In a recent Bloomberg analysis, CyberCash (CYCH) was categorized as an "infant Gorilla". A "Gorilla" being defined as one of the most enduring and powerful players in a fast growth business, with a highly sustainable competitive advantage because the market standardizes its proprietary systems which potentially locks competitors out of the market.
bloomberg.com
Here's the CYCH story:
CYCH is one of the Dots in ".com". It's products facilitate e-commerce. Specifically, CYCH provides "internet payment services" for financial institutions and merchants. In otherwords, when you or I make a purchase on the internet our payments via a credit or debit card to the merchant is facilitated by CYCH products. Neither CYCH nor its products are household words, because it is part of the infrastructure that makes e-commerce work efficiently, confidentially, and securely. With the unveiling of a new product called "Instabuy," CYCH has undertaken a three-pronged approach in working to establish a "brand-name" for its products by working through financial institutions, merchants, and consumers.
As an investment, all of us must decide two questions for ourselves: First, will e-commerce (i.e., purchase of goods and services over the internet) continue to grow significantly? Second, will CYCH's payment systems be embraced by an ever-growing cadre of financial institutions and merchants (and, now, consumers)?
I) Growth of e-commerce.
At the CeBIT technology trade fair news conference in Hanover, Germany on March 18, 1999, Intel officials opined that they "expected worldwide e-commerce revenues to jump from $41 billion in 1998 to $623 billion in 2002. In Europe, the e-commerce market should reach $223 billion by 2002, up from only $6 billion last year."
Many companies are positioning themselves to take advantage of this burgeoning market opportunity. Fortunately, CYCH has focused on this marketplace since 1994. CYCH Chairman Melton is often referred to as a "visionary," because he foresaw this emerging market way ahead of the curve.
CYCH has established a formidable infrastructure (telecommunications equipment, networking systems, and software development) with its internal resources and those of long-term investors (Intel, SoftBank, First USA) and strategic partners (Microsoft; Oracle; IBM; and First USA, the credit card subsidiary of BancOne) to provide the internet payment infrastructure for the anticipated explosive growth of e-commerce. CYCH has focused on both the domestic and international electronic commerce market.
II) CYCH products and their acceptance by financial institutions and merchants.
CyberCash is recognized as the world's leading provider of Secure Electronic Commerce Payment Solutions. Although several companies offer electronic commerce payment solutions, CyberCash is the only company to offer multiple payment types including credit, cash and check.
CyberCash is the pioneer of the major electronic commerce payment advances on the Internet. With its wide range of products and services, CyberCash is unique in enabling merchants around the globe to accept multiple forms of payment around-the-clock including Secure Payment/SET™, CyberCoin® and PayNow™ electronic check. CyberCash solutions empower a business to realize the potential power of the Internet.
As financial transactions continue to proliferate across the Internet, CyberCash solutions securely and conveniently link thousands of merchants and their customers to leading financial institutions and payment processing networks, making it as safe and easy to transact business on the Internet as it is it is in the physical world.
At the recent PaineWebber "Mass Market Internet" conference, CYCH officials reported that it has over 13,000 merchants and growing.
painewebber.com
Here is a list of many of CYCH's financial institution and merchants customers and partners:
Message 8357413
In an attempt to get more exposure to the general public, CYCH recently unveiled a product by the name of "InstaBuy." In an interview on CNBC in January 1999, COO Condon described InstaBuy:
"If you shopped on the net at all, one of the major inconveniences as opposed to shopping physically where you show the visa card and check out, every time you shop you have to enter your name, address, credit card number, social security number, all that information is entered time and time again a inconvenience to consumers. We have a new product called Instabuy that allows to you register with a bank and the credit card numbers are carried securely anywhere you shop that carries a CyberCash product. That's a huge convenience for consumers and will build more purchasing on the Internet."
First USA (one of the world's largest credit card issuers) is the first financial institution to offer the InstaBuy service to consumers across the Internet. First USA has targeted its over one million First USA credit card holders.
Recently, a CYCH company official discussed why the company is emphasizing more general public awareness for its products:
"'Why does brand identity make a difference on the Internet? Consumers are looking for the security that brand identity offers. When they see your brand name or branded product, they know you can be trusted."
According to the company official, "security and ease of use are the two most important concerns for online shoppers. He says that technologies, such as CyberCash's InstaBuy® service, are addressing these concerns and will contribute significantly to the growth of online shopping."
CYCH is working hard to sign-up consumers to utilize the InstaBuy service. CYCH has established a web-page for this purpose (www.instabuy.com).
In addition, CYCH has entered into agreements with financial institutions and merchant networks. First USA, Intershop, Netcentives, Order Trust, Impulse!Buy, Taxi Interactive are InstaBuy partners. Borders and Cyberian Outpost are
among some of the first users. During the PaineWebber "Mass Market Internet" conference, CYCH officials stated that we should expect "many" additional InstaBuy merchants coming on after April 1.
In a recent press release, CYCH made the following comments:
''Instabuy.com represents a launch point, a web site where consumers can get their InstaBuy wallets and start buying online with ease,'' said Denis Yaro, executive vice president, CyberCash. ''As more merchants make the InstaBuy service available to their online customers, shoppers will also be able to sign up when they make a purchase at any of those sites.''
III) Revenue Stream
What's nice about CYCH as an investment is that it gets a fee per transaction. Much like every credit card transaction involves a fee to Visa, MasterCard or American Express, CYCH gets approximately $.10 to $.20 per transaction:
amps.cybercash.com
Well, that's all for now. I hope the foregoing is helpful in understanding CYCH the company and CYCH the investment.
Good investing! |
