It has been an exciting year so far for BIO-key. Having wrapped up its 12-city tour with Microsoft in promotion of Windows 10, for which BIO-key is Microsoft’s exclusive biometrics partner, the company has proceeded to post substantial revenue increases in its Q4 update, and more recently has announced a major new distribution partner for the MENA regions.
FindBiometrics President Peter O’Neill recently had the opportunity to speak with BIO-key CEO Michael DePasquale about some of these exciting developments. In the following interview, they also discuss major trends including the financial services community’s growing interest in biometrics, particularly in the area of payments; and the latest developments in Microsoft’s biometric security pursuits.
Peter O’Neill, President, FindBiometrics: As an biometric industry expert, I am sure that you are pleased with the increased interest in our industry. What are you seeing in the marketplace?
Michael DePasquale, CEO, BIO-key International: We’re extremely busy in all areas of our company, which is a good thing and validates that more organizations are understanding the benefits of how biometric technology positively impacts security – workflow and their ability to meet compliance / regulatory requirements. What’s really exciting, is that we’re seeing a significant uptick in the financial services industry domestically, which is a big shift. There’s been advanced acceptance and utilization of biometrics internationally as you know and this may have impacted banks in the U.S. as they are beginning to investigate the benefits of biometric authentication – security. This is a significant change in mind-set and will likely lead to the universal adoption of biometrics across to the B2C space.
FB: We’re certainly feeling that. As you know we are involved in the financial banking FinTech sector fairly heavily and of all the vertical markets that is the one that is seeing the greatest growth. Nice to hear that you are feeling the same thing.
BK: Indeed, and what’s interesting, is the number of inquiries we are getting to address security internally within the organization. The banks sense that the biggest risks are internal and their short-term priority is to mitigate that risk and get their house in order. Once the banks address their internal vulnerabilities, the next logical step is to incorporate the same biometric platform seamlessly with their customers.
One of the other tipping points for activity with the banks, was our participation in the Microsoft “Ignite Your Business” Windows 10 Enterprise launch. As I mentioned, we started receiving requests from banks that need to address their internal security challenges and they recognize that our solutions are easily scalable to include their customers, when the time is right. The U.S. banks recognize that we’ve proven our ability to raise the bar on security and convenience through our project with a large international banking customer. That proof point is translating to more opportunities domestically.
As your also aware, our series of compact fingerprint readers is the perfect compliment to these deployments. SideSwipe, our newly announced SideTouch, and Eco ID readers are compact, easy to install and very affordably priced. They’re inexpensive yet they are high quality and they work on desktops, tablets, notebooks, it really doesn’t make a difference, we can support any device with a USB port.
FB: That is interesting because for a long time it was just the payment area that was being talked about, but we also are seeing that biometrics are rapidly moving into all aspects of financial institutions. And you are right, employees’ identification and access is one of those critical areas. Actually, HSBC commented very positively on this exact topic on my panel last week at the Money 2020 FinTech show in Copenhagen.
BK: We’re very heavily engaged right now on the payment side, mostly in Asia and you know that is a very high volume – low fee per transaction application. In the context of inside authentication or employee authentication, there are fewer transactions but the value of best in class security, which is what we deliver, is very high.
Certainly, we welcome the opportunity to support both business models, but the payment space is a tremendously competitive landscape and we haven’t even seen the beginning of the battles that will go on between the likes of Apple, MasterCard, Visa, American Express, Walmart and Target and everyone else who wants to make a small percentage on every transaction.
Our distinct advantage is that BIO-key provides interoperable connectivity across platforms and devices and is integrated with Microsoft Hello, Passport and Active Directory. Thus we deliver a full and complete solution for financial institutions and enterprise customers that want to enhance security and reduce risk using biometrics.
FB: You also had your earnings call on March 30 where you reported gains of 31%, can you tell us a little bit about this growth?
BK: Yes, our year over year revenue rose 31% to a little over $5 million, attributed to growth in both our software and our hardware verticals. It’s an indication of the trajectory of the market and our modified business model. More importantly we are also forecasting between $7-9.5 million in revenue for 2016. What this indicates is our belief that the uptick in biometrics is taking place and the opportunity for accelerated growth is at the forefront.
Additionally, our plan is to expand the visibility and distribution of our hardware products by placing them in the Amazon store. Yet, we might not target the consumer with our initial Amazon launch, and expect our compact fingerprint readers will be available in multipacks ranging from 3 to 100. After we launch on Amazon we’ll place the product line on Alibaba and use the same enterprise strategy.
FB: You also mentioned in your earnings call that you have had quite a 2015 and that you also had a strategic investment from China Goldjoy Group. Can you just review your year with us? It sounds like you had quite a successful year.
BK: Yes, there are really four salient points. The first, as we just discussed is about the revenue growth, I think this is a really good indicator about the market and the opportunity. The second is the strategic investment and partnership with China Goldjoy Group which yielded $7.5 million in net proceeds to BIO-key along with the rights to a portfolio of patented technology that is focused on the online and mobile payment space. That is what we are integrating into our core WEB-key platform right now and we’ll be introducing the product to Asian markets before the end of Q3.
The third turning point was the formation of our Hong Kong subsidiary, BIO-key Hong Kong Ltd. where we are going to expand our sales and marketing and development efforts across Asia Pacific. The opportunity to establish a physical presence in this all important region came due largely in part of our partnership with China Goldjoy.
The new office will allow us to do is to interact face to face with customers in an area in the world that we really had no direct access, until now. We are happy to say that we have already secured our first customer through our Hong Kong subsidiary during fourth quarter of 2015. The customer is a global payments company and the initial order was valued at about $245,000. So we are off to a really good start in that part of the world.
The last salient item, and this is something that came together for us at the end of last year was our marketing alliance with Microsoft. As you know Microsoft has introduced native biometric support with Windows 10 Hello and Passport, so now anyone who wants to replace their PIN or their password to access their device, their PC, their tablet, can do so by simply taking one of our finger scanners, such as SideSwipe or our EcoID and plugging it into the side of their device. There is no need to have any special download of software or any other installation requirements. Basically, if your computer is up to date with the latest Windows update, you simply plug the scanner in and you can automatically utilize the biometric to replace that PIN or password. We have a significant initiative going with them; we attended 12 events at the tail end of the year across the country with Microsoft, we were featured as their go to biometric vendor and we also attended just this month two of their CIO summits. They hold these enterprise showcases on an annual basis and BIO-key was honored to have the opportunity to introduce our biometric solutions to Windows customers at these invitation-only events.
FB: Mike thank you very much for filling us in on all the activity that is going on at BIO-key. The year coming ahead seems like it is going to be quite successful for your company and thanks for sharing the good news from 2015.
BK: You’re welcome Peter.