FindBiometrics President Peter O’Neill recently had the opportunity to speak with Ritu Favre, CEO of NEXT Biometrics. The conversation starts with a review of her first year as the company’s leader and her major accomplishments in the role. The conversation moves on to the major security benefits of NEXT’s large area sensors and the demanding Aadhaar certification process that the company recently completed. Favre then moves on to speak about the biometric smart card space, and why she believes NEXT’s large flexible fingerprint sensors are poised to dominate that emerging market. The interview concludes with a preview of what the next 12 months hold for NEXT Biometrics and where we can expect to see them on the 2018 events circuit.
Read our full interview with Ritu Favre, CEO, NEXT Biometrics:
Peter O’Neill, President, FindBiometrics: You have been CEO at NEXT Biometrics for a little more than a year now. What have been some of the key things that you have learned since taking on this CEO role?
Ritu Favre, CEO, NEXT Biometrics: I would say that I’ve definitely come up a really exciting learning curve. As you and I have talked about in the past, I worked at Synaptics and I’ve been a general manager for many years in my career but this is my first CEO role. What has been interesting to me is the breadth of topics one has to cover in this particular role. Over the course of my career I have spent a lot of time working in product development, while in my current role I have been learning about the investor side, the public relations and marketing side, sales, and a lot more detail about overall financials. From a personal perspective, it’s been really interesting to me, and a lot of fun.
From a company perspective, what’s been exciting to me is that the promise of the technology itself has really been proven out. One thing about start-up tech companies is that the technology can be really interesting, but then productizing it and monetizing it can be a lot tougher than it might look on the surface. I would say that I have been pleasantly surprised because our technology is amazing. It’s outstanding and we’ve seen the traction with the technology, so that’s been a lot of fun and an important take-away from the past year.
I would also say that having a strategy that we’ve mapped out and then executing on it has been really important. When I first started at NEXT Biometrics, we were working primarily in the notebook space. We spent the time and energy to dive into more detail about the markets we wanted to go after, what products would be the right fit, and then strategically mapping out how we would then take these products to market. That has been very important over the past year. And then finally, having the right organization to execute this strategy to deliver this great technology to customers would be another place where I’ve been spending quite a bit of time over the past year.
FindBiometrics: Especially when you’re moving as quickly as a) the industry is and b) your company is. What would you say have been the top three accomplishments at NEXT Biometrics since your becoming CEO?
NEXT Biometrics: There are a lot of things that I’ve been proud of since my move to NEXT Biometrics. The one that I would say that I’ve been most proud of, though, and I think this one comes back from my Motorola roots, is that we achieved positive gross margins for the first time in the history of the company in the first quarter. We were able to swing gross margin by close to 30 points in four quarters. That to me was really exciting. It’s an historic first for the company in any given time frame; the company has never been at positive gross margin in any quarter. I would say that that has been a huge accomplishment that I was really excited about for the company.
Another equally big accomplishment was getting the certification for our hardware to sell into the India market for their Aadhaar program. We’ve spent a lot of time talking about how big this market can be, how exciting it is, as well as what’s required to achieve this particular level with the Indian government. Obtaining the certification is a very important milestone for us.
Another big piece we’ve been working on would be the step-by-step building of the necessary foundation so that we can lead the industry in fingerprint sensor technology. Both the product development process that we use, putting the proper processes in to scale the company and then creating an organization and culture that will allow us to service these growing markets is another accomplishment that I am very proud of from the past year.
FindBiometrics: Well congratulations on those, especially that first one. That’s quite an accomplishment in a relatively short period of time. We’ve been following NEXT Biometrics for quite a few years, and one of the things that I know that you like to emphasize is your large sensor size as a key advantage. Can you tell our readers why this is such an important factor?
NEXT Biometrics: Absolutely. The security level of a fingerprint system is primarily dictated by the size of the sensor. I would say the number one factor of the level of security in a biometric system is directly correlated to the size of the sensor. We’ve done studies using several large fingerprint databases, one of which is the Madrid study, which proves that the number one factor in the security level of the system is the size of the sensor. This is why we’ve spent so much time educating and talking to people about size.
In contrast, when it comes to the people who are creating smaller size sensors, what we’re finding is that those solutions are applicable and work well for markets that require convenience in addition to security. What we say is that we emphasize security in addition to convenience. What we’re finding in the markets that we are going after – particularly in government ID and smart cards – is that having the correct level of security is mandatory. It’s not just a “nice to have,” or an advertising gimmick; it is a government specification or an ISO-specification that says you have to achieve a certain level of security with the data to back it up. This is the reason we have spent so much time talking about large size sensor because it correlates directly to the security of the biometric system.
The next piece for us that becomes relevant and important is that the larger the sensor is, the more expensive the sensor typically is. What we like to talk about is that NEXT Biometrics is able to provide a large size sensor at the lowest overall system cost, relative to the market. We are running in fully depreciated, low-temperature polysilicon (LTPS) factories, so we are able to offer a sensor that can get larger and larger at a very low rate of increase in the cost of that sensor. It always ends up becoming a little bit complicated, but it basically means that a large sensor equals the highest level of security and that highest level of security is enabled at the lowest level of cost because of the technology that we are able to offer as a company.
FindBiometrics: I’d like to shift gears a little bit to the second point you mentioned in your list of accomplishments, and that is in relation to India’s Aadhaar program. We’ve been following this program quite actively since its inception, but you recently received the hardware certification to supply sensor technology for that program. Tell us what’s involved with gaining that and how will that affect your company?
NEXT Biometrics: I will definitely say that this certification was a long and rigorous process that we had to go through. The first and most critical step is to go through a large-scale security testing. There were 6,000 people that participated in a fingerprint database and you have to achieve a certain level of false reject in that particular test. Back in the 2016-time frame, we took our products through that particular testing. That was the first gate that had to be passed for us to get the certification.
During the course of the past two years, we went through both the false reject rate testing and we went through a PIV, which is an image quality certification process. We certified some of the software that sits on our fingerprint sensors and then we had to go through rigorous hardware reliability and qualification testing, which is what we just announced most recently.
There are certain government bodies in India that have to certify that the sensor meets requirements, one of which being the Ministry of Electronics and Information Technology. Within that ministry there’s a department called the Standardization Testing and Quality Certification (STQC). We were able to attain the STQC certification a few weeks ago. The way it works is that everyone that wants to provide products for the Aadhaar program has to get certification for the hardware separately, and then a separate certification from a different government body for all of the software platforms that would run on the hardware.
What we announced a couple of weeks ago is that we’ve reached this fundamental hardware certification and going forward, we’re going to continue to build out our product roadmap to go step by step with the Indian government requirements for security. We’re also going to be doing our software certification for each of the different kinds of platforms which include Linux, Android and Windows.
That’s the long story of the certification itself. In terms of what it means, we’ve announced that we expect to see initial revenues in the Q4 time frame on our reader product portfolio, followed by integrating our modules into different point-of-sale terminals, and then we’ll also be expanding our product portfolio. We expect that starting Q4, we will start to see the early revenue and expect that to continue to grow through the course of 2019. The other thing that we announced was that we will be doing a FAP 20 size sensor which is a government-grade sensor that we can then use to get into other government programs around the world. We’re targeting the China ID program and projects in the Americas, as well as in other government regions. We believe that the FAP 20 sensor we will be sampling in the Q4 time frame will be well-suited for these other government applications that will continue to open up to us.
FindBiometrics: Congratulations on gaining that certification and moving forward. Another area receiving a lot of attention over that past couple of years is the smart card space. You’ve announced a fair bit of activity in that area recently. How will this affect your company and why is this all happening so quickly right now? It was obviously a big topic of conversation at the Money 20/20 show in Amsterdam last month. What are your views on the topic?
NEXT Biometrics: If you think about our company, the two markets that we’re very interested in – because of the unique large-size, cost-efficient technology advantage we have – are the government ID market we just spoke about, and the smart card market. As I said, both of these markets have mandates either to a certification process or a specification through the ISO body that mandates a particular sensor size. What we’ve basically seen is the government ID market will be about $300 million in the 2022-time frame.
If you switch over to smart cards, that’s where there’s a really interesting growth opportunity ahead of us if we’re able to, as an industry, not just NEXT but as an industry, make this very mainstream and easy to put into cards. We’re estimating this to be a market of about $800 million in the 2022-time frame. I would say that’s a more conservative-to-realistic view. If you talk to some people, especially at Money 20/20, you’ll hear projections up into the 1, 2 and $3 billion range in that same time frame. What seems to be driving this level of activity is that some of the payment networks are starting to see the need for enabling a higher level of security in smart card and payment transactions, specifically. There’s also a lot of interest in government ID cards using biometrics for either passport or border control uses, and then there’s also continuing interest in access control biometric cards.
What we’ve been really excited about because of the full physical flexibility, our specification and the fact that our size meets the ISO specifications exactly and is actually slightly larger, we believe that our technology is the only one that can actually meet the requirements of this emerging smart card market. Today, what we’re doing is sampling contact-based modules. We’ve announced that our NB-4410 is now sampling to customers around the world. We’ve sampled seven customers already and we’re engaged with an additional 20. What they are really liking about this particular solution is that we’re taking all the complexity of the solution itself. We have a contact solution that we can offer at the right power level and all of the integration is basically done very rapidly with our solution. They can connect our sensors to the secure element, laminate the card and then go to market with a contact-based smart card solution. We’re getting a lot of interest in that from customers.
What we’re seeing as well, as the market continues to progress, is this drive towards contactless. If you think about the way that you do payments, you’re probably using a contact reader or a contactless reader. We needed to adapt our technology to also do contactless. We were able to announce the milestone that we can now get power from a contactless reader and use that to power our biometric solution. This is a big milestone for our company because with our active thermal fingerprint technology there’s been some perception in the market that we would not be able to get to a contactless reader solution. We were able to demonstrate that we could do this back in the April time frame.
We remain very bullish that we have the right technology for this market with our flexible sensor and the lower cost solution we are able to provide. We do believe we will be very successful in the smart card space.
FindBiometrics: The smart card space certainly is a market we’ve been following quite actively. It sort of came out of nowhere and all of a sudden it’s become a very hot area for biometrics, so that’s good that you are actively involved. Final question: What’s next for NEXT Biometrics? I understand that you are about 90 employees worldwide right now. Will that be changing? Where do you see the next 12-month period taking you?
NEXT Biometrics: I would say that my primary focus right now is to get these products that we’ve developed and we think are very compelling out into the market.
We will continue to scale the company up. We feel that with the organization in place that we are in pretty good shape. What I want to do now is start to scale operations, product development, get the products ready to go and begin to take those products to market. We just recently added new talent and experience to lead our sales team in Asia. What we’ll be looking at as we go forward is strengthening further on the channel market part of it. Stay tuned for more news from us in that area over the coming weeks and months.
Finally, I also want to stabilize where we are from an organizational perspective, continue to execute on our product road map and really just begin to monetize the investments that we’ve been making and start taking the company forward towards cash-flow positive.
FindBiometrics: Well, Ritu, it’s always such a pleasure speaking with you. You’re so knowledgeable about the industry. I really appreciate you taking the time to speak with me and look forward to seeing you at Money 20/20 in Las Vegas in October or Trustech in Cannes in November.
NEXT Biometrics: Thank you so much for the time Peter. I really appreciate it.