Corporate Background PrivaSys licenses its business solution (proprietary enterprise software & card technology) to substantially improve the P&L of credit and debit card issuers. PrivaSys' business solutions have two core value propositions: 1. PrivaSys substantially reduces the $9B in annual transaction fraud, delivering immediate bottom line improvement. 2. PrivaSys drives top line revenue through substantial differentiation of card services (by enabling multiple accounts on one physical card and delivering loyalty programs at the point of sale) to attract new cardholders and optimize the relationship with existing cardholders. PrivaSys' core technology leverages the existing infrastructure of magnetic stripe readers. With almost 30 million accepting merchants worldwide, Privasys' business solution requires no change of merchants or their acquiring banks. When an issuer distributes a card, it is instantly compatible with the processing infrastructure of American Express, Diners Club, Discover, MasterCard and Visa as will as private label cards, enabling its technology to bring value to the $3+ trillion in transaction volume through these existing payment methods and is fully compatible with current processing methods. The Problem Need to Differentiate in a Commodotized Business: According to McKinsey & Company credit, debit, and charge cards have become commodotized in an increasingly consolidated business with the top 5 issuers representing 65% (WSJ) of the credit/debit card business. In order for card issuers to maintain a competitive advantage, they must differentiate their card services. With costs of customer acquisition approaching $200, up from $75 in 2000 and attrition rates of 30% or more, issuers are spending over $30B annually to attract and maintain cardholders. Security: The McKinsey Quarterly advises issuers; "Security and privacy concerns create opportunities for issuers & by offering customers the most secure& or most conveniently encrypted transactions on the market." Quantitative research by Consumer Financial Service Corporation ("CFSC Survey") found that while most cardholders have not been victims of credit card fraud, 74% of respondents are concerned about fraud/identity theft. Fraud cost VISA and MasterCard issuers $9B in 1999. Issuers face mounting losses due to skimming and card cloning. Transaction fraud from cloned cards alone is projected to grow to $8B by 2005 (Bank Technology News). Cloned and stolen cards numbers are the point of vulnerability that enables identity theft. Today, each case of identity theft results in $17K in losses to an issuing bank and with projections of 1.7 million new cases of identify by 2005, this gaping security problem associated with conventional credit card transactions represents a substantial impending loss to issuers. As international issuing banks are finding, card cloning is taking its toll today with numbers that have doubled in the last year resulting in losses of 30 basis points $8-9/card in UK/Canada and 47 basis points or $11.98/card in the emerging markets of Asia Pacific and Latin America(Lafferty).

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