Welcome everyone to this webcast featuring Crunchfish and CEO Joachim Samuelsson.
Thank you.
Very nice to have you here.
Thank you.
We'll talk about the year-end report that recently was released, and my name is Martin Dominique . I'm moderator of today's session. We will start covering a few topics and website and YouTube channel.
Later, later.
But,
Let's talk about Crunchfish.
You published your year-end report just now, and one thing to note is that sales was significantly lower than compared to 2022.
Yeah.
What's behind these numbers?
It's really just one order. In 2022, we had a big order from a Chinese mobile manufacturer in the gesture area for $500,000. That explains the whole difference, really. So essentially, sales-wise, the company is still on very low numbers, but this year we are unfortunately lacking that order for $500,000. That's the whole drop, really.
Okay. So that explains that number. And another thing in the report was the write-off of the gesture interaction business. What's behind this decision?
Well, we did announce recently that we will put it up for sale, to divest it, to focus all our efforts into offline payments and digital cash. And we had a discussion with our auditor of how should we handle this sort of in our books. And one way would be that we would take basically the write-down. What we write down is our activated development costs in the gesture area.
And we decided to do that in our discussions with our auditor. We could have maybe kept it, but I think we felt it was more prudent. The auditor certainly didn't have any objections to have a more conservative way of handling it. So that's why we took. That's the drop of, I think it is SEK 18.2 million. And that means that our cost goes up dramatically with that increase. But it's basically a once-off write-off on the gesture side.
Okay. So, talking about the gesture divestment decision, what's behind that? Why did you come to that decision?
Well, several factors. But I think one very important was that we are a small company. We really hope that we would get a revenue sort of breakthrough in the digital cash area 2023. Didn't happen. Resources are scarce. I felt that we felt that the company is then running sort of with two businesses where it hasn't sort of taken off yet. And we feel that the highest potential is in the digital cash area. So we decided to focus. But there are also changes in the gesture area itself. One is that we've realized in discussion with our new CEO there, Fredrik Clementson, that people would like to own this technology themselves. If you talk about a mobile or smartphone manufacturer, that this is they don't want to insource this.
They rather own it themselves. The other side is that there are now packages in the market from Qualcomm on their Snapdragon chip. There is from Google, MediaPipe. There is some Collabora, I think they're called. They provide packages at a very low cost, which is an entry point for many. That means that it becomes very narrow for us to do this sort of business in the gesture area. And we felt that it's better than to try to find a new home with maybe a hardware manufacturer that could optimize their gesture for their own device instead of having this approach that we've had, trying to be generic to all devices. So we felt everything that it made more sense to actually take this decision.
So now the business is up for sale. What's the process time-wise?
Yeah.
Did you have any?
Well, it's been in preparation for some months. We engaged EY Corporate Finance sort of Q4 last year. So we've been preparing. And we are now at the point where, as of I think this week, actually, they will start sending out teasers to the candidate list, which is fairly long. And this will sort of start the process. And then we will follow up. It's always hard to say exactly what will happen in these processes because it's certainly not under just our control.
Of course.
But I think we are at the point now where this will be, yeah, we will communicate and contact many of these sort of potential buyers.
I see. So in the meantime, you will keep developing the project?
Yes. Yeah, we have to. I think otherwise we would very much deteriorate the value that we are trying to sell. So we very much want to keep the team intact. It's a very strong, competent team and done a fantastic job. But it's just hard to actually create a lot of sales out of that business unit. So we think it's better that it's new home with a provider of a whole solution, including the hardware, where this team can optimize their solution for that hardware device.
I see. So, coming back a bit to the financial side, looking into 2024, given the cash position you had, start of the year, how long runway do you have?
Yeah, I think we were at a little bit less than SEK 30 million. I think we are now at, I did check with our how much do we have now, and it's SEK 27.5 million. So we're eating into that, certainly that runway we have. And I believe in the most sort of negative scenario, if we don't sort of create revenue, we have a runway until sort of Q4. We do hope, though, for revenue, both in the gesture area, which could be on the small side of what we're doing there. We're certainly hoping it for the digital cash area, and then also proceeds for the sale of the gesture business. So we certainly think that the projection is better than that, but.
Worst case.
Worst case, worst case is sort of that we have to Q4. Yeah.
Then focusing on digital cash, could you just explain what you're offering in that area?
Yes. Yes, one favorite subject. And I think the key word this time was sort of focus on offline payments. And it's about that. We realized very early, already 2020, four years ago, that we think that online payments won't be enough. It needs sort of to be complemented for resilience reasons with offline as well. Because how can you build a system that only works when everything works? You need resilience. And we started with offline to think about how that should be designed.
We were, I think, fortunate. We built a technology which has trust in the mobile phone, that you can trust who you are and that you have an intent to pay, as well as we can trust that you don't step over your boundaries, like how much balance you have. You can't spend more than you have, and you can set up other risk rules. We created that sort of technology, and we built it, and we got, as our first, in a way, implementation was in India with HDFC and IDFC, the world's first very successful trial in first half of 2023.
I see. And you were in a pilot project with these two banks.
The second?
You'd run a pilot project together with these two?
Yes. Yeah. The we did that.
Also, with the Reserve Bank of India?
Yeah, they were—it's in their regulatory sandbox. They want innovation. So they were overseeing the whole process, and it was successful. And in December, we got—now this is an approved solution for regulated entities in India. We got their stamp on it. But I think what we've done as well with Digital Cash is sort of to take this rich implementation of functionality and broken it down a bit. One thing is we have something called Digital Cash Telecom that allows you to scan a QR code, and you can connect to the backend over the telecom route over like an SMS. You are offline. You don't have connectivity, but you send an SMS. That is one thing. And that's us we got priced for this this year together with IDFC, also from RBI.
And that's one product. But we have a new thing as well, and that is to really operate in an offline mode because you don't have support anymore from the backend. If you're going to have a balance to spend. In order to keep that safe, you need to sort of have a Secure Element that secures that transaction. And this is something we also can bring out, our way of handling an offline transaction. And that's the new. I'm sure we will get questions on that. And that is what we call the Digital Cash Protector. That's very relevant in the Indian market, who now are launching offline solutions. So what we're doing now is not just to give our offline solution to online systems. Now we're giving our offline support to offline solutions as well. This is what the Digital Cash Protector brings.
Okay. So this is newly developed and launched?
It's sort of announced. And I think we are just repackaging, in a way, what we have done. But it's, yeah, we've come quite far. We've been working with this for about three months of how to take our Digital Cash Offline product and enable support for an existing offline solution instead of just being a support for an online solution. Yeah. And I was in India last week and extremely well received by Reserve Bank of India, NPCI, the biggest banks.
Because if you're going to go offline, all of a sudden you don't have the backup security-wise of the backend. There's no such. You have to have all security locally. And I think that experience that we bring after four years is extremely important. So that product, I think, is certainly available for the market. We're not giving up offline and telecom, our full solutions. They're still there. But this is an extremely important complement for the Indian market.
Okay. So in terms of market strategy, you are have different products. And how do end users get to your solution?
Well, the end users are always getting it through payment services. We are a B2B business. We're not selling to end users. We are selling to the payment, sort of providers. That's what we always do. So end users will get it through that payment providers would integrate what we have into their solution in order to be able to offer this resilience, offer this chance to pay even if you're offline, if you just scan a QR code, or getting a secure solution, so they can't sort of spend more than they have, for instance, their balance.
So you have current deals with IDFC First Bank?
Yes.
Any other?
Well, IDFC First Bank, that's after this pilot project we did in the first half of last year, it resulted in a contract with IDFC First Bank.
They have all your products?
Well, yeah, they have the Digital Cash. We didn't have the Digital Cash Protector that. So yeah, that's the IDFC. And HDFC is the other one, which we have continuously been in contact with, but have yet to get the contract with, really. But I think the idea here, because they are going full steam ahead, both with the digital Rupee as well as they are then having plans this for UPI LiteX. But they also need that security package because otherwise they will be exposed. And I think we can deliver that to them. So the Digital Cash Protector, particularly for them, it makes a lot of sense.
So, competitors, are there any?
I think there are substitute solutions. If you look at what India did, they've gone for they're going to go offline for the Digital Rupee, and they certainly did it for UPI LiteX. But they have implemented it in what is called the rich execution environment, the normal operating system on a phone. And that's easy to hack. It's very easy to hack. So, so if you do that, I, I would recommend that step up a bit in terms of security. This is where our Digital Cash Protector comes in, an application that really could protect that implementation. So, and, and I think it's, it's been understood in the market, by both NPCI as well as RBI that they need to do something because right now it's not secure enough. We come in there. But they you can do a solution like that.
The other side, and I talked about that a lot in the Q3, is to put that secure element on a hardware chip that could be on the SIM, an eSIM, or an embedded secure element. There are many sort of forms. It could be an overlay SIM. That is alternative ways. But they have all problems with scalability because that requires you, I think what the beauty with our solution is that we have a solution that can go to all smartphones just by distributing that over app stores. All these other solutions, they get dependencies on device manufacturers or operators. And these dependencies, in our opinion, is something you want to avoid.
Alternatively, you can have a SIM overlay, but that is also complicated because then you have to sort of get that distributed on people's phone to put an overlay over your SIM in you. And why do all these things? Why not just go for a solution that can go anywhere and integrate it tightly with the app itself? So our belief is that you need to have security in the form of a Secure Element. We have a Virtual Secure Element. This is our shell. And we've written an application in there. And that is the one that we think is the superior solution. It's both secure and it's scalable. So it sits on, in that middle ground.
It's ready on and on the market?
Yes. Yes. And it's even approved by the Central Bank or the Reserve Bank of India or any regulatory entities. Yes.
In the report, you also talked about Central Bank Digital Currency a bit. Could you just explain the interests and what that has, what you can offer to those?
Well, yeah, it's but if you think of it, there are two kinds of money. There are digital money that, you know, that you access on your bank account, sort of. That's and the banks are responsible for that. The central banks today, they issue cash. This is the physical thing. And that's the most offline thing we have. It's, you know, it's a tender I give to you and you, you know, I've given you something. When they go now and want to introduce a digital currency, they're going to digitize their currency, offline, is something that, I think is high on the agenda. We have seen some projects, CBDC project, where because it's easier, they've started only online. We saw that with Bank of Jamaica, for instance. They started with just do online first. Then we do offline later.
But what has happened now, which we're very happy with, is that we have just responded to a couple of smaller requests for proposals for offline. But now of the really big central banks, and I mean the Reserve Bank of India, they have announced offline is part of it now in their CBDC project. And also ECB have also announced that offline is part of it. So we're quite happy that the central banks are sort of taking lead of saying this needs to be there, and we want to have it in our first implementation. Yeah. So this is sort of what happens in the area where I think there will be an increased focus on offline payments because when we started, everything was online, everything. And then offline, yeah, step by step has come into the market.
Yes. And how will you prioritize between your marketing strategies? I mean, I mean, you have India. You have this ECB project. And you also talk about Africa and South America.
Yeah. Well, I think top priority is India. It's still India. And I think now with the protector and the reception we got from the digital cash protector, India is certainly, I think, top of line. We also met with a super app having 500 million users. They want the full offline solution there. So that's there. And we're going to launch the telecom solution there. So all our products is very relevant in India. And I actually tried in the Q4 report, the first section on the digital cash area, to try to project our product to the Indian market of how it applies. And we're very relevant. And I think the protector, particularly because they are starting from a REE world implementation, needs that protector. So India is key for us.
The central banks, I, I would say, is more of a longer-term thing, except for one country, India, because I think they are fast. They know when the central bank, Reserve Bank of India, has announced offline payments, they will, they will move really quickly. And, and the reason why they can do that is that they have the organization NPCI that has done this whole UPI system. They're going to do the Digital Rupee also, the implementation of it. They're going to, they're going to operate it, and they're going to build sort of their rails for that. So it will go quickly. And, and they will come out. CBDC otherwise is, I think we need to be there, but, but it's, it's more of a, it takes longer time.
It's a longer term.
Africa and the announcement we did on Monday here with the Sosepan .
Yeah.
This is for us a new area because particularly in Africa, there are things that is called M-Pesa, mobile money. This is very a way of paying in Africa where the mobile operators are the, say, the bank managing this payment system. We haven't really been in there. And these people that we got in contact with have really good inroads into mobile operators. And then they've already been able to sign. There are sort of two big groups, operator groups, in Africa. And one of them have already signed an NDA with us. So it's moving ahead. We haven't given them that whole area. But they are now focusing on building up that geographic region. The main character of that region is that it is the mobile operators that are driving the mobile sort of payments.
Payments.
Basically. Yeah. And so it's nice to go in. And we all support them. I think we can't say no. But I think if you ask me sort of, India is by far number one. But we're happy to look into whatever happens in the CBDC area. And we're happy to support whatever happens sort of in Africa, in their endeavors as well, for sure.
Also in South America.
Yes, yes. In South America, there are also other systems. There is an alternative to India's UPI. In Brazil, there is Pix, extremely successful as well. So that is an instant payment system. Just like we have Swish here, India has UPI, there's Pix in Brazil.
Is Pix also offline or is it just?
Well, they have only done offline with cards, sort of, on that form factor. So this will be relevant as well. But again, I think we haven't started really to reach out there. We want to have this breakthrough in India that we've been waiting and working so long for. And I think now, yeah, things are, yeah.
Yeah, my final question is actually you're stating in the report that the 2054 can be the commercial breakthrough.
Yeah, wouldn't that be nice?
Why, why would it be that?
Yeah, I think we have that ability, I think, to look at the situation we have at hand and create a solution for it. I think what we did as a world first in this pilot for offline, I'm really proud. It really went well. Unfortunately, the Indians decided to do their own offline solution. And we felt we need to relate to that. And we have. We've come around and we came back to India and said, you need to increase the security around your solution. And we have an offering for that. And in my opinion, I think the sales for that will be the same as selling the whole solution. But the good thing now is the whole ecosystem of India is going in this direction, both from a Digital Rupee perspective.
They're, they're having that. And they've already launched UPI LiteX, which is sort of their private system as well. Both are offline and both needs to be secured. And we are there and we have sort of made central banks, NPCI, and the largest banks really understood that. And if you look at our white paper that we released last week, it was very much focused on a story of what is the level of security that you have to have minimum in a minimal way. And that was a backdrop for our trip to India. And it was really well conceived, particularly since we said that we can actually provide a way that we've broken down our product into this Protector, which is what an offline solution needs in order to go live.
Rich world implementations are not enough.
Thank you, Joachim. I think we could look into questions from the audience. Let's talk about a little bit about the new product that you just launched, the DC Protector, and how it relates to V-Key.
Yeah.
Could you elaborate on that?
Yeah. Yes. Great question. V-Key is very important as a backbone to our products. We have it in Digital Cash Offline. We have it for Digital Cash Telecom, and we have it for Digital Cash Protector. But that is the shell, which makes it tamper-resistant. Within that shell, you need to write an application. That's what we have done. So if you think on your mobile phone, you have a mobile phone, that's the shell, but you have to write an application. We are the app. And we are the app both in terms of the telecom solution, the offline solution, and also for the protector. V-Key does not develop a specialized application for offline payment protection. Not at all. So this is what we develop. And that is what we bring.
And the good thing with the V-Key is that we have that virtual secure element. So we're getting the security up to the level where it has to be. But you still need to write the application. That is what we have written. And that is what we are promoting. This is not just packaging what V-Key has. Then anyone could do that. But we write the application. That's, I think that's... I've seen comments and people I don't think they realize they don't see the difference between what an application is and what is actually the operating system and the, yes, security around that. V-Key has what they call V-OS, a virtual operating system in a secure environment. We write the application that runs on that.
Okay. So, also to establish that DC Protector is one product and you will have other products running alongside complementing. DC Protector is one product that you're.
Well, as I said, the DC Protector is a product that supports an offline solution with the necessary protection. And we need to go there now because India didn't go for our full suite. They took their own, yeah, very similar to our product, I must say. We have some patents which are not granted yet in India, but possibly will be. But I think we are adding the security to that one, which I think they need that because otherwise you can create money yourself.
We also have a question regarding: Do you expect any major big deals or big events to trigger the, the share price short-term?
We are and we have been for a while, and that's been announced that we are talking to NPCI. I think if we get really seriously in bed with them. In this last trip, I did have a meeting with the CEO of NPCI. I think it's looking good. I think that will be a huge breakthrough if we can establish that and get that into sort of commercial term. That could be on different levels. Either they take what we have to the core of what they have. Then, as I write in my CEO word, that would probably have to be some sort of they have to buy source code from us because they want to be in full control. But what's good as well, the alternative is that let's leave it to the apps or the banks to get the security.
And that opens up the opportunity to, just like we've always dreamt of, to sell it to the whole ecosystem. So it could be on either side. But I think anything we do with NPCI, because the NPCI is the backbone of India's payment system. They're going to do the digital Rupee. They have already done UPI and other sort of payment services in India. And they are, yes, extremely successful. If we get in bed with them, yes. And that could happen within that timeframe that you're saying. But we have some other things as well. You know, yes, that we will get this little signature from RBI. So we get going there and that will open up that we can then go to others as well. So there are things happening in there.
The signature is some sort of approval?
Well, I've heard it's already okay with the technical department of RBI. But it needs some sort of signature. It's coming. It's just that I don't know why they are really delaying things. But it's also we have a great super app in India that, as I said, 500 million users, interested in us for the full offline solution. We have other big apps we're talking to as well. We have big payment providers that are interested in our offline solution as well, that they have a platform online and they need offline as well. It's a lot of things. And it's just hard to say when things will happen. But I think if I want to take out one, I think it is the development that was happening with NPCI.
It's key to a lot of things, what we do.
Because we have a question regarding that. Are you building on a joint solution with the UPI LiteX?
I think they have now specified an offline solution. That's what they've done. And that is what everybody gets. That's what is called a common library. Everybody has to take that. This is sort of their implementation. But it is a REE world implementation. So it's not safe enough. So what is needed is to strengthen the security. That could be done by the banks or the apps or possibly by NPCI themselves. But it needs to be strengthened. I think we all agree on that. This is where we come in. We come in with that extra layer of protection for offline payments. Any solution that, if they, you know, they have UPI, it's like we have Swish. They have a security layer there as well, but it's built on connecting the app to the backend. That everybody has that.
But now there are new requirements because all of a sudden you don't have the backend to rely on. You need offline protection as well. And this is what we are so good at. And that's why I think this extra security implementation is important. It would be even better if they were to work with us and take our full offline solution. We could implement what they have done because then you get all logic within one trusted environment like we have done. That's even better. But that's, I think, a too big step for them to take. The protector is a great first step because that's an absolute must. And everybody agrees. Start with that. When we have that, then you can always say, okay, let's migrate to have all the offline logic safely.
Because right now we have to mix between what they've done and what we have done. It's much better the security than they have today. But it can be even better if you put all logic, all offline logic within the same container. That's what we have done. But that's hard sell to go for. You have done something. Let us rewrite it. That's not what we're coming with; it's let us help you to get the protection up to a decent level. And then we can always talk in a next step to take it to the next level.
And that will be huge. You know, UPI, and also now the Indians are running fast. UPI is sort of the most successful payment system in the world, really. It's already 13 billion transactions a month, growing really quickly. They will soon outgrow, I think, Visa and Union Pay from China on cards and be the biggest, biggest payment system in the world. They're shooting for 100 billion, and in five years. So it's just extremely, I think, successful. And this is the one where we are now hoping to get in really close to the core of that with our offline offering, really. So it's exciting. It is.
Also, we have a question regarding details. Is the revenue producer the same for DCP as for DC offline, or do you have different?
I would think that, you know, we are new to the market. And I think what we have projected and we have signed one contract. We have a, they pay for active users for Digital Cash Offline. I think we can get a similar amount of money for Digital Cash Protector as we can get for Digital Cash Offline. I don't really think that is a big difference. The good thing right now is that the whole focus on offline that is happening, Digital Rupee as well as UPI, that is, they've put the whole ecosystem in India on their toes.
That that's this is what is going to happen. This is where we really want to come in and help. And I think revenue-wise it's similar models. What could happen as well is that instead of selling it per user, it could be an enterprise deal that we are selling it to the core of this common library. So we put our technology in the core. That will be a much bigger ticket. And it won't be per user or anything. It will just be all you can eat. And here also we deliver it not as a binary code, but as source code. But that would be done by, in that case, NPCI.
We also have a question regarding any dialogue with Swish.
Magnus Lageson, as people are aware, is our sort of, our CPO. He is sort of sitting close to it. And I do think that, yeah, he has that dialogue. And he used to work there. We, as I said, Sweden and Swish hasn't been our focus, but whenever they are ready, just so that we can support, say, telecom operators in Africa, we can certainly support Swish as well. But it hasn't been, we haven't been driving for it, really.
Okay. I think we've covered all the questions, most of them at least. Let's wrap it up.
Yeah. You don't want to take there. There are some others there. You don't want to take those questions or.
I think we've covered the topics more or less.
Okay. Yeah. Yeah. We can wrap it up. Yeah.
Thank you for coming.
Thank you so much for having me.
Thank you for watching and sending questions.