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Trycera Financial is in
position to take advantage of the shift away from paper to using more plastic for
financial transactions with their prepaid debit card and financial services business
Financial Services
Prepaid Debit Cards
(TRYF-OTC: BB)
Trycera Financial, Inc.
18023 East Sky Park Circle, Suite G
Irvine , CA 92614
Phone: 949-273-4300
Alan Knitowski
Chairman
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – March 29, 2007
BIO:
Mr. Knitowski is Chairman of Trycera Financial, Inc. (OTC BB: TRYF), a financial
services company specializing in customized and turnkey prepaid MasterCard© and Visa©
debit cards and financial services. He is also Chairman of Caneum, Inc. (OTC BB: CANM), a
business process and information technology outsourcing services company. Mr. Knitowski is
Founder and Managing Director of Ecewa Capital Group LLC, Co-Founder and Co-Manager of
Trymetris Capital Management LLC and the Trymetris Capital Fund I LLC, Advisor of
Edgewater Networks, Inc. and Angel Investor of numerous technology, media, biotechnology
and energy companies.
Previously, Mr. Knitowski was Co-Founder and Director of Telverse Communications, a
next-generation advanced services ASP focused on wholesale communications services for
carriers, service providers and value-added resellers, which was acquired in July 2003 by
Level 3 Communications (NASDAQ: LVLT). Most recently, Mr. Knitowski was Director of
Marketing for the Voice Technology Group at Cisco Systems and was responsible for
business, market and community development, including business planning and strategy for
Cisco’s global packet communications initiatives. In November 2000, Mr. Knitowski
joined Cisco as part of the Vovida Networks acquisition, where he served as Co-Founder,
President and CEO and led the company from idea conception through its eventual
acquisition by Cisco (NASDAQ: CSCO).
Company Profile:
Trycera Financial, Inc., is a financial services company specializing in the delivery of
prepaid card programs, prepaid card program management and private label catalog shopping
cards. As a registered MSP for MasterCard and an ISO for Visa, the Company partners with
companies focused on developing, implementing and marketing customized prepaid card
solutions. As an innovative program manager, the Company has delivered a diverse suite of
customized solutions including the Platinum Tel Everyone Prepaid Visa card, US Capital
Debit MasterCard card and the Model Prepaid MasterCard card. In addition to the customized
solutions, the Company has also developed three branded products including the Trycera
Financial Prepaid MasterCard card, the Finium Prepaid MasterCard card and the Mi Dinero y
Mis Sueños Prepaid MasterCard card, which are marketed directly by the Company through
direct and reseller channels. All MasterCard cards are issued by MetaBank pursuant to
license by MasterCard International, and all Visa cards are issued by MetaBank pursuant to
a license from Visa USA, Inc.
Separately, the Company operates a catalog shopping
card network under the name Tru Platinum. The Tru Platinum catalog shopping card offers
thousands of products to create a unique catalog shopping experience with a user friendly
web interface for fast product ordering and delivery to the consumer’s door. To
complement its core prepaid card business, the Company has developed ancillary card
services to improve the overall cardholder experience and functionality. These card
services are highlighted by Full Credit, a service that allows enrolled cardholders the
ability to have non-traditional payment information such as rent, utilities and wireless
phone service payments reported to local credit reporting agencies. The Full Credit
program is ideal for cardholders seeking report items and build upon a credit profile with
credit reporting agencies nationwide. To further enhance the consumer experience, the
Company also operates a 24/7 call center called isleCORE Systems, Inc. isleCORE is located
in Honolulu, Hawaii, and services a wide range of business and industry, including
financial services, wireless telecommunications and the State of Hawaii.
CEOCFO:
Mr. Knitowski, will you tell us something about your background with Trycera Financial?
Mr. Knitowski: “Trycera Financial is
the fifth company created by a group of serial entrepreneurs that since the bubble popped
in March of 2000, has built and sold three companies. The most recent company was sold to
Cisco Systems; the second was sold to Level 3 Communications (Nasdaq: LVLT), and the first
was sold to Internet Security Systems, which was subsequently purchased by IBM (NYSE:
IBM). A fourth company trades publicly in the business process and IP outsourcing space
and the fifth company is Trycera Financial. Trycera Financial focuses exclusively on the
prepaid stored value space; that is prepaid VISA and MasterCard. The business itself is
much like building Capital One or MBNA (merged with Bank of America Corporation –
NYSE: BAC) as a business except instead of focusing on subprime credit cards, we focus on
prepaid debit cards. The CEO, president and director, Matthew Kerper and Bryan Kenyon
respectively, were involved in a company called Next Estate Communications, which was
subsequently renamed to Green Dot Corporation. Green Dot is the 800-pound gorilla of the
stored value industry and is a Sequoia Capital (a venture capital firm) backed company,
led on the investment side by Michael Moritz (of Yahoo (Nasdaq: YHOO) and Google (Nasdaq:
GOOG) fame). Matthew, Bryan and our team have been building Trycera over the last
two-and-a-half years, but before that Matthew and Bryan actually were core members of a
team that built Green Dot from zero to $30 million a month in gross dollar processing
before leaving to found Trycera.”
CEOCFO:
What is your vision?
Mr. Knitowski: “The vision is to create
an innovative financial services company similar to Capital One Financial Corp. (NYSE:
COF), where we strive to build and grow an agnostic card acceptance and network. By
focusing on the agnostic networks, we can deliver Visa or MasterCard, across a broad
spectrum of convenient locations for loading money onto the cards, whether that is found
at a retail location, such as Western Union; you can use PayPal, direct deposit, wire
transfer or any number of other load network sources at retail. To facilitate the delivery
of our financial services we interface directly with the issuing banks and the processors
who handle the financial transactions throughout the payment systems and networks. We
manage the payment and technology processes so our valued partners can focus on card
delivery and added value to their core consumers and cardholders. We act as program
managers for multiple fortune 1000 companies including direct online and offline issuances
that we do for ourselves through various channels predominantly outside retail. We partner
with companies that use our product as payroll cards and some that use the cards to pay
commissions to their sales agents or other salaried employees. We also have companies that
use the cards for their health benefits or the flexible spending accounts and people that
use them for prepaid travel expenses and other general purpose items.”
On an individual basis, the range of use is from credit challenged individuals, who
represent the 80% of the U.S. that cannot qualify for a traditional credit card or are
trying to rebuild their credit, all the way to high ‘net worth’ individuals.
Theses would be people who use them as monthly spending allowance cards if you will for
their kids, spouses and individuals that are involved in helping them run their personal
lives. The cards are recognized anywhere on the planet that Visa or MasterCard are
recognized and are setup as a means for a financial tool to allow people to get more
familiar in spending what they made last month instead of what they think they might make
next month.”
CEOCFO:
You mentioned many different channels; please elaborate.
Mr. Knitowski: “The nice part about
Trycera, in terms of scaling the business very large, is that we do not have to go out and
replicate the financial transaction industry. Visa and MasterCard can handle billions and
billions of transactions everyday around the world in concert with the issuing banks and
processors. With our partners handling the transactional aspects of the portfolio, we need
to only focus on driving growth through new channels and segments that then use or need
our product. For instance, we have a company that we signed up for their 3,000 person
commissioned sales force across the US. They actually deliver 100% of their commissions
checks via a card instead of a manual check. Not only do they gain the advantage of a cost
effective delivery (plastic vs. check) but also the individual cardholder has the
flexibility to take money off the card or spend it safely wherever the branded product is
accepted globally! It looks, acts and feels like a lot of the products that people are
used to and use every day, except unlike Wells Fargo & Co. (NYSE: WFC), Citibank, or
Bank of America where you deposit money to set up a savings or checking account, these
relationships act like a virtual account. Therefore, you have no relationship directly
with a bank, but you are able to flexibly use the money that you have. Another channel
opportunity is debt consolidation. Across the US, there are a number of people who have
overextended and slipped into a financial challenge or strain and they are trying to deal
with creditors to determine a means by which to pay. What we have done is set up a
specific program for that works with the company and the overextended individuals to
provide a valuable financial tool that helps control spending and favorably helps reduce
overall debts and financial burdens. With our processing and bank partners we have
developed and deployed an innovative multi-purse card solution to address the needs of the
debt management industry and participate in a revolution to help those cardholders out of
debt and deliver a tool that will be useful for their financial futures.”
CEOCFO:
What is the value of the card over a check?
Mr. Knitowski: “I think the big issue
is that every time someone cuts a manual check, it usually runs their business at least
$30 per check and as high as $50. That is for the printing cost, transactional cost of
people executing things on a computer, a mailing cost and all of the reconciliation that
goes with paper based products. Therefore, from a sheer cost savings perspective, it is a
wonderful benefit for companies because it allows them to get away from costly paper-based
transactions into more reasonable costs of a card based transaction. The second part of
the value is that a card allows users instantaneous access to funds, whether they are
commissions, salaries or otherwise. They do not have to wait for the check to be mailed,
and then take the check down to the bank; deposit the check, wait several days while the
check clears and the funds becomes accessible. In some cases, people do direct deposits to
offset that. This is another means of providing direct deposit based on the flexibility of
the way the business wants to set up its business rules to pay its employees and based on
what the employer wants. In some cases, people want a certain percent wired directly to
their bank account of each check and the rest on their card. Other people may want it
exclusively on their card in their wallet right now.”
CEOCFO:
Do you see a time when checks will be almost obsolete?
Mr. Knitowski: “I think on a global
basis that the growth of Visa and MasterCard and companies like them, continue developing
innovative ways to marginalize check use. While card based transactions continue to grow
every day, there will always be check use, especially in emerging economies. However, as
integrated wireless technologies and devices converge for point of sale transactions and
banking access, we can expect that checks will continue a downward trend and card
transactions will continue to expand. I think it is just a matter of time worldwide,
before we get to be at a very low percentage of paper-based transactions.”
CEOCFO:
Will you touch again on the unbanked customers?
Mr. Knitowski: “I think the easiest way
to think about unbanked customers is that they signify a group of individuals that by
either choice or necessity, choose to use financial tools and means that are not part of a
traditional banking system or network. Some unbanked prefer cash payments for all goods
and services while others who may have suffered as a result of poor credit or prior loan
defaults, prefer to now use alternative methods of commerce. As an extension of the
unbanked consumer, the reality is that about 80 to 85 million of every hundred million in
the US, actually do not qualify for credit. Many consumers get an endless array of credit
card offers everyday and mailboxes are almost stuffed to the point where it is like spam
mail similar to what an individual receives in a typical email account. The problem is
that the lion’s share of the country does not necessarily have the benefit of credit
and what we like to do is provide a means for the majority of those individuals in the
United States, namely to have a means to transact and two, to how to be responsible with a
product. To prove that cardholders can be responsible we have also launched an innovative
program called My Full Credit, which allows somebody to report recurring and non
traditional payments such as wireless phones, utility payments, car payments and rent to
240 regional credit agencies around the USA. This information is used oftentimes as a
basis for alternative credit scoring by larger credit groups such as Experian (Experian
Group Inc. – LSX-EXPN), TransUnion (Trans Union LLC) and Equifax Inc. (NYSE: EFX),
but in most cases this information is helpful for regional credit agencies modeling an
individuals ability to service debt for any number of purchases. What we do is provide a
means where if you pay the minimum payment on your car, if you pay your utility bill, your
cell phone bill, and you prove you can be responsible, we can aggregate that alternative
information, report it in and help build a credit profile for those that over time need to
do that. If we prove that people can be responsible on a debit card, then we help maximize
their opportunity to enter or re-enter the credit card market with a positive record. We
see it as providing flexibility and helping customers make sound financial
decisions.”
CEOCFO:
Will you tell us about the financial picture of Trycera today?
Mr. Knitowski: “The financial picture
at Trycera is working to achieve what we believe will be a crossover as a cash neutral
business and generating a profit before the close of the first quarter of 2007. It was
founded in mid-2004 and for the first 18 months, the focus was centered on building the
foundation by setting up the processors, the associations (Visa and MasterCard), the
issuing banks and loads networks and developing and delivering the core programs and
products that are now available. As we continued building, we developed three key product
offerings to complement the financial strategy. Our first offer is our Trycera branded
product, which includes three different MasterCard options. We also have what we call OEM
platforms, which are quick to market, scalable and semi-customized programs specifically
tailored to a business but operate under a generic infrastructure. We have fully
customized programs that not only have a host of custom features, including card graphics,
collateral materials, custom prompts, custom websites, call-center response and innovative
customized voice response systems. We put out a press release last week (January 2007),
saying that December represented the first million-dollar gross dollar volume load in the
company’s history. What the gross dollar volume means is the aggregate amount of
money that is loaded onto the portfolio of Visa and MasterCard cards that we have through
all of our online and offline channels. That equates to an annualized rate of about $12
million a year and these are on exponential curves. Year over year we have seen over 500%
growth and every single month we see more money loaded on the cards and more active cards
outstanding than the month before. In addition, we expect this year that we will be on a
blistering ramp throughout the year supporting all the programs that we set up in 2006
that are launching throughout the first and second quarters of this year.”
CEOCFO:
Why are companies partnering with Trycera?
Mr. Knitowski: “The biggest reasons
companies partner with Trycera are the backgrounds and pedigrees of the individuals
running the company and they have been involved in building out historic value in the
debit industry with Green Dot. The operations and executive teams at Trycera have deep
knowledge and can bring a program to market faster and with unparalled feature and
functionality. Moreover, the Trycera solution provides the most cost effective turnkey
solution in the prepaid space, by delivering a structure that avoids the costly contract
alternatives and guaranteed minimums that are required by the various processor, bank and
association agreements.”
CEOCFO:
In closing, why should potential investors be interested?
Mr. Knitowski: “There are three reasons
why people should be looking at Trycera right now and one is the management team. I have
been involved in building and selling many businesses over time and we have 100% track
record of monetizing investments for investors. Each occasion, all of our success came
after the bubble pop and not before. The three companies we sold previously were purchased
for a couple hundred million dollars. Therefore, one is just the flat-out management team
of knowing how to do something and be successful. The second thing is that people like
myself and other insiders have put up over $500 thousand individually, which was my case,
and $100s of thousands from every other director and advisor involved in the business. We
put our own money where our mouth is and investors can rest assured that they are
investing right along management when they are a participant in our business. The third
one is the huge success of what investors have seen in the MasterCard IPO. MasterCard went
out and traded in the $40 to $50.00 range and right now, it trades at around $100 a share.
That was in 2006; in 2007, you are going to see Visa launch a third IPO. You see Western
Union spun out of First Data Corporation (NYSE: FDC) and trade publicly. Discover (a
Morgan Stanley Company – NYSE: MS) and American Express (NYSE: AXP) are also going to
see the public markets in 2007 to 2008. It is all a common theme of a worldwide phenomenon
of more plastic transactions tomorrow than they are today. Therefore, you have to ask
about the best way to invest and be a part of the growth of the financial products tied to
these types of instruments. One way is to invest in Visa or MasterCard directly, but the
reality is that that just gives you exposure to Visa or MasterCard. An investment in
Trycera gives you a very nice valuation as an entry point, huge upside growth potential, a
wonderful macro-economical phenomenon, and you can get exposure to Visa and MasterCard
instead of having to pick one or the other. We think all of those things in combination
with the success of the management team and the exponential growth in our portfolio all
bode well for future investment. A final consideration is that the business plans to be
profitable excluding stock option expenses in the first quarter of 2007. Investing in
profitable companies already means that you are going to be investing in the upper 15% of
everything that is publicly traded and we think that is a fantastic opportunity for people
to get in.”
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