June 15 Investor's Newsletter
THE PLAYSTAR INVESTOR JUNE 15, 1999
____________________________________________________
Greetings Investors!
Welcome to another issue of the PlayStar Investor. As you know,
Stuart has had his plate full this month, but he's never too busy to
provide you with some information on Internet credit card
processing, and the CardEngine software. On the opposite end
of the spectrum, things on the casino front have been rather quiet
due to some necessary systems upgrades and maintenance
(more on that under "Casino Update"). Yes, it has been a crazy
June so far and we're only at the halfway mark!
It's a short issue this time, but as always, we love to hear from
you and we want to make this newsletter a relevant forum for
you. So, if you have any burning issues you'd like us to address,
comments or criticisms you want to make known, or words of
encouragement, send them to us at ir@playstar.com, and we
just might post them in our next issue.
Coming soon: watch for "In Your Dreams", a special edition of
the PlayStar Investor featuring a short story of a competitor's
worst nightmare.
The PlayStar Team
playstar.com
PLAYSTAR (PSCKF) - SMART INVESTING!
____________________________________________________
IN THIS ISSUE:
CEO's Message . . . Stuart on Internet Credit Card Processing
CardEngine Software . . . what is it all about?
Recent E-commerce News . . . an article on industry growth
Casino Update . . . contest activity & service interruption
____________________________________________________
MESSAGE FROM THE CEO
In entering into a licensing agreement with Cyberstation, and
having a software system like CardEngine to provide offshore
credit card processing services, PlayStar has entered into a
potentially lucrative arena.
I would like to provide a brief overview of the Internet credit card
processing industry and I have also included an overview of the
CardEngine software and some e-commerce news that I found
very interesting. With this information, you should have a good
understanding of one component of our technology and the
market potential.
So how does PlayStar make money?
In providing Internet credit card processing services to banks
and merchants, NetEngine provides the technology and
infrastructure to perform transactions. As a result, NetEngine
charges a fee to each merchant for each transaction processed.
This fee can vary from between ten cents per transaction to a
dollar for every successful transaction.
In addition, acquiring banks charge merchants a fee for
providing credit card payment options. This fee, which is known
as the "Discount Rate," is a percentage of the gross sale. Based
on the bank's perception of risk, the merchant will be charged
more or less than other merchants. NetEngine may receive a
percentage of the discount rate.
With these two revenue centers, NetEngine stands to make
significant revenues. Success will be based upon the number of
banks that are prepared to acquire merchant risk, to the number
of merchants being signed up to use NetEngine's services.
However, and more importantly, NetEngine's success will be
based upon its ability to manage the growth of the organization.
In this last respect, a streamlined administrative infrastructure is
critical.
If you have any questions on credit card processing or anything
else, please feel free to send them to me. However, you will find
that this mid-month issue does not include questions and
answers which are addressed in the end of month issue.
Regards,
Stuart
stuart@playstar.com
____________________________________________________
CARDENGINE SOFTWARE
To perform credit card transactions over the Internet, NetEngine
provides Merchants with a free copy of its CardEngine software,
which is installed on secured servers. CardEngine is used by
Merchants to perform credit card transactions on the Internet.
The CardEngine software is executed once per credit card
transaction and it is designed for multitasking. Each Merchant
can have multiple programs running on the same server and on
multiple servers, all at the same time. The CardEngine Program
acts as an internal black box allowing the Merchant to retain full
control over their operation and the look & feel of their site.
Secure Communications is assured because CardEngine uses
2,048 bit RSA keys which is rated for military grade
cryptography. These keys are used to sign the Merchant and
transaction hub certificates for cross verification purposes.
Without these certificates, Merchants may not process
transactions or review online reports outlining their transactions.
In addition, NetEngine can assign or deprive rights to each
certificate. In this way, Merchants can be switched on or off
remotely, and managers may be assigned more functions than
clerks.
CardEngine was entirely developed outside of the United States,
without any participation of US citizens; hence CardEngine can
be used worldwide without violating any cryptographic export
restrictions.
After receiving the transaction request data, the CardEngine
program will automatically load the Merchant's client data file,
create a TCP/IP socket connection to a transaction hub on the
Internet, and establish an TSL connection on that socket with
the Merchant's CardEngine server. The hub examines the
transaction request, including the credit card information,
against the CardEngine database, and if the transaction
request "passes," it then processes the transaction through
the processing network. The hub then submits the transaction
results back to the Merchant's CardEngine, which in turns
provides the results to the Merchant's customer. The entire
transaction occurs live, and only takes a few seconds as real
time processing is critical in reducing both Consumer and
Merchant Fraud.
While the technology to process credit cards has existed for
some time, the technology to reduce Consumer and
Merchant Fraud is still highly dependent upon effective
databases. Given the numbers of transactions, the only way
to control Consumer and Merchant Fraud is to examine
each transaction against a database. For example, based
on address verification, bad debtors verification, phony
name verification, bogus company verification, and bad
credit card account number verification, individual
transactions may be denied.
In addition, the CardEngine system submits each
transaction to online Merchant monitoring and real time
accounting. This includes monitoring of reserve accounts
to remain competitive, ensuring zero floor limits, and not
allowing stand-in authorizations. By monitoring the number
of credit cards used per order, the number of declines per
order, and order velocity monitoring, potentially fraudulent
transactions will be denied before they enter the system.
CardEngine ensures that Acquiring Banks maintain their
reputations as efficient financial institutions.
Once the credit card transaction has been processed,
Merchants and the Acquiring Bank have immediate access
to the transaction data. However, Merchants can only access
the data if their computer holds a unique CardEngine Certificate.
The certificate is used to authenticate the user and to ensure
that only authorized individuals can access this sensitive
information. While competitive systems use their servers to
generate transaction reports, NetEngine downloads the
transaction data to the Merchant's computer, which is then used
to generate the reports. To ensure the merchant is using the
latest transaction data, the Merchant may synchronize his
computer with the NetEngine server. By using the Merchant's
computer to generate reports, NetEngine may grow exponentially
without significant investment in hardware and software.
The CardEngine system contains six major software
components:
CardEngine Merchant Secret Datafile (Key & Certificate):
A file which is unique to each section of a merchant account,
that contains the merchant's secret 2048 bit RSA encryption
key, and their X509v3 certificate, which contains the required
merchant account information. The secret datafile is used by
the CardEngine Client and the CardEngine Web in order to
identify each merchant with the CardEngine Servers. Different
sections within an organization can be issued different levels
of access.
CardEngine Client:
A command line program, that communicates securely with the
CardEngine Transaction Servers, and is used by merchants to
perform their credit card transactions, and is designed to be a
module that can be easily integrated into other software.
CardEngine Web:
A browser based software package used by merchants to view,
search, evaluate, and export up-to-the-minute transaction results,
that provides an easy to use generic transactional front-end and
a batch facility to the CardEngine Client. The CardEngine Web
securely access merchant credit card data from the CardEngine
Synchronization Server through the Internet.
CardEngine Server:
A secure system of multiple firewalls, servers, and
communication equipment, directly connected to the credit
card banking infrastructure in multiple countries, which is
used to receive, process, and return credit card transaction
results. Its contains many different components, including
CardEngine Transaction Servers that process the credit
card transactions, and the CardEngine Synchronization
Servers that send the transaction result data to merchants.
CardEngine Administration:
Personnel and software packages that are used to modify
credit allowances; process chargebacks; modify fraud,
suspend, sales, monthly limits, & other CardEngine databases;
update the CardEngine News, and perform other CardEngine
Servers related administration.
CertEngine Certificate Authority (CA):
The secure entity that creates & administers all of the secret
datafiles for banks and merchants (including the merchant keys
and certificates); has the ability to renew, modify, & revoke
them; and maintains an active list of revoked merchants for the
CardEngine Servers and CashEngine Servers. In addition,
CertEngine also generates browser based certificates for
secure websites, encrypted e-mail, and code signing.
Credit Card Scrubbing
For each and every transaction received by the CardEngine
transaction servers, CardEngine imposes many layers of credit
card scrubbing in order to minimize frauds and chargebacks.
Many of the databases, including the negative databases, are
shared by all merchants transacting with CardEngine. In
addition we share negative databases with other acquiring
processors to insure that a bad customer that charges-back
from any merchant is prohibited from transacting with any
other merchant.
____________________________________________________
E-COMMERCE NEWS
June 10, 1999
WASHINGTON (Reuters) - All those Furbies, Tamagochis and
''Star Wars'' toys bought at Web auctioneer eBay sure add up.
While some have estimated annual Internet sales in the tens of
billions of dollars, a new study from the University of Texas and
financed by Cisco Systems Inc. found that U.S. companies
generated a whopping $301 billion in revenue last year from
online-related goods and services.
The total, derived from interviews with about 3,000 companies
participating in the Internet economy, included $102 billion of
Internet commerce, such as sales of books by Amazon.com,
toys at eToys.com and even subscriptions to thestreet.com.
Sales by intermediaries, like stock trades and online travel
agents, totaled $58 billion in 1998, the study found.
Nearly half the total came from the hardware and software
used to build the infrastructure of the Internet and electronic
commerce.
The study found $56 billion was spent last year on software,
consulting and training to provide Internet services and
another $115 billion was spent on hardware and software to
run the lowest layers of the global computer network.
To avoid double counting some revenues, the $301 billion
total included a $30 billion reduction from the sum of the
four separate categories.
The end results "seem to exceed all prior estimates," said
University of Texas Associate Professor Anitesh Barua, who
co-authored the study. Starting from almost no online
commerce three years earlier, ''the growth rate is nothing
short astounding,'' he said.
The study also estimated that 1.2 million U.S. jobs were
involved in Internet commerce.
Lehman Brothers senior economist Ethan Harris said the
study demolished an assumption by many analysts that
Internet sales were concentrated among a few
big companies.
''What they found, in fact, is that there are thousands of
companies selling on the Internet,'' Harris said. ''That
argues for continued growth.''
The figures also put the Internet portion of the economy
on par with other more established sectors like automobiles
and telecommunications.
E-commerce ''has already achieved a status of great
prominence in the U.S. economy,'' said Cisco development
manager Doug Karmin. Cisco, the leading provider of
Internet switching gear, has seen its stock skyrocket in recent
years, already rising more than 20 percent so far in 1999, on
the back of the Internet growth wave.
____________________________________________________
CASINO UPDATE
The PlayStar Casino should be ready to welcome players back
to its tables this Friday, pending successful completion of
system servicing. The interruption in service, though necessary,
was unfortunate in timing, as we are at our fiscal year end.
On a positive note, the traffic generated by the June Multiple
Payout Draw has been overwhelming! The first week of June
alone yielded revenues reaching almost 40% of our projected
total monthly revenue goal. We expect that the enthusiastic
response will continue once systems are up and running again.
Ease of participation and no special requirements to enter are
two of the major factors we believe have made the Multiple
Payout Draw popular. The other factor of course, is the
number of prizes available to be won (23), and the opportunity
of winning a Grand Prize of $1,000.
___________________________________________________
You have received this newsletter by request. If you wish to
unsubscribe at any time, just send a blank email to
irnews-unsubscribe@playstar.com
For latest on casino developments, subscribe to PlayStar
Casino's newsletter by sending a blank email to
playersedge-subscribe@antigua.org
playstar.com
PLAYSTAR (PSCKF) - SMART INVESTING |
